Time Warner Inc

Time Warner Inc.

Report on Determination of Current Board Leadership Structure

February 2014

This is the fifth annual report providing (i) a description of the Board of Directors’ policy and practices relating to its review of the Board’s leadership structure, (ii) a description of the Board’s review of this subject in January 2014, and (iii) a summary of the factors the Board considered in reaching its conclusionthat the current structure, with one individual serving as Lead Independent Director and another serving as the Corporation’s Chairman of the Board and Chief Executive Officer, is effective and appropriate.[1]

Policies and Practices Relating to Review of Board Leadership Structure

As noted in prior reports, under Time Warner Inc.’s Corporate Governance Policy, the Nominating and Governance Committee is responsible for reviewing and making recommendations to the Board regarding the Board’s leadership structure, which includes evaluating whether (i) one individual should serve as Chairman of the Board and CEO and (ii) the Board should have a Lead Independent Director.

For more than a decade, the Nominating and Governance Committee and Board have reviewed the leadership structure of the Board as part ofthe Board’s annual self-evaluations and the performance of the individual or individuals serving as Chairman and CEO as part of annual performance reviews; and the Compensation and Human Development Committee has reviewed the performance of the Chairman and CEO in connection with setting executive compensation. In addition, since 2006 the Nominating and Governance Committee has also reviewedthe performance of, and the independent Directors of the Board have elected, the Lead Independent Director annually.

In January 2009, the Board enhanced and further documented the Corporation’s practices in this area by adopting the “Policy on Determining the Leadership Structure of the Board of Directors” (the “Policy”), which provides for the review of the Board’s leadership structure and the performance of the individuals who serve in Board leadership positions on an annual basis and whenever there are changes in the individuals serving as Chairman, CEO, or Lead Independent Director.

The Policy provides that the Nominating and Governance Committeewill review (i) the Board’sleadership structure, (ii) the responsibilities of the Chairman, CEO, and Lead Independent Director positions, and (iii) the qualifications for those positions, including whether the Chairman should be an independent Director. The Policy enumerates the criteria that the Nominating and Governance Committee will consider in its review. The Nominating and Governance Committee is then responsible for making a recommendation to the Board with respect to whether to make any changes in the Board’s leadership structure.

January 2014DeterminationRegarding Current Leadership Structure

The following section summarizes the Nominating and Governance Committee’s most recent review(in January 2014) of the Board’s current leadership structure. As discussed in more detail below, the Committee concluded that the current arrangement, with Mr. Jeffrey Bewkes serving as the Corporation’s Chairman and CEO and Mr. Stephen Bollenbach serving as Lead Independent Director, is an appropriate structure for Time Warner at this time. The Committee presented its recommendation to the Board that it maintain the current leadership structure, which the Board approved in January 2014.

Factors Considered by the Nominating and Governance Committee and the Board

Board Leadership Positions and Responsibilities. The Committee reviewed the current leadership positions of Chairman of the Board, Lead Independent Director, and CEO and the responsibilities of each position. The Committee noted that while there are distinctions among the three roles, there is also an overlap and interplay between the roles of Chairman and CEO. For example, the Board and management have substantial roles in determining the Company’s strategy, long range plan and budget and in reviewing and approving transactions. The Committee concluded that having a combined Chairman and CEO has promoted unified leadership and resulted in clear decision-making processes and accountability with respect to these matters. The Committee also noted that having Mr. Bewkes serve as Chairman and CEO has continued to facilitate the flow of information to, and discussion among, Board members regarding the Company’s businesses.

The Committee also noted that the Lead Independent Director has substantial responsibilities that enable the individual to provide strong leadership of the independent Directors and help the Board provide effective independent oversight of the CEO. At the same time, the Committee also discussed revising the description of the role of the Lead Independent Director in the Corporate Governance Policy to clarify the individual’s authority and responsibilities,including calling meetings of the independent Directors and presiding at Board meetings at which the Chairman is not present. The Board adopted these changes to the Corporate Governance Policy in February 2014.

Qualifications. The Committee reviewed the formal qualifications for each position and noted that the independent Directors appointed Mr. Bollenbach as Lead Independent Director in May 2012 and reappointed him to that position in May 2013. In connection with his appointment, the independent Directors noted his depth of understanding of the Company and its Board, his experience as a former senior officer at several major companies with international operations, including a major media company, and his effective independent leadership when he served as Chairman of two of the Board’s committees.

Policies, Practices and People in Place to Provide Independent Board Oversight of Management. The Committee also considered a number of long-standing policies and practices the Corporation has in place to ensure independent oversight of management, including the following:

• Oversight of CEO Performance and Compensation. The Nominating and Governance Committee and the Compensation and Human Development Committee – both composed entirely of independent Directors – are responsible for reviewing the performance of the Chairman and CEO, and they report and discuss their findings to the other independent Directors in executive session without the Chairman and CEO present, thereby providing effective, independent oversight of the performance and compensation of the Chairman and CEO.

• Lead Independent Director. As noted above, the Board has a Lead Independent Director, whose authority and responsibilities – as approved by the Board in February 2014 – include the following: (i) presiding at all meetings of the Board at which the Chairman is not present;(ii) calling meetings of independent Directors; (iii) presiding at executive sessions of the Board and serving as the liaison between the Chairman of the Board and the other Directors (unless the matter under consideration is within the jurisdiction of one of the Board’s committees); (iv) approving the agenda (including time allocated to items), and materials for Board meetings; (v) advising the Chairman with respect to consultants who may report directly to the Board; (vi) serving as interim Chairman in the event of the death or incapacitation of the current Chairman; and (vii) being available, as appropriate, for communication with the Corporation’s stockholders.

• Executive Sessions. The Board and its Committees regularly hold sessions without the Chairman and CEO or other members of management present, thereby providing an opportunity for independent Directors to express and discuss their views. As part of those sessions, the Board and its committees may meet with independent advisors without management present.

• Agendas and Meetings. The Lead Independent Directorreviews and approves the agenda for Board meetings, while committee chairmen reviewand approve agendas for their respective committee meetings. In addition,as a matter of practice, the topics covered at Board and committee meetings regularly reflect topics suggested by Directors. Further, in addition to the Lead Independent Director having the authority to call additional meetings of the independent Directors, the independent Directors may meet separately at the request of anyindependent Director.

• Board Selection and Composition. The independent Nominating and Governance Committee is responsible for recommending Director candidates for the Board. The Board itself has a high degree of independence, with 11 of its 12 members qualifying as independent Further, recognizing that a board with directors who have a mix of long experience at a company and fresh perspectives can strengthen a board’s ability to provide effective oversight, in 2013, the Board amended its Corporate Governance Policy relating to mandatory retirement age and average tenure to help ensure that the Board is composed of Directors with a mix of tenures, with the expectation that the average tenure of the non-employee Directors will generally not exceed 10 years.

Beyond thepolicies, practices and people described above, the Committee noted that the current structure has facilitated the active participation and questioning of management at Board and committee meetings, and that management has been responsive to the Board’s information requests and suggestions, including addressing a number of strategic, organizational, and regulatory topics in response to its annual Board and committee self-evaluation process. The Committee also noted that the Company’s performance has been strong under the current leadership structure.

Directors’ and Stockholders’ Views. The Committee also considered views expressed by Directors regarding the Board’s leadership structure in conducting its annual self-evaluations, as well as the views of the Corporation’s stockholdersas expressed through their proxy voting policies and the voting results at the Corporation’s annual stockholdersmeetings. The Committee noted that Directors have indicated that,with Mr. Bewkes serving as Chairman and CEO and Mr. Bollenbach as Lead Independent Director,the Board is functioning well and there is effective communication among Directors and management.

With regard to stockholder views, the Committee noted that there have not been any significant changes in the policies or views of the Corporation’s major stockholders in the past year. Most of them generallyeither defer to the Board’s judgment regarding the Board’s leadership structure or evaluate the question on a case-by-case basis, often considering the existence of a lead independent director as an acceptable alternative to splitting the roles. Others generally support stockholder proposals calling for an independent Chairman, but may support a combined Chairman and CEO role in light of a company’s other governance practices, such as having a lead independent director with specific responsibilities. Only a small minority of the Corporation’s largest stockholders have a stated policy of consistently supporting the appointment of an independent Chairman.[2]

The Committee also noted that stockholder proposals requiring an independent Chairman of the Board failed to receive majority support at each of Time Warner’s 2006, 2007, and 2008 annual stockholders meetings.[3] A similar stockholder proposal was submitted for inclusion in the Corporation’s 2009 proxy statement, but that proposal was withdrawn in part due to the adoption of the Policy.[4] Further, the average support for stockholder proposals to require an independent Chairman has fluctuated in the past few years, but has remained below 40% of votes cast.[5]

Company Circumstances. As the Company’s circumstances have evolved, the Board has adopted different leadership structures, at times combining the Chairman and CEO positions, and at other times separating them. In the past, the Board determined that it would be appropriate to separate the Chairman and CEO positions in a few circumstances: (i) following the AOL/Time Warner merger (which accommodated the needs of the merging companies) and (ii) during times of management transition and succession (e.g., when Mr. Bewkes became CEO).[6] By comparison, the Board determined that it would be appropriate to combine the Chairman and CEO positions in times when the Company was at an important strategic juncture (e.g., in January 2003 when it named Mr. Richard Parsons to be Chairman in addition to CEO, andin December 2008, when it determined that Mr. Bewkes should assume the role of Chairman as well as that of CEO).

Since 2008, Time Warner has been executing a strategy as a content-focused company, including driving the digital transformation and international expansion of the Company’s businesses, increasing its investment in programming to drive future ratings and revenue increases, and improving operating and capital efficiency. The Committee and Board have concluded that, while the Company executes this long-term strategy, it would continue to benefit from the clarity and accountability provided by having one person serve as Chairman and CEO.

Attraction and Retention of Candidates. On November 20, 2012, the Company entered into a new employment agreement with Jeff Bewkes that provides he will serve as Chairman and CEO of the Company through 2017. The Committee noted inits annual reviews in January 2013 and 2014 that, even with this contractual provision, it is useful and appropriate for the Committee and Board to consider the leadership structure annually in accordance with the Policy.

The Committee also noted that a company of Time Warner’s stature could attract different individuals for the separate positions of Chairman, CEO and Lead Independent Director. However, separating the Chairman and CEO positions may make it more difficult to attract and retain talented senior executives, particularly individuals being recruited from positions where they currently serve in both capacities, and thus may have the unintended consequence of limiting the potential pool of candidates.[7]

Practices in the U.S. and Other Countries. The Committee considered practices in the United States, United Kingdom, and other countries.

In the U.S., combining the Chairman and CEO roles remains the majority practice at the S&P 500 companies, with 55% of S&P 500 companies combining the roles, 20% having a separate but non-independent Chairman, and 25% having an independent Chairman.[8] The Committee noted that there has been a gradual increase (of approximately two percentage points per year) in the number of companies in the S&P 500 with an independent Chairman, increasing from 13% of the S&P 500 in 2007 to 25% in 2013. At the same time, large-cap companies have continued to move among different leadership models. In 2013, 11% of the S&P 500 companies changed their leadership model – of these companies, 31% transitioned to a CEO and separate executive Chairman structure and 29% transitioned to a CEO and independent Chairman structure, while 27% recombined the roles.[9]

The Committee noted that the pattern of combining the Chairman and CEO roles is more pronounced among the largest 100 publicly traded U.S. companies, a group that includes Time Warner. Of these companies, 69% combine the roles, 18% have a separate but non-independent Chairman, and only 13% have an independent Chairman.[10]

Board leadership structures vary greatly among countries, primarily due to applicable laws and regulations within each jurisdiction. In some countries outside the U.S., it is more common to separate the roles of Chairman and CEO, including in the U.K and Germany where separation is generally legislatively mandated. In other countries, companies are allowed to determine which structure is appropriate given current operations and circumstances. Although Canada calls for separation of the positions, the national corporate governance policy acknowledges that there may be instances when it is not appropriate to separate the roles. In the corporate governance codes in France, the emphasis is on transparency of the decision-making process – there, a majority of the CAC 40 (a benchmark French stock market index) split the Chairman and CEO roles; however, the number of companies that split these roles has decreased slightly since 2008.[11]

Legislative and Regulatory Developments. As required by SEC regulations, all public companies must disclose their leadership structure in their proxy statements, including the roles and responsibilities of the CEO and Chairman and the rationale for separating or combining those roles. The Committee noted thatonly 4% of the S&P 500 reported a formal policy requiring separation of the CEO and Chair roles in 2013; similar to Time Warner, the majority of these companies decide on a case-by-case basis (including almost 80% of the largest 100 publicly traded U.S. companies).[12] Further, the Committee notedthat no new legislation or regulation in this area is currently anticipated.

Impact on Company Performance. The Committee considered the impact that changing the current effective leadership structure would have on the Company, includingstudies that suggest that there is nosignificant relationship between separate Chairman and CEO roles and company performance.[13] The Committee noted that a recent study indicated that separating the Chairman and CEO roles was correlated with improved performance at companies that were underperforming, but with lower performance at companies that were doing well under a combined Chairman/CEO.[14]

Evaluation of CEO and Lead Independent Director Performance. Finally, while not required as part of the annual review of the leadership structure of the Board, the Committee considered its and the Compensation and Human Development Committee’s most recent annual performance reviews of Mr. Bewkes as Chairman and CEO of the Corporation, which were completed in January 2014. The Committee also considered its 2013 assessment of Stephen Bollenbach as the Lead Independent Director.

Conclusion

In light of the factors discussed above, at their January 2014 meetings, the Nominating and Governance Committee recommended, and the Board determined, to continue the current leadership structure of the Board, with one individual serving as Lead Independent Director and another serving as Chairman of the Board and CEO.

Copies of this Report, as well as Time Warner’s Corporate Governance Policy, Nominating and Governance Committee Charter, and the Policy are available on the Corporation’s website at

1

[1] “Corporation” refers to Time Warner Inc.; “Company” refers collectively to the Corporation and its subsidiaries.

[2] According to data provided by Georgeson Inc., Time Warner’s proxy advisory firm.

[3] The proposal received approximately 16% of the votes cast at the 2006 and 2007 annual meetings (representing approximately 11% and 12% (respectively) of the outstanding shares) and approximately 44% of the votes cast at the 2008 annual meeting(representing approximately 34% of the outstanding shares).