AOL’s Case won’t crack

Exec re-elected with a vote of 78%

NEW YORK — There were no kung fu fights, but big AOL Time Warner shareholders made it crystal clear Friday they’d like Steve Case and a few other directors off the board of the world’s biggest media company.

Yet the entire management-backed slate was re-elected as the conglom’s annual stockholder meeting morphed into a forum on corporate governance — testing the patience of a determinedly congenial Richard Parsons.

He would surely have liked to dwell on “The Matrix,” which went on to gross $136 million Thursday-Sunday. “That’s going to be huge –and that’s good news for all of us,” Parsons said, singling out Warner Bros. and HBO as the heart and profit center of the giant company.

Event took place in Landsdowne, Va., the heart of AOL country, not in Gotham, where it’s usually held. In what was likely a unique experience for Steve Case lately, the AOL founder got a standing ovation after brief remarks as he stepped down as chairman.

“Where are we? Are we in Virginia? Somehow I feel we’re not in New York,” joked Parsons, who will assume the chairman title. He greeted hundreds of shareholders as they walked in and took pains during Q&A to call them by their first names, even as they grilled the company for “hiding behind technical rules that deny shareholders a voice” on the board.

Shareholder meetings are notorious for drawing nut jobs and rabble-rousers who complain about everything from a CEO’s suit to the quality of the pastries in the lobby. But the AOL TW meet was coherent and steadily on message.

Who sits on boards and how they get there has become a hot-button issue among shareholder activists across all industries. They blame directors for rubber-stamping exorbitant compensation packages and questionable business decisions by executives who, in many cases, are friends and former colleagues.

Walt Disney’s board, long seen as handpicked by Michael Eisner, has been under fire for years. Vivendi Universal’s board was excoriated at the French conglom’s annual meeting in Paris last month. Now, it may be AOL Time Warner’s turn.

Companies present a list of director nominees in the so-called proxy statement mailed to stockholders each year before the annual meeting.

Shareholders can’t vote against a director; they can only vote yes or abstain. They can try to propose an opposition slate or individual, but the process, a proxy battle, is exceedingly costly — running over $1 million according to one pension fund that considered it — and complex.

“I don’t have the time for that. I’ve go to work,” said a portfolio manager who withheld his vote from Case in a protest move.

Case was re-elected to the board with a vote of 78%. Two former advisors, Miles Gilburne and Kenneth Novack, received, respectively, 65% and 82%. Other directors cleared 96% or 97% — numbers much more typical.

Parsons acknowledged to reporters after the meeting, “Numbers talk.” But, he said, “I can’t tell you what it means to the board.”

Reps of the American Federation of State, County and Municipal Employees at the meeting Friday said they asked the company to open up its proxy voluntarily and free of cost to qualified outside nominees. Parsons’ answer: The company doesn’t have to, so it won’t. AOL TW followed its own by-laws and existing SEC regulations, he said.

Unlocking Case

One fund manager said he’s convinced Case at least can be pressured to leave the board, just as was pushed to step down as chairman. “The heat works,” he said.

Case announced plans to leave management two month ago under intense pressure from shareholders and employees of the former Time Warner who blame him for a decimated stock, an army of lawsuits and federal probes of AOL’s accounting. For AOL shareholders, he arguably pulled off a miracle by hitching AOL to some stable assets before Internet stocks and AOL’s growth prospects crashed.

The last few years “have been difficult and disappointing, and nobody is happy about the stock price,” Case said. But he didn’t cry. Gerald Levin, the other architect of the AOL TW merger, was visibly teary at last year’s annual meeting, where he resigned as CEO.

Many on Wall Street credit Parsons with pulling the company out of financial and emotional trough by selling $2 billion worth of assets, putting new management in place and jetting around the country and the world to meet with employees to boost morale.

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