Feature

Time Warner chief confounds shareholders and Wall St

To underestimate Richard D Parsons is to risk being very wrong, Alasdair Reid writes.

Richard D Parsons is one of those larger-than-life characters you instantly think you recognise and understand because you've seen their fictional equivalents on telly. 'The West Wing', say, or 'LA Law', if it had been set in 'Ally McBeal' territory on the East Coast.

Parsons is one of the most powerful men in corporate America, a hotshot lawyer and one of the country's most prominent African-Americans who first made his name as a White House adviser. He's a fully paid-up member of New York's great and good, a man who subscribes to all sorts of worthy causes and who is a ferocious patron of the arts.

Last week, though, was probably as memorable as any in his diverse career as he pulled off one of the most improbable conjuring acts in recent corporate history -- he was able to announce that Time Warner, the company of which he is both chairman and chief executive, has delivered a profit of $2.6bn for the calendar year 2003.

Which is nothing short of astonishing really, even though Parsons had told analysts months ago to expect good news. The background has been well-rehearsed -- Time Warner's $284bn merger with AOL, a mere internet service provider (albeit the biggest in the world) whose sense of its own importance had inflated in line with its share price in the crazy days of the dotcom bubble.

The merger in 2000 turned out to be one of the most expensive mistakes ever. The value of the AOL part of the business dribbled away and morale sank as accounting irregularities emerged and the division became mired in a Securities and Exchange Commission investigation. Last year, the sprawling conglomerate (still called AOL Time Warner at this point) posted the largest ever losses in corporate history -- just short of $100bn.

As the heads rolled (the chief executive, Gerald Levin, and the chairman, Steve Case, within weeks of each other in 2002), Parsons, who is 56 this year, managed to keep his, taking first the chief executive role and then, in May last year, becoming the chairman too. The business press was sceptical, hinting that he had reached the top more by luck than judgment. They said he was a genial, well-connected corporate diplomat but no visionary. And, the implication was, no saviour.

In particular, they were often unnerved by his awesome unflappability. "Smooth as buttercream," was the way one observer summed up his handling of a fractious shareholders' meeting in May 2003. They had good reason to be angry: their shares had lost 75% of their value in two years. But Parsons' serene composure led commentators to wonder whether it was down to complacency or even an inability to comprehend the enormity of the situation.

The latter is unlikely, given his intellectual calibre -- he came top out of 3,600 law school graduates who sat the New York bar exam in 1971. In the 70s, he held various positions in state and federal government, working as a senior aide to both Gerald Ford, the accident-prone golfer who woke up one morning to discover he was president following Nixon's resignation back in 1974, and Nelson Rockefeller, another US vice-president who was slightly less accident prone, yet slightly less lucky.

In the 80s, he swapped the kudos of the political world for the cash allure of Bonfire of the Vanities-era New York, becoming the managing partner of the top New York law firm, Patterson, Belknap, Webb and Tyler. He joined Time Warner in 1991.

Some analysts believe that the group's troubles were effectively at an end when Parsons ditched the AOL bit of its name shortly after taking control. Others have dared to suggest that the focus on the AOL mess tended to disguise the fact that Time Warner has a handful of similarly (though smaller) unattractive and under-performing businesses it still needs to sell.

And indeed it is in the process of divesting itself of Warner Brothers Music -- a property of diminishing worth as AOL's customers continue to share their music files via the internet. Some observers suggest that Parsons should be seen primarily as an interim manager who will continue to perk up the balance sheet by selling assets.

Others add that there is something terribly tree-hugging about Parsons -- he kicks ass, obviously, in the rather detached and clinical way that US corporate managers tend to kick ass; but his previous roles at Time Warner have involved him in such roles as "people development" and head propagator of "vision and values". On conference platforms, he strives for statesman-like gravitas but often fails to impress as he searches for apposite quotes from the collected speeches of President Kennedy.

But others warn that you underestimate him at your peril. After all, he's no corporate dilettante -- he's been on the board at Time Warner for a good while now. And, with Wall Street hugely grateful for the numbers he has just delivered, that's no mean power base.

The Parsons file

1990 Dime Bancorp, chairman and chief executive

1991 Time Warner, director

1995 Time Warner, president

2002 AOL Time Warner, chief executive

2003 Time Warner, chairman and chief executive

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