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Dick Parsons has no shortage of friends. This month, the affable chairman and chief executive of Time Warner has had a steady stream of phone calls from some of the world’s top corporate chiefs.
Their message to him: we support you, even as Carl Icahn and Bruce Wasserstein team up to try to unseat you and break up the company you run.
The messages come as Mr Icahn, who made billions of dollars as a corporate raider in the 1980s and has continued to target companies whose shares he regards as undervalued, has embarked on his most ambitious proxy fight yet.
Despite controlling just 3 per cent of the media conglomerate’s $85bn-worth of shares, Mr Icahn has hired Mr Wasserstein, the mergers and acquisitions veteran who heads Lazard, to put together a slate of eight directors who will run against Mr Parsons and his board.
The calls to Mr Parsons – from luminaries including Jeffrey Immelt of General Electric, Sir Howard Stringer of Sony and Rupert Murdoch of News Corp – came after Mr Wasserstein joined forces with Mr Icahn. Mr Icahn been targeting Mr Parsons since August.
“These executives are shocked by Lazard’s decision, they thought of Lazard as an adviser to all the top CEOs, not to investors like Carl Icahn,” says one person involved.
Backing from other chief executives is not unusual for Mr Parsons who, unlike some other media moguls, is popular and well-liked. “Dick Parsons is viewed as someone who is politically astute, polite and a good team player,” says a long-time analyst of Time Warner. “He is extremely well-regarded.”
Mr Parsons trained as a lawyer and began his career in the 1970s working for Nelson Rockefeller, the Republican governor of New York. He has honed his diplomatic and negotiating skills over the years. After a stint working in the White House, Mr Parsons moved to a prominent New York law firm where he was managing partner.
His history at Time Warner goes back to the early 1990s, when he joined the media company’s board. He became president in 1995, after running Dime Savings, a financial institution, and worked closely with then CEO Jerry Levin.
Mr Parsons was one of the executives who pushed forward the merger between AOL and Time Warner – now regarded as one of the worst in corporate history.
As the prime architects of the deal – Mr Levin and Steve Case from AOL - lost credibility and were forced to step down from their executive positions, Mr Parsons stepped up to take on the job of trying to sort out the mess at the company, which is worth upwards of $40bn.
Mr Parsons became the heir to Time Warner, not least because he was someone the entire board could rally around and who could possibly bring some stability to a company notorious for bad relations between its various divisions.
“The job of chairman of Time Warner is to be CEO of CEOs, and I don’t know another person who is better suited than Dick Parsons,” says a prominent media investor and Time Warner shareholder. “You no longer have the battles between the various divisions, and this is because of Dick’s ability to bring people together.”
In recent weeks, Mr Icahn has stepped up his criticism of Mr Parsons and the Time Warner board, most of whom approved the AOL and Time Warner merger six years ago.
Mr Parsons’s reputation means Mr Icahn’s campaign to target him personally might not immediately cause investors to jump ship. “Dick might get just a bit more of the benefit of the doubt than other executives would in his position,” says a senior media industry executive.
Nevertheless, Mr Parsons is under pressure to prove that he is more than a diplomat and that he has a strategic vision for Time Warner and its 80,000 employees as the media industry grapples with the challenges and opportunities presented by the rapid growth of digital distribution.
As well as Mr Icahn’s calls for restructuring to lift Time Warner’s stagnant share price, Mr Case’s recent revelation that he proposed a split of Time Warner into four companies has further shone the spotlight on Mr Parsons. Mr Case wrote in the Washington Post that he made the suggestions after concluding that the AOL Time Warner merger would never work. He resigned from the board after his plan was rejected.
Mr Parsons believes in Time Warner’s conglomerate structure, although he is planning to spin off a small stake of the group’s cable group next year.
“I don’t think that people who follow that advice [to split up] are going to be rewarded over time, and in fact my prediction is that in time you’re going to see those who have tried to disaggregate, to get nimble, to become more competitive, to reaggregate,” Mr Parsons said in Los Angeles recently. He said scale – financial and managerial – was increasingly important to all businesses.
Added to that, Mr Parsons also believes convergence – the much-hyped reason behind the AOL Time Warner merger – was finally becoming a reality. “We have a bit of everything in our company so that we are prepared for whatever comes down the road,” he said.
Over the next six months, Mr Parsons will be put to the test. Larry Haverty, a portfolio manager at Gabelli & Co, a Time Warner shareholder, who has been consistently supportive of Mr Parsons, says the clock is ticking.
“If we are having this conversation in March and the stock still has not moved, then all bets are off. The market will then be telling [Dick Parsons] that he will need to do something more drastic than he is planning now to lift the share price.”
Unfortunately, Mr Parsons cannot count on his friends to do this for him.
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