Behind the Purge at CBS

At 11 one morning last week, the directors of CBS Inc. walked into the 35th-floor boardroom of the company's headquarters tower in mid-Manhattan for their monthly meeting. They could not fail to notice the one empty seat at the huge, 17-place mahogany table--the seat reserved for President Arthur R. Taylor--but no one said anything about it. They had all been warned of what was going to happen next. CBS Chairman William S. Paley, 75, wasted no time. He announced that Taylor, 41, a financial wizard whom Paley himself hand-picked in 1972 for the presidency, had resigned, effective immediately. What "the Chairman," as Paley is known at CBS, did not say was that just a few hours earlier he had summoned Taylor to his office--and fired him.

Paley had other announcements. Next April, he said, he himself would give up his post as CBS's chief executive officer, though he would remain as chairman. To fill Taylor's job, he named John D. Backe, 44, the president of CBS's publishing division. Then, as if to calm ruffled nerves, came a flood of impressive figures. CBS's third-quarter profits rose to a record $40.8 million on sales of $525 million. That was a big jump from the same period last year, when the company earned $29.1 million on revenues of $461 million, and clearly pointed the way to CBS's first $2 billion year. The directors quietly approved all the decisions and adjourned at 12:20.

Charming Autocrat. The shake-up at Black Rock, as the CBS glass-and-granite monolith on Sixth Avenue is known, caught the broadcast industry by surprise--including senior executives at CBS. "This comes as a complete bolt out of the blue," said a corporate spokesman, struggling to explain the changes. What everyone wanted to know was: Why? Why had Taylor been fired after leading CBS to ever greater financial success and presumably having been selected by Paley to succeed him? Why had Backe, who had no experience in broadcasting--the heart of CBS's operations--been chosen as the next president? Why was Paley giving up one of his jobs?

The last question was easiest to answer, and indeed holds the key to the others. Paley's resignation as C.E.O. means virtually nothing. Renowned as perhaps the greatest of broadcasting's pioneers--and as an autocrat of considerable taste and charm--he has run the company ever since 1928, when he bought control of the 16 radio stations that were to become the Columbia Broadcasting System. CBS now has some 213 television and 255 radio affiliates, plus divisions producing records, musical instruments, and books and magazines. Since he was the man who created this still burgeoning enterprise, Paley apparently has no intention of relinquishing control of it.

"Look," argued one longtime observer of the ways of Black Rock, "if Paley had wanted to bow out, he would have bowed out this week and not waited until next April." CBS insiders pointed to the fact that Paley even then will remain not only chairman of the company but its biggest stockholder, with about 1.5 million shares. Says an old Paley student, CBS Director Frank Stanton, 68: "I foresee no critical change."

Ax Man. Stanton should know. The first of Paley's presumed corporate heirs, he joined CBS in 1935, became president in 1946, and always expected to take over when the chairman reached retirement age of 65. But when that date finally arrived in 1966, Paley announced that he would not step down after all; it was Stanton who retired at 65. His successor was Charles T. Ireland, a financial expert hired away from International Telephone & Telegraph in 1971 to guide an ambitious acquisitions program. When Ireland died of a heart attack the next year, another outsider with financial savvy was brought in: Arthur Taylor, then a 37-year-old whiz kid from International Paper Co.

Taylor once remarked that "people either like me or they don't." Many did not. Wielding a corporate ax as probably only an outsider could, he consolidated some unprofitable operations, sold off others (including the then losing New York Yankees), and imposed rigid cost controls, all of which trimmed a case of middle-age corporate spread at CBS and led the company to 17 straight quarters of high profit. But some executives bridled at what they considered Taylor's arrogance, which apparently grew as quickly as the company's earnings. It is said that Taylor once stormed up to a man using a telephone booth in Washington and shouted at him to get out, announcing, "I am president of CBS!"

Taylor's hard-nosed style did not go over well with the people making TV films, either. Says a Hollywood executive: "Producers and stars are generally individualistic. They don't respond well to corporate thinking. Taylor wasn't easy with the people out here." Taylor also irked newsmen by lecturing them on freedom of the press. When his managers objected to his attempts to be what one calls "a conscience of the industry," he overrode them.

Paley had more tangible reasons to be upset. This year CBS is having trouble coming up with big new TV shows. For the first time since the 1950s, the company is behind ABC and NBC in the audience ratings. Since programming is not a direct responsibility of CBS's president, Taylor might seem to be free of responsibility for the plunge in ratings or the consequent six-point drop in CBS stock since the new TV season began last month. But Paley, some insiders believe, blamed Taylor. He invented the industry's new "family viewing hour"--the sanitized period between 8 and 9 p.m. in which programming is supposed to be free of sex and violence. To meet family-hour standards, CBS had to move popular shows like All in the Family into later time slots, where their ratings dropped; some newer shows (Doc, Switch, Spencer's Pilots) are mired in the bottom 50.

King's Wrath. Another apparent irritant to Paley came in 1973 when Taylor hired an International Paper executive, presumably to fill his shoes when he stepped into Paley's. Says former CBS Programming Chief Michael Dann: "There is no such thing as power politics at CBS. Power rests with the throne and Mr. Paley is the king." Adds Dann: "When the old man gets mad, he gets mad. And when he gets mad, he lets go his wrath." A board member puts it another way: "CBS is the house that Paley built, and he simply didn't want to leave it in the hands of Arthur Taylor."

Whether Paley will want to entrust it to John Backe (pronounced Backey) remains to be seen. Backe is also an outsider. The son of an employee of B.F. Goodrich in Akron, he went to Miami University in Oxford, Ohio, served in the Air Force, then joined General Electric and studied at Cincinnati's Xavier University for a degree in business administration. In 1966 Backe moved to Silver Burdett, the publishing arm of General Learning Corp., a joint venture of GE and Time Inc. By 1969 he had become president of General Learning, leaving it in 1973 to head up CBS's publishing group,* where he boosted sales from $150 million to $207 million in three years.

"Backe is a bright and capable manager's manager," says a CBS director. Adds a former colleague: "He has an analytical mind. He can be very warm and attractive, but he's tough in business. John also has a quality of dash that goes with his hobby of flying planes." Yet Backe is not well known at Black Rock --his offices were in a publishing house on Madison Avenue--and he will have to learn fast about the rest of the company, particularly its broadcasting area. He will get help, of course, from the man who likes being needed--and plans to keep on filling that key role at CBS as long as possible--William S. Paley.

"Three publishing houses--Holt, Rinehart & Winston, Popular Library and W.B. Saunders --and 25 magazines, including Field & Stream, World Tennis and Road & Track. The division also has negotiated to buy Fawcett Publications.

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