Icahn and the Time Inc. Culture

On Friday Carl Icahn announced the end to his bid for a proxy contest against the incumbent leadership at Time Warner.  Although he had referred to Time Warner CEO Richard Parsons as a "moron" and had questioned Parsons' integrity, Icahn bowed out for the relatively small price of a $20 billion stock buy-back for all investors and two new independent directors.  Given that Icahn had sought to break up the company and had commissioned Lazard to develop a 343-page report to that effect,  most have characterized his retreat as a defeat.

For observers of Time Inc. this development comes as no surprise.  Throughout its history Time has remained somewhat aloof from the concept of shareholder primacy.  Founder Henry Luce said, in words reminiscent of recent remarks by the Google CEO, that the company was "principally a journalistic enterprise" that was "operated in the public interest as well as in the interest of its shareholders."  Chancellor Allen famously said in his Paramount v. Time decision that "The mission of the firm is not seen by those involved with it as wholly economic . . . ."  And the Paramount v. Time decision itself is a monument to putting a managerial plan above the interests of the shareholders.

Richard Parsons had seen his company go from the newly christened dreadnought of the Internet era into a burning hulk left for scrap on the seven seas.  He was left to manage the disaster after the previous class of admirals and captains had jumped screaming into the icy water below.  Achieving stability and moving forward was no mean feat.  Given these circumstances, it was unlikely that Parsons was going to be intimidated by Icahn's threats.  It remains to be seen whether Icahn, Wasserstein, and Lazard are right about the wisdom of splitting up the company.  But given its almost singular history, it seems unquestionable that Time Warner was not going to be bullied into choosing that course.

(One final note:  Thanks to Melanie Reichenberger and the staff of the Journal of Corporation Law for accepting my article on the AOL Time Warner merger after an exclusive review.  The paper will be coming out this fall.  If you'd like to read an earlier version of the paper, it's located here.)