Parsons Elected to Double Role at Top of AOL

In a vote for stability and continuity, AOL Time Warner Inc. on Thursday elected Chief Executive Richard Parsons to the additional post of chairman.

The move ended speculation about yet another possible leadership shake-up at the world’s largest media conglomerate.

At a regularly scheduled meeting, the board of directors voted unanimously for Parsons to succeed Steve Case, who announced Sunday that he would step down as chairman in May. He faced mounting pressure from shareholders angered by a steep plunge in the firm’s stock that has destroyed $200 billion in market value since Internet service provider America Online and old-line media giant Time Warner merged in 2001.

Parsons’ rise to power will put the company squarely in the hands of the Time Warner guard. Case, an AOL co-founder, was the last remaining architect of the ill-fated merger. With Case set to leave, insiders say the new team at AOL Time Warner can proceed with its restructuring plan.

“There’s still smoke, but the fires are out and now they can get down to the task of cleaning up and rebuilding the business,” said Christopher Dixon, an analyst who covers the company at UBS Warburg.

Given the merger’s difficulties and the recent spate of scandals in corporate America, many investors were calling to separate the chairman and CEO jobs as the best way to protect shareholders’ interests.

Splitting the jobs would have helped “heal some of the wounds with the investor community,” said Patrick McGurn, director of Institutional Shareholder Services, which advises investors and companies on corporate governance issues. Now, he added, “the pressure” on AOL Time Warner “may remain hot.”

But other corporate watchdogs say an independent board is more important to shareholders than is splitting the roles of CEO and chairman.

The “downside to separating the two jobs” is that “there are then two sources of authority, making the company more difficult to manage,” said Charles M. Elson, head of the Center for Corporate Governance at the University of Delaware. The real key to protecting shareholders, he suggested, is having a majority of directors who are outsiders and own stock.

In fact, some observers say that with Parsons empowered as chairman, other changes could be in store for the AOL Time Warner board. The 14-member board now is made up of an equal number of directors from the two original companies.

Several sources said some holdovers from the AOL board, such as Vice Chairman Kenneth J. Novack, could be pressured to step down to clear the way for independent directors or to reduce the number of insiders.

Such changes would continue the housecleaning of AOL forces that has been applauded by Time Warner executives. They blame the Internet side of the operation for wiping out the value of their stock options and retirement accounts.

After a two-year period marked by stock erosion, management turmoil and a federal accounting probe, company executives say bringing unity and calm were important criteria for the board, which includes CNN founder Ted Turner, former baseball commissioner Francis “Fay” Vincent and Netscape founder James Barksdale.

Parsons, 54, is considered a master consensus builder who has brought peace across the troubled company. For much of this week, however, his elevation to chairman hardly seemed assured. Beyond the issue of splitting the roles of CEO and chairman, some critics suggested that AOL Time Warner would be better served by having a harder-edged executive at the top.

Parsons was elevated from co-chief operating officer to CEO in May after Gerald Levin resigned under pressure from investors and board members. Parsons was president of Time Warner under Levin, but people within the company said he was never as impassioned as others about the merger.

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.