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American Morning

Steve Case Will Step Down as Chairman of AOL Time Warner

Aired January 13, 2003 - 07:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


PAULA ZAHN, CNN ANCHOR: Now to the big story in the business world this morning. Steve Case will step down as chairman of AOL Time Warner in May. He will still be a board member of the company, which is CNN's parent firm. Case, as you might remember, co-founded America Online and was a chief architect of the merger with Time Warner.
In May 2001, the company's value peaked, according to the "Wall Street Journal" this morning, at about $260 billion. It now stands at about $65 billion.

Steve Case joins us now to talk about his decision.

Good morning.

STEVE CASE, CHAIRMAN, AOL TIME WARNER: Good morning.

Good to be here.

ZAHN: Good to have you with us.

How do you feel about the decision?

CASE: Well, I guess I have mixed feelings. I feel good about the decision because I think it's the right thing for the company at this particular time. But obviously I would, I loved being chairman. I love this company. And so I have some mixed feelings about stepping aside. But I do think it's the right decision. I've thought about this hard over the last few months and decided it shouldn't be about Steve Case and what he wants, it should be about the company and 90,000 employees of the company and the millions of people, families who are investors in the company.

At this time for, given the environment we're in, I just thought it was the best thing to do.

ZAHN: Did you jump or were you pushed?

CASE: Well, I jumped. I was, there was certainly in the fall a lot of speculation in the press that maybe I should step aside as chairman. But the realities over the last year, only one investor ever came to me and suggested I step down and only one director on our board ever came to me and suggested that I step down. So I felt I had considerable support and that would likely to be continued through the next few years.

But at the end of the day, as we approached the May shareholder meeting, I did think there was a possibility of, you know, more noise, and that would be a distraction. This company does not need any distractions. We have a lot of hard work to do and our people really need to focus on their business, not on this esoteric debate about Steve Case.

ZAHN: Though in the "New York Times" you said you would love to have remained on as chairman if it had not been for all these distractions. Come May, would you have had enough votes by the board to stay on?

CASE: Oh, sure. But when we did the merger there was a provision in it that said that it takes 75 percent of the board to remove me as chairman until next year, and there was overwhelming support on the board, and that continued. So there's no precipitating event here other than as I reflected and, as many people do, when you go away for the holidays, you kind of take things in perspective and think about the past year and what you've accomplished and think about the next year and what you think you should be focused on. And on reflection, I thought it was the right time, mostly because I wanted to avoid that possibility of the distraction. But also I felt that some of the building blocks, the foundation work that was important when I stepped back in and was more active a year ago, a lot of that's now in place.

And so it felt like the right decision.

ZAHN: I know that you said in your resignation statement, quote -- we're going to try to put this up on the screen -- "Some shareholders continue to focus their disappointment with the company's post-merger performance on me personally."

You were the chairman of the company. You were the architect of the merger. Why shouldn't shareholders focus on you?

CASE: Well, it's perfectly reasonable, for exactly the reasons you mentioned, that I was the architect of the merger, I was the chairman of the company. The company has not done well. It's certainly not done anything anybody would have expected when we did the merger. So it's not at all surprising that some of that anger and disappointment would be directed at me.

What I had to wrestle with was really believing that I could play an important role going forward guiding the company to capitalize on its promise. And I didn't want to step away and potentially not be able to play an important role.

At the same time, I recognize that there had been a distraction in the fall. There might be new distractions in the spring. And on balance, I decided let's avoid the distraction, let's focus on our business. I can continue to make a contribution. Granted, it's in a different way, as a member of the board. And now seemed like a good time because that foundation work was in place.

Remember, six months ago Dick Parsons was just becoming CEO.

ZAHN: Sure. CASE: We built a new team at the corporate level. AOL had some real issues. We now have new leadership and a new strategy there. We have, our company now has a strategy and the board has a strategy committee. So things feel like they're, the foundation -- that doesn't mean we don't have a lot of hard work ahead, we do -- but the foundation work was in place.

So let's avoid the distraction. I'll continue to contribute as a broad member and it just felt like the right time.

ZAHN: In a personal sense, how badly do you feel about the almost $200 billion worth of shareholder value that has been wiped out? I mean what do you say to the folks out there that were counting on their 401Ks to fund their retirement?

CASE: I recognize a lot of people have bet on this company and are disappointed by the results. But it's never over till it's over. I really do believe that the merger made sense. The strategic logic was sound. We were in a very difficult environment in terms of the economy generally, advertising particularly, the Internet sector in particular. But if you look at the underlying consumer trends, the technology trends, consumers are getting more choice, more control and more convenience and that's going to have a transformative impact on media and entertainment and communications. And our company, AOL Time Warner, is best positioned to ride that wave.

Right now we have a lot of challenges we need to focus on. But we also need to make sure we keep our eye on the prize and really capitalize on these trends over the next decade.

So in the long run, I really do believe that we'll be able to capitalize on the promise and I demonstrated my commitment a year ago, almost, when I bought another million shares of the company. So I've kind of put my money where my mouth was and really do bet on this company and investing in this company.

ZAHN: But that was also after you sold a lot of stock and at the point that you were making a 30 percent projection of growth for the company. And that's what the investors are saying, you may have just bought stock recently, but why did you dump all that stock before?

CASE: Well, I think if you look at the facts, actually, my holdings in this company have increased since the merger. So sometimes people kind of look at one thing and don't look to the overall picture.

But I think at this particular juncture it's better to look forward into the future as opposed to the past. Indeed, that's part of the reason, a large part of the reason I made this personal decision. It's time for this company to move forward and that's what I think we can do more effectively by me stepping down as chairman.

ZAHN: I'm getting the big rap here in my ear.

But very quickly, what do you think the SEC and the Justice Department investigation of alleged shoddy accounting practices is going to lead them?

CASE: Well, it's up to the government to decide how to pursue that. I'm not...

ZAHN: Were you aware of that stuff going on?

CASE: I was not. I've always exercised my responsibility both when I was CEO of AOL and then when I was Chairman of AOL Time Warner, I've always tried to make sure we did the right thing, and I feel good about the way I conducted myself and the leadership I provided.

But at the end of the day, the government has to do what it thinks is appropriate there. And Dick Parsons, the CEO, and Wayne Pace, who is our CFO, really are in charge of that investigation. So they should speak to it.

But I certainly felt good about the decisions I made in my leadership positions.

ZAHN: Well, thank you very much for coming by in person to share the news with us this morning.

CASE: Thank you.

ZAHN: Steve Case.

BILL HEMMER, CNN ANCHOR: Paula, more on this with Andy Serwer, who certainly has been tracking this story, I guess, from day one.

ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

HEMMER: Good morning, Andy. Good to see you.

SERWER: Good morning to you.

HEMMER: He says he's a distraction. How do we define that right now in the big scheme of things?

SERWER: Well, I think -- he used the word distraction several times and I think that Steve Case did the right thing. He was a distraction in terms of shareholders' focusing in on whether or not he should stay. He was a distraction, his presence was a distraction in terms of other management trying to move the company ahead, namely Don Logan and Mr. Miller at AOL. So I think he realized that.

There was a question of whether things would come to a head at the meeting in May. And I talked to some insiders who said that basically he did not have the votes and he would have been asked at that point. So it probably made a lot of sense for him to leave at this time.

HEMMER: Impact on markets today could be what as we gauge it now?

SERWER: Well, it will be interesting to see. I don't think the stock is going to go down. You know, it's already up in pre-market trading in Europe and a lot for Wall Street to sift through. But basically, you know, it's just another chapter in this huge media saga.

HEMMER: A huge deal.

Thank you, Andy.

Talk about it more throughout the morning here.

SERWER: We will, yes.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired January 13, 2003 - 07:31   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA ZAHN, CNN ANCHOR: Now to the big story in the business world this morning. Steve Case will step down as chairman of AOL Time Warner in May. He will still be a board member of the company, which is CNN's parent firm. Case, as you might remember, co-founded America Online and was a chief architect of the merger with Time Warner.
In May 2001, the company's value peaked, according to the "Wall Street Journal" this morning, at about $260 billion. It now stands at about $65 billion.

Steve Case joins us now to talk about his decision.

Good morning.

STEVE CASE, CHAIRMAN, AOL TIME WARNER: Good morning.

Good to be here.

ZAHN: Good to have you with us.

How do you feel about the decision?

CASE: Well, I guess I have mixed feelings. I feel good about the decision because I think it's the right thing for the company at this particular time. But obviously I would, I loved being chairman. I love this company. And so I have some mixed feelings about stepping aside. But I do think it's the right decision. I've thought about this hard over the last few months and decided it shouldn't be about Steve Case and what he wants, it should be about the company and 90,000 employees of the company and the millions of people, families who are investors in the company.

At this time for, given the environment we're in, I just thought it was the best thing to do.

ZAHN: Did you jump or were you pushed?

CASE: Well, I jumped. I was, there was certainly in the fall a lot of speculation in the press that maybe I should step aside as chairman. But the realities over the last year, only one investor ever came to me and suggested I step down and only one director on our board ever came to me and suggested that I step down. So I felt I had considerable support and that would likely to be continued through the next few years.

But at the end of the day, as we approached the May shareholder meeting, I did think there was a possibility of, you know, more noise, and that would be a distraction. This company does not need any distractions. We have a lot of hard work to do and our people really need to focus on their business, not on this esoteric debate about Steve Case.

ZAHN: Though in the "New York Times" you said you would love to have remained on as chairman if it had not been for all these distractions. Come May, would you have had enough votes by the board to stay on?

CASE: Oh, sure. But when we did the merger there was a provision in it that said that it takes 75 percent of the board to remove me as chairman until next year, and there was overwhelming support on the board, and that continued. So there's no precipitating event here other than as I reflected and, as many people do, when you go away for the holidays, you kind of take things in perspective and think about the past year and what you've accomplished and think about the next year and what you think you should be focused on. And on reflection, I thought it was the right time, mostly because I wanted to avoid that possibility of the distraction. But also I felt that some of the building blocks, the foundation work that was important when I stepped back in and was more active a year ago, a lot of that's now in place.

And so it felt like the right decision.

ZAHN: I know that you said in your resignation statement, quote -- we're going to try to put this up on the screen -- "Some shareholders continue to focus their disappointment with the company's post-merger performance on me personally."

You were the chairman of the company. You were the architect of the merger. Why shouldn't shareholders focus on you?

CASE: Well, it's perfectly reasonable, for exactly the reasons you mentioned, that I was the architect of the merger, I was the chairman of the company. The company has not done well. It's certainly not done anything anybody would have expected when we did the merger. So it's not at all surprising that some of that anger and disappointment would be directed at me.

What I had to wrestle with was really believing that I could play an important role going forward guiding the company to capitalize on its promise. And I didn't want to step away and potentially not be able to play an important role.

At the same time, I recognize that there had been a distraction in the fall. There might be new distractions in the spring. And on balance, I decided let's avoid the distraction, let's focus on our business. I can continue to make a contribution. Granted, it's in a different way, as a member of the board. And now seemed like a good time because that foundation work was in place.

Remember, six months ago Dick Parsons was just becoming CEO.

ZAHN: Sure. CASE: We built a new team at the corporate level. AOL had some real issues. We now have new leadership and a new strategy there. We have, our company now has a strategy and the board has a strategy committee. So things feel like they're, the foundation -- that doesn't mean we don't have a lot of hard work ahead, we do -- but the foundation work was in place.

So let's avoid the distraction. I'll continue to contribute as a broad member and it just felt like the right time.

ZAHN: In a personal sense, how badly do you feel about the almost $200 billion worth of shareholder value that has been wiped out? I mean what do you say to the folks out there that were counting on their 401Ks to fund their retirement?

CASE: I recognize a lot of people have bet on this company and are disappointed by the results. But it's never over till it's over. I really do believe that the merger made sense. The strategic logic was sound. We were in a very difficult environment in terms of the economy generally, advertising particularly, the Internet sector in particular. But if you look at the underlying consumer trends, the technology trends, consumers are getting more choice, more control and more convenience and that's going to have a transformative impact on media and entertainment and communications. And our company, AOL Time Warner, is best positioned to ride that wave.

Right now we have a lot of challenges we need to focus on. But we also need to make sure we keep our eye on the prize and really capitalize on these trends over the next decade.

So in the long run, I really do believe that we'll be able to capitalize on the promise and I demonstrated my commitment a year ago, almost, when I bought another million shares of the company. So I've kind of put my money where my mouth was and really do bet on this company and investing in this company.

ZAHN: But that was also after you sold a lot of stock and at the point that you were making a 30 percent projection of growth for the company. And that's what the investors are saying, you may have just bought stock recently, but why did you dump all that stock before?

CASE: Well, I think if you look at the facts, actually, my holdings in this company have increased since the merger. So sometimes people kind of look at one thing and don't look to the overall picture.

But I think at this particular juncture it's better to look forward into the future as opposed to the past. Indeed, that's part of the reason, a large part of the reason I made this personal decision. It's time for this company to move forward and that's what I think we can do more effectively by me stepping down as chairman.

ZAHN: I'm getting the big rap here in my ear.

But very quickly, what do you think the SEC and the Justice Department investigation of alleged shoddy accounting practices is going to lead them?

CASE: Well, it's up to the government to decide how to pursue that. I'm not...

ZAHN: Were you aware of that stuff going on?

CASE: I was not. I've always exercised my responsibility both when I was CEO of AOL and then when I was Chairman of AOL Time Warner, I've always tried to make sure we did the right thing, and I feel good about the way I conducted myself and the leadership I provided.

But at the end of the day, the government has to do what it thinks is appropriate there. And Dick Parsons, the CEO, and Wayne Pace, who is our CFO, really are in charge of that investigation. So they should speak to it.

But I certainly felt good about the decisions I made in my leadership positions.

ZAHN: Well, thank you very much for coming by in person to share the news with us this morning.

CASE: Thank you.

ZAHN: Steve Case.

BILL HEMMER, CNN ANCHOR: Paula, more on this with Andy Serwer, who certainly has been tracking this story, I guess, from day one.

ANDY SERWER, "FORTUNE" MAGAZINE: Yes.

HEMMER: Good morning, Andy. Good to see you.

SERWER: Good morning to you.

HEMMER: He says he's a distraction. How do we define that right now in the big scheme of things?

SERWER: Well, I think -- he used the word distraction several times and I think that Steve Case did the right thing. He was a distraction in terms of shareholders' focusing in on whether or not he should stay. He was a distraction, his presence was a distraction in terms of other management trying to move the company ahead, namely Don Logan and Mr. Miller at AOL. So I think he realized that.

There was a question of whether things would come to a head at the meeting in May. And I talked to some insiders who said that basically he did not have the votes and he would have been asked at that point. So it probably made a lot of sense for him to leave at this time.

HEMMER: Impact on markets today could be what as we gauge it now?

SERWER: Well, it will be interesting to see. I don't think the stock is going to go down. You know, it's already up in pre-market trading in Europe and a lot for Wall Street to sift through. But basically, you know, it's just another chapter in this huge media saga.

HEMMER: A huge deal.

Thank you, Andy.

Talk about it more throughout the morning here.

SERWER: We will, yes.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com