Hours after the death of Time Warner Chairman Steven J. Ross, Time Warner Inc. proceeded Sunday with a plan to drop six directors from its 21-member board. Company executives called the timing unfortunate but insisted that no palace coup was afoot to reduce the influence of Ross’ cronies.
Nevertheless, longtime Ross confidante Martin D. Payson resigned Sunday as Time Warner’s vice chairman. Company sources said Payson was distressed by the move to rid the board of insiders and quit the company in pique. Payson could not be reached for comment.
Since the 1990 merger of Time Inc. and Warner Communications Inc., onlookers have speculated that tensions could erupt in the boardroom because of the different company cultures. At the time of the merger, the two full boards were combined into one, creating an unwieldy board with a large group of insiders.
The Wall Street Journal reported Friday that directors were locked in a “major struggle” over the downsizing, and described Time Warner President Gerald Levin as the “architect” of the plan.
But several longtime Ross loyalists disagreed with that characterization, saying that Levin conferred carefully with the ailing Ross. “For anyone to think otherwise is absurd,” said one high-level executive.
Indeed, Levin landed the co-chief executive job last February after his predecessor, Nicholas J. Nicholas Jr., was perceived by Ross to be making a power grab while Ross was undergoing treatment for prostate cancer. In recent months, Warner division executives have given Levin high marks for steering the company yet keeping a low profile in deference to the ailing Ross.
“I think he’s solidly positioned,” said one executive from the Warner side. “I think he has a good relationship with most of the divisions.”
With $27 billion in assets, the giant company’s holdings include America’s largest magazine publisher, the world’s leading music company and Hollywood’s powerhouse studio, Warner Bros., which is likely to capture the leading market share again this year in box office receipts, for the sixth time in 11 years. In addition to “Malcolm X” and “The Bodyguard,” Warner has just released a likely moneymaker in “Forever Young.”
For the nine months ended Sept. 30, Time Warner reported revenue of $9.3 billion, up 8% from the same period a year earlier. Third-quarter net income was $6 million, contrasted with a loss of $62 million in the third quarter of 1991.
Throughout most of 1990 and 1991, Levin and Ross circled the globe to come up with innovative ways to reduce the $11 billion in debt assumed at the time of the merger. In October, 1991--a month before Ross’ cancer diagnosis was disclosed--the company announced that two Japanese companies--Toshiba and Itochu (formerly C. Itoh & Co.)--would invest $1 billion in a limited partnership, Time Warner Entertainment. The deal was concluded in mid-1992.
Levin is expected to continue trying to recruit large or foreign investors, even as he deals with revamping the Time Warner board. But sources said Levin is unlikely to try to handpick directors who will rubber-stamp his every move.
By all accounts, directors agreed at a retreat in September that a two-man committee should shape a proposal to revamp the board. The two men selected were former Time Chairman Richard Munro and Hugh Culverhouse, the Tampa Bay Buccaneers owner and former Warner director.
Ross was consulted in the early stages, but the Time Warner chairman underwent 11 hours of surgery in early November. As he convalesced in a Los Angeles hospital, sources said he was too weak to disturb and he did not play a role in the plan’s final stages.
On Sunday, Time Warner announced the immediate resignation of two outside directors, Michael Dingman and Benjamin D. Holloway, in addition to Payson, the vice chairman. Three more directors will depart in 1993: former Radcliffe College President Matina S. Horner, and insiders Jason McManus and Bert W. Wasserman.
McManus, the company’s editor-in-chief, will continue to report to the board through its editorial committee, while Wasserman, a longtime Warner executive, continues in his job as chief financial officer and executive vice president.
“I think the board restructuring is a positive move for the company and the shareholders,” said Gordon Crawford, senior vice president of Capital Research Co., which owns 11% of Time Warner common stock and is its single largest holder.
Crawford added: “Hopefully, one of the positive things to come out of this tragedy is a further movement by both the board and the management thinking of themselves in terms of Time Warner, and not in terms of their ancestry at Time or Warner Communications.”
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