Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 1, 1992 TAG: 9202010079
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: By The Washington Post
DATELINE: NEW YORK LENGTH: Medium
HE LOVES TO SKEWER THOSE PLUMP PACKAGES
Pay expert Graef Crystal has become known for colorful, irreverent comments such as these:Q: Why are top Japanese and German executives willing to work for a fraction of the pay dished out in the United States?
A: "Their greed glands are smaller."
Q: How are pay levels negotiated at American companies?
A: "The bargaining is done essentially by the chief executive officer, standing in front of the shaving mirror."
Both Vice President Dan Quayle and Democratic presidential candidate Bill Clinton have sought his views on why and how America's top business leaders are overpaid.
He gave a rousing speech in 1989 that focused the ire of large institutional investors on the way rich paychecks for management were costing shareholders money.
He is Graef S. "Bud" Crystal, a bald, bespectacled, 57-year-old professor at the business school of the University of California at Berkeley.
From his cluttered bedroom office in Napa, Calif., with a personal computer holding years of invaluable records on corporate pay at America's 500 largest companies, Crystal has become a one-man SWAT team battling what he sees as wildly excessive compensation paid to many chief executive officers of American business.
Because of his expertise and outspoken views, Crystal has done more than any other individual to make executive compensation a prominent subject of national debate and, possibly, legislation, according to both his supporters and detractors.
One of Crystal's favorite targets has been Time Warner Inc. co-chief executive Steven J. Ross, whose average earnings of $16 million a year from 1973 through 1989 led Crystal to dub him "the Prince of Pay."
Crystal also has skewered General Dynamics Corp. Chairman William A. Anders, who benefited from what Crystal called "a unique and controversial" bonus plan. Anders reaped total compensation valued at $9.35 million last year, in part because of a pay package that Crystal criticized for offering hefty rewards to executives for the company's good performance over just the short term.
But it wasn't too long ago that Crystal was on the other side of the issue. For more than two decades, until he took early retirement at the beginning of 1988, Crystal made a lucrative living as a management consultant advising executives who sought to fatten their paychecks.
Charging nearly $500 an hour for his work, Crystal earned as much as $650,000 a year plus benefits worth about $150,000 at his firm, Towers, Perrin, Forster & Crosby.
In 1984, he was the first tenant to move into the new, luxury Trump Plaza cooperative building, where he bought two apartments and united them.
Crystal once likened his old career to that of a prostitute. He admits he was too generous in supporting some plump pay packages for executives whom he wished to retain as clients. In self-defense, he contends the compensation schemes he devised were more reasonable than his competitors', especially in linking pay to companies' performance.
"I don't think I was ever for sale. At least I was not consciously for sale. . . . But I acted in the full realization that if I didn't please a client, I wouldn't have that client for long," he wrote in the preface to "In Search of Excess," the most recent of his five books on executive pay.
Crystal's high profile, and the rise of executive compensation as a potentially hot political issue, led two aides of Quayle's, Allan B. Hubbard and Will Eagle, to invite Crystal to talk with them in Washington on Nov. 14. Shortly after that meeting, Quayle publicly criticized "some of these exorbitant salaries paid to corporate executives . . . unrelated to productivity."
Crystal spoke on the phone with Clinton this past autumn. According to Crystal, Clinton said he "can't tell labor to cinch up its belt unless I tell executives to do so as well." Clinton has proposed limits on tax deductions for bonuses paid to executives.
One prominent pay expert who criticizes some of Crystal's work is Harvard Business School Professor Kevin J. Murphy. He said Crystal's method of evaluating pay tends to focus too little attention on whether the compensation package is structured in a way to create a strong link between high pay and good corporate performance.
Murphy, who calls himself a "free-market economist," faulted Crystal for helping to make compensation a subject of potential government interference.
"What he's succeeded in doing, in bringing it to the public's eye and making it a big political issue, is not what we would like," Murphy said. "We'd like it [pay] to be a private matter among shareholders, directors and management."