Richard Parsons, the chief executive of AOL Time Warner’s
, will take the reins of chairman when AOL founder Steve Case steps down from the post in May, the media conglomerate said Thursday.
The company’s board of directors voted to combine the positions of chairman and chief executive officer and unanimously elected Parsons to the post. The decision consolidates the 54-year-old Parsons’ power in the world’s largest media company as he oversees the pressing job of AOL’s turnaround and future within the company.
Parsons is to take the reins as of May 16th at its annual meeting of shareholders.
The announcement was expected to put to rest speculation over who would succeed Case as chairman after the 44-year-old resigned on Sunday amid a torrent of criticism and pressure from shareholders over his role in the troubled AOL Time Warner media merger.
Since the merger closed in 2001, AOL Time Warner has seen its stock price decline by as much as 70 percent as AOL’s advertising commerce revenues fell and regulatory probes over its accounting practices mounted.
Parsons was not as involved with the details of the merger of AOL Time Warner as was Case, along with former executives of AOL Time Warner. As such, the former co-COO has apparently avoided the shareholder backlash that hit Case and his colleagues, such as former CEO Gerald Levin and former COO Robert Pittman. All three have effectively been forced out as a result of the troubles in the AOL unit that helped spark sell-offs that wiped billions from the company’s market capitalization.
The vote to elevate Parsons to the chairman role isn’t expected to bring any major changes to AOL right away, said people familiar with the company.
Whether the board might spin off AOL from the Time Warner side of the house, where strong earnings performance in its film, publishing, television and programming studio divisions have been overshadowed by AOL’s woes, continues to be just what it is, speculation, company spokes people said.
Nor are the changes at the top expected to make any difference in the day-to-day work or goals of AOL Chief Executive Jonathan Miller, whom Case helped pick for the job after Pittman left the position last July.
A source familiar with the online unit said that as Case readies to exit his chairman’s role with AOL Time Warner, Miller would have one less executive peering over his shoulder as he works to turn the company’s difficulties around during 2003.
Miller reports to Don Logan, a former Time chairman whom Parsons appointed to oversee the AOL division and AOL Time Warner’s publishing and cable divisions.
Since Miller joined the company last August, he has moved quickly to launch new e-commerce and content initiatives in response to the sharp declines in AOL’s commerce and advertising revenues.
This week, Miller also tweaked some senior management roles in the online division by placing Joseph Ripp, an AOL vice chairman, and Lisa Hook, the president of AOL’s broadband division, in heightened roles overseeing and integrating yet-to-be announced products, according to a source familiar with the company.
They are expected to collaborate further as AOL pursues growth in its broadband service in order to address slowing growth among its 35 million base of mostly dial-up subscribers. That job includes striking carriage arrangements with broadband cable and DSL providers in order to build on the company’s 2.7 million broadband subscriber base.
In addition to its strategy of offering a $14.95 “bring your own access” to customers who use another broadband access provider’s network, Logan is expected to help shepherd exclusive content offerings from Time Warner publications, such as Time and People, to AOL subscribers, in order to entice broadband and narrowband subscribers alike.
A source familiar with the company said short programs exclusive to AOL subscribers are also on the drawing table this year, though it was unclear whether any programs might unfold in 2003.
The short programs, when they do materialize, would join a bevy of exclusive “first-looks-and-listens” that AOL is already offering from its corporate sibling’s music, film and television divisions.
“It’s back to a basic game of blocking and tackling for AOL Time Warner,” observed Ken Marlin, a former media investment banker with Veronis Suhler Stevenson who now runs mergers and acquisitions advisory firm Marlin & Associates.
As analysts speculate over whether an AOL spin-off makes sense for the media giant, Marlin places himself in the camp that believes the idea would be folly, especially after two years of integrating the property with other media divisions within AOL Time Warner.
“Time Warner shareholders may be angry over the stock price, but that’s a price issue,” he said. “Strategically, AOL Time Warner is clearly the best-positioned of all the large companies to take advantage of the convergence in media technologies.”
And as for pundits who question the whole idea of media convergence, which helped drive the merger of AOL and Time Warner in the first place, Marlin calls them mostly “middle-aged luddites who refuse to acknowledge what is plain to any college student: that music, magazines, television and the movies have converged, and are converging. AOL Time Warner is clearly the best-positioned media company in the world because they have combined with AOL.”
The possibility that Parsons would be awarded the dual roles of CEO and chairman was expected to raise conflict issues among corporate governance experts. But in its statement Thursday, AOL Time Warner said the board reaffirmed strong governance measures, which include executive sessions of all non-management directors without the CEO and other management present, which are also chaired by a director who does not hold a senior management position.
Case said of the vote: “I am delighted by this decision and look forward to working with Dick to ensure a smooth transition.”
Parsons, also in a statement, said: “I am highly gratified that the Board shares my determination to maximize AOL Time Warner’s tremendous potential. As we address the challenges facing our Company and the industries in which we operate, I will work together with the extraordinary people in this Company to focus on increasing value for our customers and our shareholders.”