(FORTUNE Magazine) – SINCE he snatched CBS's top job from Thomas H. Wyman in a melodramatic September boardroom battle, Laurence A. Tisch has gone to great lengths to present himself as a conciliatory fellow almost overwhelmed with reverence for the proud traditions of CBS. Don't be fooled. This short, bald dumpling of a man, who looks so profoundly out of place in the extravagant confines of Wyman's old five-room office suite, is without question going to stand CBS on its ear. Tisch's conquest completes the transformation of the network business from a glamorous swirl of glitter and smoke to a decidedly earthbound contest of nuts-and-bolts operating managers. ABC's January takeover by Capital Cities, a company of legendary leanness, set the tone. Then NBC (and parent RCA) merged with General Electric, where chief Jack Welch had earlier eliminated 100,000 jobs. In many ways the lessons of the CBS affair apply to managers in any industry, from steel to oil to banking, who are caught in changing markets. It is a strong reminder of the need for executives and boards of directors to put shareholders' interests first. A self-contained, self-made billionaire, Larry Tisch is as well known for the icy rationality of his investment decisions as for his warmth of personality. He shows no sign of being intimidated, much less deceived, by the costly trappings of CBS's faded preeminence. Told that many Wall Street security analysts are less troubled than he by CBS's mediocre financial performance, he says, ''That's Wall Street's problem.'' In concert with his tightknit family, Tisch, 63, controls Loews Corp., a cost-conscious conglomerate that has bought a quarter of CBS's stock. Tisch -- who usually enjoys pocketing a fat trading gain -- has ignored entreaties from takeover types eager to pay premiums of 40% to 60% for Loews' CBS holdings. In an unusually strong statement Tisch says: ''While I am involved actively at Loews, the stock owned by Loews will not be for sale.'' Asked by FORTUNE what kind of improvement in performance he was looking for at CBS, Tisch casually offered a reply stunning in its implications. ''The return on assets isn't high enough,'' said the financier, who then went on to muse: ''What's a fair return on assets these days -- 12%?'' Twelve percent? Yipes! During his six years in office Wyman, 56, a widely respected, old- school professional manager who sits on some of the most prestigious boards in America (GM, AT&T), never beat 6.2%. CBS's return on equity is high because the company shrank its equity by buying back a lot of its stock, which it paid for through heavy borrowing. ; Tisch hastens to add that he is still studying CBS and that the 12% goal is unrealistic for now. But it is informative nevertheless. Were he to settle on 12%, he would be looking for roughly double what CBS recently earned on its $3.1 billion of assets, an expectation that implies CBS would have to earn about $380 million a year. In its best year this august enterprise made little more than half that, and now, with viewer defections, much tougher competition, and the worst TV advertising market since 1971, CBS is in the middle of a slide that is still gaining momentum. Tisch says he is convinced that the conditions squeezing CBS are likely to endure. To meet Tisch's goals, CBS will have to boost earnings dramatically, sell a lot of assets, or -- most likely -- both. Sean McGowan, a security analyst at the Balis & Zorn brokerage firm, suggests Tisch may sell CBS's nonbroadcasting properties and use the proceeds, perhaps $2.5 billion, to buy back stock and retire debt. Over time he may do just that, but Tisch says he is not considering the sale of anything. It is worth noting that Tisch's unchallenged reputation as a man of his word depends partly on the lawyerly care with which he sometimes chooses his words. His commitments are often sharply limited. When he says he isn't considering something, he is expressing only a transient state of mind subject to infinite later change. ''The word 'forever' scares me,'' he says. ''I don't like to box myself in.'' According to Tisch, anyone who believes he promised not to buy more than 25% of CBS is mistaken; the point was a big issue as board members speculated about Tisch's intentions. ''I never gave that promise,'' says Tisch. ''We said it was our present intention to buy up to 25%.'' He considers himself free to change his mind anytime. Whatever he decides about selling assets, Tisch will have to focus on pumping up earnings. He has most closely studied CBS's TV business -- ''We're basically a broadcasting company,'' he says -- and he relishes talking about the ratings and revenue increases to be won with better programming. In that area he humbly defers to CBS founder and 8% shareholder William S. Paley, 85, recalled at his own request from cantankerous semiretirement to serve as chairman once again. Probably no one at CBS believes Paley, even in his prime, could come up with programs that would quickly boost the network's profits by sums huge enough to delight Tisch. Like other network executives, Tisch plans to fight for slower growth in programming costs. CBS spends $2 billion a year on programming, so even a 1% swing can make a big difference. But the dispute over costs between the networks and the studios that produce programs has lasted years, and progress has not been dramatic. That seems to leave only one immediate option: a frontal assault on the profligate corporate culture. Arguably the fattest of the three network companies, CBS came of age in TV's golden days, when its No. 1-rated network threw off far more cash than the imperious Paley, then chief executive, could wisely spend. The waste continues. Although Wyman eventually cut 10% of CBS's bloated $500-million annual overhead -- a move that outraged employees -- CBS is still rich in staff. Except in the records group, Wyman left CBS's easy-come-easy-go style of asset management fundamentally unaltered, while the markets CBS serves changed profoundly. Tisch says he is ''looking to see major accomplishments in operations by the end of the year.'' Shortly after Tisch's ascension, a veteran senior vice president of CBS was proudly regaling visitors with familiar stories about the expensive lengths to which CBS went in building its headquarters, known as Black Rock: The Canadian granite that sheathes it, for example, had to be buffed just so lest it reflect sunlight. While he was telling the story, Capital Cities/ABC, just across 53rd Street, was selling its Manhattan headquarters for a reported $150-million gain. In business values, Tisch has more in common with Cap Cities and its penny-wise boss, Thomas Murphy, than with his new colleagues at CBS. When he moved into Wyman's office he did not call in an army of decorators to refurbish the place overnight. Instead Tisch brought over a couple of framed family photos and set to work. TISCH'S POWER to enforce his wishes at CBS is greater than it may seem at first. He does not command a voting majority of the stock and he is Loews' only representative on the 14-member board, a situation with which he is content at present. But if the board refuses to listen to reason, Tisch has ample resources to buy still more CBS stock, which is suddenly getting cheaper as investors realize Tisch is unlikely to sell out to a raider. Security analysts expect the price to drop from the recent $125 a share to about $115 -- which would be $12 less than the average price Loews paid. The board probably won't provoke Tisch into hostile action. ''Reasonable people can work out their differences,'' says Tisch, an unusually reasonable man. He is a crafty and patient diplomat who has carefully avoided flaunting his power. The board seems malleable, especially since the public-spirited Tisch is unlikely to try to corrupt the objectivity of CBS News. Directors consider CBS a ''public trust,'' an excuse to spurn takeover offers of up to $160 a share. Given the current price, some shareholders might have preferred to sell. The directors must also realize that they have backed their share of stupid business decisions. One was the purchase of several Ziff-Davis magazines in 1985 for $360 million, which industry experts consider at least $50 million too much. This board evidently does not worry overmuch about financial results. Even when it abruptly withdrew its support from Wyman, the cause was not his undistinguished performance but rather his betrayal of trust by shopping CBS to Coca-Cola without authority. Tisch's proposals are likely to benefit CBS's shareholders, so the board will probably go along. His first move, already well under way, is stabilizing an organization that has been rocked by a major libel suit by General William Westmoreland, takeover threats from Jesse Helms and Ted Turner, near revolution by the anti- Wyman faction at CBS News, and a long series of financial reverses. ''It was like nuclear fission,'' says a member of Wyman's team. Also under way: the search for a CBS chief executive to replace Tisch, who with Paley is serving on an ''interim'' basis. When the replacement comes aboard, Tisch will probably move up to chairman without much loss of authority. Paley, apparently enjoying his comeback, might balk. Tisch is not waiting for the new chief executive. He is diving into the 1987 budgeting process, which has just begun and promises pain. Signs of the Tisch style are already proliferating. For example, the corporate public relations department, one of many at various levels of CBS, has been ordered to cut 12 from its staff of 19. The corporate arrogance that permeates CBS has not been justified by the company's performance for a long time. By the time Tisch is done, CBS may once again have earned its pride. BOX: INVESTOR'S SNAPSHOT CBS SALES (LATEST FOUR QUARTERS) $4.8 BILLION % UP 4% NET PROFIT $196.0 MILLION CHANGE DOWN 31% RETURN ON COMMON STOCKHOLDERS' EQUITY 32% FIVE YEAR AVERAGE 20% RECENT SHARE PRICE $125.25 PRICE/EARNINGS MULTIPLE 16 TOTAL RETURN TO INVESTORS (12 MONTHS TO 9/19) 14% PRINCIPAL MARKET NYSE LOEWS ASSETS (AS OF 6/30/86) $18.5 BILLION CHANGE FROM YEAR EARLIER UP 30% NET PROFIT (LATEST FOUR QUARTERS) $547.0 MILLION CHANGE UP 21% RETURN ON COMMON STOCKHOLDERS' EQUITY 20% FIVE-YEAR AVERAGE 17% RECENT SHARE PRICE $62.75 PRICE/EARNINGS MULTIPLE 9 TOTAL RETURN TO INVESTORS (12 MONTHS TO 9/19) 42% PRINCIPAL MARKET NYSE