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AOL/Time Warner and WorldCom:Corporate Governance and the Effects of the Deregulation Paradox
Unformatted Document Text:  17 In the meantime, AOL’s Robert Pittman was assigned the task of overseeing the post merger integration. In the weeks and months that followed, the economic downturn and subsequent loss of advertising had a strong negative impact on AOL’s core business. AOL found itself financially weaker than it was a year earlier because of rising debt and a falling share price which left it without the financial means to pursue future deals. As an example, AOL was counting on cable television (and the deals that go with it) to deliver the broadband capabilities from its online entertainment and news services that it promised at the time of the merger. And AOL/Time Warner executives have angered big institutional investors by missing growth targets and spinning financial reports to make their performance look better than it was. Adding to the tension were new questions about AOL’s accounting practices (“AOL Reshuffles its Management Deck,” 2002). The once hoped for synergies did not materialize, leaving the company with an unwieldy structure and bitter corporate infighting. The question can be rightfully asked. Did Time Warner’s board of directors fulfill their responsibilities in monitoring the proposed AOL/Time Warner merger? The answer to this question may have something do with what Collins (2002) describes as the problem of charismatic leadership and strong personalities. According to Collins, people are less likely to challenge the strategic vision of a charismatic leader out of respect for his/her past success or out of fear of appearing contrary. What is important to remember, however, is that charismatic CEOs do make mistakes. Given their personality and leadership style, the charismatic leader is less likely to be challenged by individual

Authors: Gershon, Richard. and Alhassan, Abubakar.
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17
In the meantime, AOL’s Robert Pittman was assigned the task of overseeing the post

merger integration.
In the weeks and months that followed, the economic downturn and subsequent

loss of advertising had a strong negative impact on AOL’s core business. AOL found itself

financially weaker than it was a year earlier because of rising debt and a falling share price

which left it without the financial means to pursue future deals. As an example, AOL was

counting on cable television (and the deals that go with it) to deliver the broadband

capabilities from its online entertainment and news services that it promised at the time of

the merger. And AOL/Time Warner executives have angered big institutional investors

by missing growth targets and spinning financial reports to make their performance look

better than it was. Adding to the tension were new questions about AOL’s accounting

practices (“AOL Reshuffles its Management Deck,” 2002). The once hoped for synergies

did not materialize, leaving the company with an unwieldy structure and bitter corporate

infighting.
The question can be rightfully asked. Did Time Warner’s board of directors

fulfill their responsibilities in monitoring the proposed AOL/Time Warner merger?

The answer to this question may have something do with what Collins (2002) describes

as the problem of charismatic leadership and strong personalities. According to Collins,

people are less likely to challenge the strategic vision of a charismatic leader out of

respect for his/her past success or out of fear of appearing contrary. What is important

to remember, however, is that charismatic CEOs do make mistakes. Given their personality

and leadership style, the charismatic leader is less likely to be challenged by individual


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