Former executive antagonizes CEOs with criticism of their lofty salaries


NAPA, Calif. -- The corporate chief executives who gathered last month for a conference at Northwestern University's business school campus in Evanston, Ill., became nearly apoplectic when Graef S. Crystal made his presentation. And who could blame them?

Mr. Crystal had some fairly harsh things to say about the way CEOs are compensated. He has been delivering his message with evangelistic fervor for several years, though frequently with all the impact of a pesky mosquito.

But suddenly he is being courted by the media and widely listened to by politicians, reformers, the public -- and even CEOs -- thanks mostly to the furor over President Bush's recent trip to Japan.

Seeking trade concessions, Mr. Bush was joined by a gaggle of U.S. corporate chieftains whose average compensation last year, the midst of a protracted recession, was $3.4 million, six times the average for their Japanese counterparts.

Mr. Crystal has seized this moment in the limelight, and many corporate heads are furious with him.

In Evanston, one of them accused Mr. Crystal of slander and later snubbed his wife, Sue, when she tried to engage him in small talk. Mr. Crystal became furious in his own right. "From now on," he declared, "no more Mr. Nice Guy."

Nice guy? To the CEOs who have been dodging Mr. Crystal's blistering barbs, the idea that he could be even more of a gadfly than he already is must have been frightening. "I'm a rebel with a cause," said Mr. Crystal, who teaches an executive compensation course at the University of California in Berkeley known informally as Greed 259A.

His message is a simple one: CEOs are paid too much in relationship to their companies' performance, and their pay seldom reflects downturns in corporate fortunes. He has become the point man for a growing movement of shareholders, employees, legislators and others who feel executive pay must be reined in if the country is to regain its economic vigor.

"People are interested in this topic because while the average person is hurting, CEOs have done very well," said Sen. Carl Levin, D-Mich., who held hearings on the topic Friday. "People know there's something wrong."

Mr. Crystal has particular credibility, even with his critics, because he spent the better part of his career advising companies about how to use many of the razzle-dazzle, pay-boosting techniques he now lambastes.

"He knows what he's talking about and companies know that, and that's a scary thing," said Abraham Nad, publisher of Directorship, a newsletter in Westport, Conn., that tracks corporate board issues.

Mr. Crystal has made his mark with a personal computer and the public records of 550 corporations. Because he is so quotable, and willing to be quoted, his ideas have found a wide audience, especially with some of the state pension funds which have begun to take an active role in companies whose shares they own.

"The issue he's highlighting is one that concerns most Americans," said Rep. Martin O. Sabo, D-Minn., another proponent of reform.

He and Gov. Bill Clinton of Arkansas, the Democratic presidential candidate, are looking at ways to use the tax code to curb excessive pay by making it more expensive for the company or for the executives. Of all the proposals being floated, corporations like this idea the least, arguing that it smacks of government interference and ultimately would only harm shareholders by reducing earnings.

Senator Levin's three-pronged proposal is considered somewhat more acceptable because it is more mild. It would force companies to improve the quality of information made available in their annual proxy statements and would require companies to do a better job of accounting for stock options. Mr. Crystal began developing his expertise as a compensation analyst at RCA in 1959. He spent the next 28 years alternating between consulting jobs and jobs in industry. At the pinnacle of his career, he was billing $500 an hour.

He had an apartment in Trump Plaza in Manhattan and a house in the San Francisco Bay area, and, at various times, vacation homes in South Hampton, N.Y., and Maui, Hawaii. At one point he owned three grand pianos, reflecting his passion for music. Any time he got on a plane, there were two seats waiting, one for him and one for his companion -- a computer. In 1987, at the age of 53, he took early retirement and joined the business school faculty at the University of California in Berkeley.

He made the biggest splash as a commentator, writing columns for Fortune and Financial World and, last year, "In Search of Excess," a kiss-and-tell book chock full of zingers about some of the most private moments of some well-known business figures.

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