Meeting Not All Smiles for Parsons

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Lansdowne, Va.– AOL Time Warner Inc.'s annual meeting here started on a positive note, with chairman and CEO Richard Parsons drawing applause from about 400 attendees gathered in a resort ballroom here after he predicted that the company's struggling America Online unit would make a rebound.

"Where are we – are we in Virginia? Somehow I feel we're not in New York," Parsons said at the gathering last Friday, suggesting he thought he was on friendly ground.

But much of the applause the rest of the way was directed at shareholders who stood up to criticize and question everything from AOL's accounting practices and executive-compensation packages to the company's business dealings in China.

Several shareholders complained about their inability to nominate independent directors for AOL's board.

"Clearly the company has been in trouble and shareholders are looking for new leadership," said a speaker identified as a representative from the AFL-CIO labor union.

Other shareholders criticized the compensation disparities at AOL, and complained about how shareholders, who have watched their stock tank, were being asked to vote on compensation for directors.

"How am I supposed to vote for [compensation] for directors since [former AOL chairman Steve] Case said there will be no dividend for AOL?" asked one stockholder, who said she owned 400 shares.

One shareholder took the floor to question why Ted Turner, who stepped down as vice chairman at the meeting, should be reelected as a director because of the risk he poses with his periodic outrageous statements in the media, while another shareholder complained about Turner's past comments about Christianity.

Parsons, on the cover of the May 19 Business Week, stood by Turner, the current Fortune
cover subject. Parsons sat near Turner at the front of the ballroom, along with Steve Case and other directors.

"Thank you, Ted, for agreeing to sign up again" as a board member, Parsons said.

Despite impassioned pleas from sponsors of two shareholder proxies, shareholders rejected a proposal that would have limited AOL's business in China and a proposal that addressed pay disparities between AOL management and lower-level employees.

Regarding AOL's accounting scandal, which has prompted investigations from the Securities and Exchange Commission and the Department of Justice, one shareholder asked Parsons to ensure that the company would be more conservative with its accounting.

"If we have to lean one way or the other, we play it safe," Parsons responded.

When asked about AOL's advertising sales position, Parsons said the company has generated more in ad revenue this year than it had by the same time in 2002.

Asked about minority representation on the board, Parsons said, "We're not where we want to be."

Case, who officially resigned as chairman at the meeting, gave shareholders a short address, thanking them for their support over the years. He then called on Parsons to take the podium.

Parsons kicked off the meeting by laying out several principles the company planned to follow going forward.

Better accounting was near the top of the list.

"Our reputation for full and honest financial reporting must be without question," Parsons said.

Shareholders overwhelmingly approved several proposals. After the votes were tallied, Parsons said all 13 directors up for election were approved by shareholders. He said 70% of shareholders approved an executive incentive plan, 92% of shareholders approved bonuses for directors, and 96% of shareholders ratified Ernst & Young as the company's auditor.

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