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Graef Crystal: Is He Paul Revere Or Benedict Arnold?


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GRAEF CRYSTAL: IS HE PAUL REVERE OR BENEDICT ARNOLD?

Balding, stocky, and disheveled, Graef S. Crystal hardly seems cut out for celebrity. Yet through his appearances on 60 Minutes, ABC News Nightline, and Good Morning America, the gadfly and guru of executive pay is getting more publicity these days than some who would be President.

A witty business-school professor, "Bud" Crystal is also incurring the wrath of a seemingly endless parade of chief executives, corporate lawyers, and pay consultants. The heat he's generating helped get him fired on Feb. 24 from his job as columnist for Financial World magazine. Moans Crystal: "I sense that people are starting to play hardball, and they are totally unforgiving about anything I do."

`FEEDING FRENZY.' Why the furor? Because in an election-year recession, executive pay suddenly has become a hot political issue--in part because of Crystal's agitation. It's an ironic turnabout for a consultant who for years strode into boardrooms to justify ever-higher compensation for the boss.

Crystal, 57, jokes about his "crossing the street," but few others are laughing. Some go so far as to blame him for the media's widespread coverage of the issue, for pending congressional legislation to limit executive pay, and for a Securities & Exchange Commission crackdown on pay practices at public companies. "He's an egomaniac," grouses Louis J. Brindisi Jr., a pay consultant in New York. "He has created a feeding frenzy, and he has opened the floodgates for the lunatics to get involved in executive pay."

Even big-name lawyers Martin Lipton, of Wachtell, Lipton, Rosen & Katz, and Ira M. Millstein, of Weil, Gotshal & Manges, have joined the harsh chorus. Lipton has circulated a paper on compensation that he says "exposes the fallacies" of the consultant's conclusions. Millstein has charged that Crystal unfairly singled out client Champion International Corp. Chief Executive Andrew C. Sigler as an overpaid executive. Rather than respond to Millstein's complaint privately, as the lawyer hoped, Crystal retorted that he would report on it in his newsletter. "Bud's contentious," says Millstein. "He decided to make this the cause celebre of the century."

UNFAZED. What makes the adjunct professor at the University of California at Berkeley so threatening is his intimate knowledge of pay practices and the stridency he brings to the debate. The latest brouhaha over his dismissal at Financial World was spurred partly by complaints from Phelps Dodge Corp. Chief Executive Douglas C. Yearley. He was miffed when Crystal overstated his pay last year by $3 million. Crystal concedes he mistakenly credited the executive with 59,000 shares of restricted stock instead of the 5,900 Yearley received. Yearley hired former New York Times chief counsel James Goodale to demand a retraction from Financial World. The magazine complied. Crystal also publicly apologized to Yearley at a mid-January conference at Northwestern University.

Yet the incident, confirms FW, eventually led to Crystal's ouster. "Bud does things that would be considered inflammatory, and it probably didn't help his cause," says Douglas A. McIntyre, president of Financial World. It's not Crystal's first run-in at a magazine. Only last June, he quit a similar job at Fortune after alleging editorial interference over his conclusion that Steven J. Ross, CEO of Fortune's parent, Time Warner Inc., is overpaid.

Crystal promises no letup. He's already booked for Larry King's radio show and expects to address the Senate Finance Committee. They will be appearances that can only add to his notoriety.John A. Byrne in New York


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