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AOL/Time Warner and WorldCom:Corporate Governance and the Effects of the Deregulation Paradox
Unformatted Document Text:  18 board members when and if the situation requires it. Under such circumstances, the board suffers from a diffusion of authority; that is, a failure between and among board members to assume responsibility for management decision-making and actions. For Time Warner CEO, Jerald Levin, pursuing the AOL merger was intended to be his final legacy. It should be understood that Jerald Levin had a long history of strategic deal-making. Earlier in his career, Levin was the leading force behind HBO’s commitment to use satellite communication, thereby, redefining the future of long haul television distribution and giving new meaning to the term cable network services. Levin was also the same person who in 1990 helped engineer Time’s merger with Warner Communication. In 1996, he led the charge in acquiring Turner Broadcasting. And lastly, Levin was the man behind the AOL/Time Warner merger. In retrospect, Levin was a victim of empire building; that is, a love of deal-making and a singular willingness to decide what deals, products and strategies were best for his company, his shareholders and the public at large. As Lieberman (2002) notes, “he frequently made those decisions alone, without opening himself up to questions or critics” (p. 2B) According to one senior AOL Time Warner official, “Jerry had a firm grip on the board.” (“AOL’s Board Digging In,” 2002) ‘This deal was a big leap of faith,’ says a person who was at the meeting. Yet the board jumped, assured by Time Warner CEO Jerry Levin that conver- gence of new and old media and the growth it would produce were real. (p. 46) Levin’s single minded pursuit of the deal failed to give Time Warner a collar (or escape clause) in the event that AOL’s stock value dramatically changed prior to the deal’s completion. In the end, Levin bet the future of Time Warner on the deal,

Authors: Gershon, Richard. and Alhassan, Abubakar.
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18
board members when and if the situation requires it. Under such circumstances, the

board suffers from a diffusion of authority; that is, a failure between and among board

members to assume responsibility for management decision-making and actions.
For Time Warner CEO, Jerald Levin, pursuing the AOL merger was intended

to be his final legacy. It should be understood that Jerald Levin had a long history of

strategic deal-making. Earlier in his career, Levin was the leading force behind HBO’s

commitment to use satellite communication, thereby, redefining the future of long haul

television distribution and giving new meaning to the term cable network services.

Levin was also the same person who in 1990 helped engineer Time’s merger with

Warner Communication. In 1996, he led the charge in acquiring Turner Broadcasting.

And lastly, Levin was the man behind the AOL/Time Warner merger.
In retrospect, Levin was a victim of empire building; that is, a love of deal-making

and a singular willingness to decide what deals, products and strategies were best for his

company, his shareholders and the public at large. As Lieberman (2002) notes, “he

frequently made those decisions alone, without opening himself up to questions or critics”

(p. 2B) According to one senior AOL Time Warner official, “Jerry had a firm grip on

the board.” (“AOL’s Board Digging In,” 2002)
‘This deal was a big leap of faith,’ says a person who was at the meeting.
Yet the board jumped, assured by Time Warner CEO Jerry Levin that conver-
gence of new and old media and the growth it would produce were real. (p. 46)

Levin’s single minded pursuit of the deal failed to give Time Warner a collar

(or escape clause) in the event that AOL’s stock value dramatically changed prior to

the deal’s completion. In the end, Levin bet the future of Time Warner on the deal,


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