Make Way For The Ceo

AOL Time Warner CEO Gerald Levin returned with his trusted deputy Richard Parsons from a tour of Ground Zero, devastated. Not since the 1997 murder of his son had Levin appeared as shattered as he did looking over the wreckage that September morning. "He seemed to almost cry when he talked about 9-11," says Sandy Reisenbach, a Warner Bros. studio executive who, as another father of a murdered son, is a member of a sad fraternity with his boss. But the devastation also seemed to infuse Levin with a new sense of purpose for his media empire. "Our commitment not to just build our business but to make a difference" is among the company's "unique resources," he proclaimed in a companywide e-mail on Sept. 14. By early November, Levin was telling a gathering of investors that AOL Time Warner would spend heavily on its mission as a "public trust," even if that lowered profits. "I'm the CEO, and this is what I'm going to do," Levin also reportedly said. "I don't care what anyone else says." It was a declaration that dropped jaws at rival media companies.

But the real stunner came last week when Levin abruptly announced that he will retire next year--and that Parsons will be the new CEO. Reporting to Parsons: co-chief operating officer Robert Pittman, the AOL golden boy and a former MTV founder whom many had assumed would succeed Levin. Wall Street loathes surprises, but the sudden resignation was neatly explained as the climax of Levin's recent spirtual metamorphosis. "My true DNA" is to serve "a passionate, philosophical, moralistic purpose," says Levin.

Insiders, however, say the company line doesn't capture the mounting tensions of recent weeks. NEWSWEEK has learned that AOL Time Warner chairman Steve Case had grown increasingly peeved with Levin's imperious tone. According to a senior official, Case was especially disturbed by a state-of-the-company e-mail Levin sent employees, absent Case's cosignature, on Thanksgiving eve. In it, Levin outlined several "guiding principles" including, foremost, his intent to invest in the public trust. And although Case hasn't fully embraced the idea, AOL Time Warner early last week made an expensive bid to combine its No. 2 cable operations with No. 1 AT&T.

Nobody suggests Case, whose AOL acquired Time Warner in January, forced Levin out. Still, nagging speculation persists even within the company about "the real story" behind the dramatic changes. Theories are rampant, in part because little happens at AOL Time Warner without intrigue. According to two senior insiders, the succession drama fits the pattern. Case and Levin "had once been simpatico, but lately the tension was building between them," says one. Any student of the history of the former Time Warner would be understandly concerned about Levin's new assertiveness. At Time Warner, he was an accomplished dispatcher of powerful rivals, the latest being Ted Turner. Case and Levin weren't available to comment on their relationship. A spokesman, however, scoffs at the speculation. And one executive notes that Case and his wife joined Levin's family over Thanksgiving at their Vermont getaway.

Despite the company's history of internal warfare, Parsons has broad support. Still, true to form, there is a back-story. NEWSWEEK has learned that food-and-tobacco giant Philip Morris recently sought to lure Parsons, a former director, as CEO. Parsons declined to comment, as did a spokesman for Philip Morris, where top officers are retiring. "Dick was going to be a CEO," Levin says. "He is enormously talented." (Indeed, Parsons, a onetime corporate lawyer, had been the CEO of a New York savings and loan before Levin tapped him as president of Time Warner in 1995.) Recalling how Levin broke the news of the new appointment, Parsons says: "I was sitting here in my office, and Jerry wandered in. He said, 'Dick, you're ready, and I'm ready'."

A 53-year-old Brooklyn native who ventured to Hawaii for college, Parsons has long been on a fast track to success. The late New York governor Nelson Rockefeller tapped him as an aide after Parsons earned the highest score on the state bar exam in 1971. When President Gerald Ford selected Rockefeller as vice president, Parsons relocated to Washington, where he became a White House aide. Charming and confident, Parsons is regarded as a skilled corporate diplomat. He earned his latest promotion by quietly tackling some of AOL Time Warner's most challenging issues. For instance, it was Parsons who took the lead in convincing Washington to approve the company's merger with AOL. On top of everything, Parsons is African-American, one of a still tiny, but growing, cadre reaching the helm of Corporate America while avoiding having race cited as a factor in their rise.

As early as last spring, Levin says, he indicated to Parsons that he'd be the next CEO. Levin also informed a pivotal director, Fay Vincent. Early on, insiders say, Levin had qualms about the other candidate, Pittman. Although he insists otherwise, insiders say Levin was displeased that Pittman seemed to be boldly positioning himself in the press as heir apparent--something Pittman denies doing. Levin was said to have been livid over Pittman's mug on the cover of Business Week within days of AOL Time Warner's creation. The headline: showtime--bob pittman's job is to implement the biggest merger in history. In an interview, Pittman says he favors the No. 2 job.

Parsons is taking the reins at a daunting time. AOL Time Warner is suffering from the industry wide slump in advertising and subscriptions. The drop-off at AOL is especially ominous, given that a premise of the merger was that the online operations would be an engine of the combined behemoth. On Friday, media analyst Jessica Reif-Cohen of Merrill Lynch slashed estimates of AOL Time Warner's revenues and profits, citing, among other things, the online division. The stock dipped 5 percent.

One bright spot these days is Warner Bros., which reports to Parsons. "Harry Potter" is a gold mine, and "Ocean's Eleven," which recently opened, is expected to be a hit. Up next is "Lord of the Rings." Already, Parsons is emphasizing that meeting the challenges ahead will be a group effort. "We're a team here, and I include Steve [Case] in that," he said.

For now at least, Parsons is enjoying an outpouring of adulation. His office is overflowing with lavish bouquets. At home, his wife toasted him with a $300 bottle of port. And without intending to, he upstaged Johnnie Cochran in Harlem recently at a party celebrating the famed lawyer's new job as chairman of the Apollo Theatre. The rush of events was so overwhelming that Parsons had yet to phone his mother some 24 hours after the news broke. Now that's a lapse that could pose the stiffest test of his vaunted diplomatic skills.