A Legendary Chairman

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At one point in the 1960s, according to a story told in David HaIberstam’s mammoth history of twentieth-century media giants, The Powers That Be, William Paley, the chairman of CBS, was puzzled by the failure of a restaurant he had opened in the CBS headquarters building in Manhattan. He suggested to the restaurant’s manager that perhaps they should turn it into a supper club for people who wanted a late dinner after a play or concert. “Bill,” his manager informed him sadly, “there ain’t no supper business in this town.”

“No?” said the man who ran CBS. “Why not?”

The explanation was simple: “Because everyone’s home watching the tube.”

If you were home watching the tube in September 1986, then you saw William Paley, at the age of eighty-four, playing a central role in one of the most dramatic business stories of our time. It was a drama that Shakespeare might have relished, featuring the deposition of an embattled king and the restoration of his legendary predecessor—an episode from the Wars of the Roses enacted in the boardroom at Black Rock, the CBS headquarters in New York City.

When the dust settled, Thomas Wyman, who had succeeded Paley as chairman of CBS in 1983, was out as chairman, president, and chief executive officer. Paley returned as acting chairman, while Laurence Tisch, the chairman of Loews Corporation and owner of 24.9 percent of CBS—a stake worth nearly a billion dollars at the time of the struggle—took over as acting CEO. (In January 1987 the board of CBS made both appointments permanent.)

The return of Paley as chairman of one of America’s most glamorous corporations at the age of eighty-four added a remarkable chapter to a career that already loomed large in the history of American business. I would call it a “climactic” chapter, but who knows? Paley is one old soldier who seems to intend neither to die nor to fade away. Retirement homes are full of ex-CBS executives who thought they would outlast him.

 

Paley’s story follows a classic American pattern—not from rags to riches but from riches to megabucks. Yet it is not merely the story of a man who took advantage of inherited wealth. It is the story of an entrepreneur who, at a very early age, saw and seized opportunities that were far from obvious to other businessmen.

Paley’s father and his uncle, Samuel and Jay Paley, were immigrants from Russia who established a highly successful cigar company in Chicago in the 1890s. In his teens, working in his father’s factory, Bill Paley learned how to put bands on the cigars and how to mix different blends of tobacco—a perfect apprenticeship for a man who had every reason to expect that he would spend the rest of his life in the cigar business.

In his autobiography, As It Happened, published in 1979, Paley recalls a moment of illumination that occurred as he approached eighteen: “I...recognized that my father and men like him got caught up in the web of business and constantly postponed retirement and the pleasures of leisure. In order not to get caught that way myself, I made an oath to myself and a solemn vow that I would retire, no matter what, at age thirty-five.” But something happened on the way to retirement.

The power of an infant medium, radio, was brought home to Paley in an interesting way. In 1927, while his father and uncle were in Europe, he bought a one-hour program to advertise La Palina cigars on station WCAU in Philadelphia. The cost was fifty dollars per broadcast, and Paley’s uncle put a stop to his nephew’s “foolishness” as soon as he found out about it. A few weeks later Paley’s father realized that the market was sending him a message: “Hundreds of thousands of dollars we’ve been spending on newspapers and magazines and no one has ever said anything...but now people are asking me, ‘What happened to the La Palina Hour?’”

At about the same time, a friend of the Paleys, a Philadelphia building contractor named Jerome Louchheim, purchased a controlling interest in a struggling radio network, the United Independent Broadcasters. The network —sixteen stations—was backed by the Columbia Phonograph Company and known on the air as the Columbia Phonograph Broadcasting System.

In its first full year of operation the UIB ran up a net loss of $220,066. At that point, wishing to unload an apparent lemon, Louchheim approached Sam Paley with a memorable sales pitch: “Sam, why don’t you buy it from me? You at least have a cigar to advertise.”

The offer did not interest Sam Paley, but it thrilled his son. Neither the network’s shakiness nor the size of the gamble unnerved him. “I had about a million dollars of my own and 1 was willing to risk any or all of it in radio.”

After a brief negotiation Paley and his father purchased 50.3 percent of the company for $503,000, with $400,000 coming from Paley himself. At the age of twenty-seven William Paley was the president of his own company—a “patchwork, money-losing little company.”

Its main competitor, the much larger National Broadcasting Company, was backed by the immense resources of the Radio Corporation of America. RCA had created NBC in 1926 by merging its own network with a larger one that it bought from AT&T.