Ross’s troubles began when the business press issued its annual lists of top-paid executives in the spring. Ross topped most of them by reportedly earning an astonishing $78 million in 1990, and his picture graced the cover of Forbes magazine. The latest magazine to weigh in was Fortune, which also called Ross America’s highest-paid executive. But the magazine put his pay at a dowdy $39 million. Was this a mere difference in interpretation? Not exactly, says Graef Crystal, the pay expert who has prepared Fortune’s survey for four years. Fortune has called Crystal, an adjunct professor of business at the University of California, Berkeley, “America’s foremost authority on executive compensation” - but last week he resigned his Fortune assignment, contending he had run into “heavy interference” from the Time Warner executive suite. Crystal told NEWSWEEK, “The climate has really changed in the past two years.” He says that Fortune editors told him magazine group editor in chief Jason McManus went over every word of his article “like he was reading the Dead Sea scrolls.”
ot true, responded Fortune managing editor Marshall Loeb. “There was absolutely no interference,” says Loeb. “We’re totally insulated at Fortune from any kind of pressure or influence.” And McManus, he says, “did not study it in any detail.” Loeb also says he never heard from Ross on the article, but he said that when The Wall Street Journal broke the story of Crystal’s resignation last week, Ross was outraged. “He said, ‘You know I never go near the magazine’.” Crystal acknowledges that he was not forced to change anything of substance in his article.
Much of the flap involves the tricky question of how to value stock options. Everyone agrees that Ross got $3.3 million in salary and other compensation in 1990. But Time Warner also awarded Ross a stock-option grant that gives him the right to buy 1.8 million shares of Time Warner at $150 over 12 years. Crystal valued those options at more than $100 million. Then, applying a method used in previous years, he spread that amount over three years to avoid a one-year bulge. Other publications lumped the options into the year they were awarded.
The controversy comes at a bad time for Ross and Time Warner. Many stockholders have been furious since the company announced a complicated plan last month to raise up to $3.5 billion by issuing new stock. The market has sent its stock plummeting by 25 percent to about $88 last week. A spokeswoman says that Ross may indeed be a “lightning rod.” But in a year, she predicts, “Sununu will probably disappear and people will still love Ross.” Maybe so, but it’s clear that unlike Hollywood, Wall Street isn’t so willing to let Ross have a smooth ride.
