NEW YORK – AOL Time Warner Inc. chief executive Dick Parsons was tapped to be the media conglomerate’s new chairman Thursday, giving him broadened authority as he tries to turn around a mega-merger gone sour.
The board’s unanimous decision to have Parsons replace Steve Case, the America Online co-founder who announced last week he was stepping down as chairman, completes a shake-up begun a year ago. It caps a heady rise in power for the quiet-spoken Parsons, who formally took over as CEO just eight months ago, and for the victory of old media over new media in the company’s reformation.
“This is the final acknowledgment that the AOL-Time Warner combination was a poorly orchestrated merger and now the entire new management team that’s been put in place over last 12 months can move ahead,” said Mark May, media analyst at Kaufman Bros. “This has been a wholesale shift from AOL people back to Time Warner people.”
Parsons’ appointment will take effect May 16 at the annual shareholders meeting, the same date Case had indicated he would leave the company. Case announced plans for his departure on Sunday, saying that he felt his continuing presence would be a distraction as the company tries to recover from what has been a terrible run since the merger. He will remain on the company’s board.
The board’s decision to give Parsons both jobs came despite speculation that the two positions would be kept separate to ensure sufficient oversight of the company. But the company indicated Thursday that it remains confident its corporate governance measures are adequate.
“It’s a company that needs some healing and they needed somebody who plays well with others, and Dick has shown that he does that. He’s a peacemaker, he’s the kind of guy that brings people together and this is a company that really needs a group hug,” said Jonathan Gaw, a research manager at IDC Inc., a technology market research firm.
Before becoming chief executive in May, Parson was AOL Time Warner’s co-chief operating officer. He had been named president of Time Warner in 1995, after joining the board of directors in 1991. Previously, he was chairman and chief executive officer of Dime Bancorp. Thursday’s appointment makes him among the most prominent African-American executives in the country.
“I am highly gratified that the board shares my determination to maximize AOL Time Warner’s tremendous potential,” Parsons said. “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.”
Investors had pushed for the changes, following a sharp drop in the company’ stock price chiefly caused by problems at the America Online division. Those problems include shrinking revenues and accounting practices currently under investigation by the Justice Department and Securities and Exchange Commission. AOL Time Warner’s shares have tumbled roughly 80 percent since the merger was announced in 2000, and more than 60 percent since the deal was completed in 2001.
The announcement comes a little over two years after the merger was finalized and places AOL Time Warner firmly in the grasp of executives from the Time Warner side of the business.
When Case leaves, the highest ranking executive from AOL will be Paul Cappuccio, the company’s general counsel.
In the last year, nearly all the key architects of the merger have left, including Jerry Levin, the Time Warner chief executive who pushed for the AOL Time Warner combination. They have been replaced by a team chosen by Parsons, who, at least in the short term, appears willing to try to work out America Online’s problems, rather than selling it.
The announcement came after the end of regular trading. Shares of AOL Time Warner had closed up 6 cents at $15.30 on the New York Stock Exchange. They fell 5 cents in the after-hours session.