(FORTUNE Magazine) – Mel Karmazin is the most powerful man in radio, and he's a long way ahead of whoever's in second place. The 53-year-old street-smart boss of CBS Radio rules a vast and very profitable empire of stations and personalities, unmatched since the era before television--and that makes some people nervous.

Start with advertisers, who fear that CBS Radio, with its clusters of big-city stations, intends to use its market power to demand higher prices for commercial time. Then there are Karmazin's radio-industry competitors, who worry that he can outspend them for the best stations, talent, and programming. His 4,000 employees, meanwhile, know they are working for the toughest taskmaster in the business, one who demands results, hates excuses, and takes no guff. Why, even Howard Stern, radio's outrageous bad boy, can't say an unkind word about the boss on the air--because his contract forbids him to mention Karmazin's name.

Finally, there's Westinghouse CEO Michael Jordan. Why would he be nervous? Well, he isn't, he says, and maybe that makes sense since Karmazin works for him, at least in theory. Westinghouse bought Karmazin's Infinity Broadcasting Co. for $4.9 billion last year, just half a billion less than it paid for CBS in 1995, and Jordan shrewdly has made radio a centerpiece of his corporate strategy. As a result, CBS will earn more money this year from its thriving radio division than from its laggard TV network and stations. "It's the sleeper in our portfolio," says Jordan.

There's nothing the least bit sleepy about Karmazin, a pugnacious, blunt-spoken executive who also happens to be Westinghouse's largest individual stockholder, with roughly ten million shares that are worth about $195 million. Think of him as a shock jock in a business suit. He's already terrorized some CBS bureaucrats with complaints that they're spending too much of his money on staff lawyers, human resources, and an overpriced annual report. Says Jordan: "Mel's in your face a lot."

What's more, Karmazin is used to running his own show. He's bound to be a force for change at CBS, particularly if the stock price languishes. "His talents are going to be hard for the directors and owners of that company to ignore," says Steven Dodge, CEO of American Radio Systems, another big radio group. "It would be a terrible waste of his ability for him not ultimately to surface as 'the guy' in that company."

Wall Street is already applauding Karmazin's arrival at CBS. He is popular with investors for good reason: Infinity's stock price climbed by 58% a year, on average, after the company went public in 1992 at $17.50 a share. Investors smart enough to have bought at that time collected $170 when Infinity was acquired by Westinghouse last December. Analysts credit Karmazin, who ran the company with a relentless focus on shareholder value, driving his people hard to bring in more revenues and watching every nickel as if it were his own. Says James Singleton, vice chairman of the merchant bank Cypress Group and a former Infinity board member: "Mel is the consummate shareholder CEO. That's what he lives and breathes."

Indeed, Karmazin eschews most of the trappings of corporate America. No paintings, photographs, or trophies adorn the walls of his midtown Manhattan office. He lives by himself across the street, often goes to work before breakfast, goes home for lunch to ride a stationary bicycle, and cares not, he says, for such perks as limousines or corporate jets. Straining credulity just a bit, Karmazin insists that he made all the money he needs even before joining Infinity, by accumulating Metromedia stock when he worked for John Kluge in the Seventies. In a rare sit-down interview with FORTUNE, Karmazin said his focus since then has been his investors: "I was driven by opening up the paper and seeing my stock price every day. I truly got off on that."

While Karmazin has worked in radio for 30 years, only recently has the industry taken flight. Radio executives became more professional in the Eighties, bringing sophisticated market research and targeted program formats to what had been largely a mom-and-pop trade. Those trends dovetailed nicely with the growth of niche marketing and advertising, and the business grew at a good clip. But not until the Federal Communications Commission eased ownership limits in the Nineties could groups like Infinity explode into multibillion-dollar enterprises. The Telecommunications Reform Act of 1996, which eliminated national limits on station ownership and permitted companies to own up to eight stations in a market, set off a tidal wave of consolidation--some $15 billion in station sales last year, up 315% from 1995--that continues unabated to this day. "It changed our whole world," says Karmazin.

In other ways, though, radio hasn't changed much. It's a simple business, really: Put on popular programs, promote them, attract listeners, and sell them to advertisers. Perhaps surprisingly, it's also a growth business: Listenership and ad revenues have grown steadily during the Nineties. In an unstable media world, where TV, cable, videocassettes, newspapers, magazines, books, and the Internet all compete for people's time at home, radio remains the companion of choice for those in their cars or at work. And, in case you haven't noticed, traffic jams are worse than ever. "You're not going to see any technology that's going to put radio out of business tomorrow," says James Marsh, a media analyst with Prudential Securities. "It's got staying power, and it's very profitable when it's done right."

No one has done it better than Karmazin. The son of Eastern European immigrants--his father drove a taxi, his mother worked in a curtain-rod factory--Karmazin grew up in a housing project in Long Island City, New York, in the shadow of the 59th Street bridge. "My family had zero money," he says. "We never had a vacation. We never had a car." He got into radio by accident, when a high school teacher offered him a typing job in an advertising agency. The owner, Irwin Zlowe, encouraged him to go to college, which he did, taking classes in the mornings, evenings, and summers at Pace College, where he earned a business administration degree. That ended his formal education; he's done things his own way ever since.

He wasn't impressed by his first experience working in corporate America, which unfolded at WCBS-AM Radio, as it happened, after he joined as a $17,500-a-year ad salesman in 1967. Karmazin sold so many ads that his boss cut his commission rate; he made $70,000 anyway and was told that was too much for a salesman. "That was the dumbest thing I'd ever heard in my life," he says. "I quit."

Even then, Karmazin told colleagues that he wanted to run a company of his own. Today, he pays good salaries and sets no limits on what his salespeople can earn; Infinity's top salesman brought in close to $400,000 last year. Salespeople are paid based on revenues, programmers based on ratings, and general managers based on cash flow.

After WCBS, Karmazin spent 11 years at Metromedia; in 1981 he joined two former colleagues, Gerald Carrus and Michael Weiner, at Infinity. They had founded the company, which then owned just three radio stations, but Karmazin insisted on running it and earned stock options to increase his stake. Playing the Wall Street game in the Eighties, the trio took the company public in 1986, bought it back in a leveraged buyout in 1988, and returned with a second IPO in 1992--making money for themselves and their shareholders each time.

Karmazin's strategy for building the business was more straightforward. Infinity bought top stations in big cities--"oceanfront properties," he calls them--paying then-record prices for such outlets as New York all-sports station WFAN-AM ($70 million) and Los Angeles oldies station KRTH-FM ($116 million). Wherever possible, he sought out high-profile morning hosts like Stern and satirist Don Imus in New York, or local legends Ron Chapman in Dallas and Dick Purtan in Detroit, who was hired away from a competitor last year. Karmazin also bought the radio broadcast rights to popular sports teams like the Dallas Cowboys and the New York Mets, Knicks, Rangers, Giants, and Jets. "A lot of radio stations play the same music," Karmazin says. "We want programming that can't be replicated."

If hiring shock jocks meant taking some heat, Karmazin was willing. The foul-mouthed Stern, with his sex and bathroom humor, was too much to bear for corporate higher-ups at NBC, who fired him in 1985--an episode hilariously chronicled in his Paramount movie, Private Parts. Karmazin snatched him up, knowing he had a huge following among listeners and betting that advertisers would stick by Stern because "they knew how good a salesman he was." So what if Stern farted and belched his way to fame--he generated lots of cash flow for Infinity.

For years, Karmazin even stuck by Stern when the Federal Communications Commission repeatedly charged him with indecency. Among the alleged violations: Stern talked about masturbation and orgasms and joked that Woody Allen's 21-year-old girlfriend liked his "old Jewish penis." Karmazin spent a small fortune fighting the FCC in court, refusing to pay any fines and accusing the agency of trampling on the First Amendment. But eventually he agreed to make a "voluntary contribution" of $1.7 million to the federal government to clear Infinity's record. Why the about-face? Fighting for free speech was all well and good, but Stern's FCC problems were hampering Infinity's ability to buy more stations. "I had a business to run," Karmazin explains.

If Stern and Imus helped make Infinity rich, Karmazin did well by them too. The first time Karmazin met Imus after Infinity bought WFAN, the I-Man asked him for a digital workstation to produce funnier bits, something the previous station owners hadn't provided. Imus got one right away, along with a new five-year contract reportedly worth $12 million. He had just signed again with the man he calls the "Zen Master" on the air. "I know everybody from Sumner Redstone to Ted Turner," says Imus. "I wouldn't have considered working for anybody else."

Neither Stern nor Imus was heard outside New York before they joined forces with Mel. Conventional wisdom held that radio morning shows couldn't travel, but Stern is now heard in 35 cities and on cable's E! Entertainment, while Imus is carried by 100 stations and MSNBC Cable, all generating revenue for CBS. Most other big-name radio personalities either work for CBS Radio or Westwood One, a powerhouse radio syndication company that Karmazin began managing in 1994 after it merged with a rival syndication firm he ran. Under his hand, Westwood's value climbed from less than $3 to nearly $20 a share.

The Westinghouse-Infinity deal came together swiftly last spring. Initially, Karmazin wanted to buy the CBS and Westinghouse stations; he even offered to buy all of Westinghouse, with the idea of spinning off everything but radio. But Jordan, who recognized radio's potential, wasn't selling. Karmazin says he saw such power in an Infinity-CBS-Westinghouse combination that he was willing to be acquired, provided he remain in charge of the radio units. He negotiated a four-year contract that gives him a base salary of $925,000, plus performance-based bonuses of up to $2.6 million a year and options to buy 500,000 Westinghouse shares.

Now CBS Radio has 77 stations in 16 major markets, with powerful clusters in New York, Los Angeles, Chicago, Philadelphia, and Dallas. "The dramatic consolidations have created groups that reach audiences that are comparable with television's," says Frank Bodenchak, a Morgan Stanley analyst. If newspaper publishers aren't already worried by Karmazin, they should be--he's going after their customers, organizing sales teams in each city to target only new accounts. "Circulation is dropping. Young people are not reading. Internet provides an alternative," Karmazin says. "The advertising pie is likely to be rejiggered, with newspapers being the big loser." He told his general managers right after the merger to increase ad revenues by another 5% this year, over their earlier targets, solely because of his arrival. "The Mel tax," it's called inside CBS. Says Karmazin: "There is no excuse for not selling advertising. You hit your number. You get paid to do that."

Karmazin's swagger vexes advertisers, though, particularly those who are committed to radio and will find it hard to bypass CBS. "They're buying up control," says Jean Pool, director of North American media services for J. Walter Thompson. "Control means higher prices, monopoly prices, collusion. And we consumers will pay." Others argue that if Karmazin raises prices too high, he'll undermine his effort to win market share from newspapers and television.

Being big also means Karmazin can try new things. He'd like to hire a top creative director from an ad agency, solely to stimulate better radio commercials. (Some say the last great radio campaign was Motel 6's "And we'll leave the light on for you.")

Unlike some radio operators, though, Karmazin doesn't see consolidation as a major cost-cutting tool, although he eliminated a CBS national sales unit after the merger, saving $8 million. He does plan to import Infinity's strict cost controls to the much larger CBS group, requiring that he or a trusted aide sign off on every hire, every raise, every overnight trip, and every purchase over $500. He even reviews the phone and Federal Express bills for every station--this at a division that will generate more than $1 billion in revenues and close to $500 million in cash flow this year.

With radio doing so much better than television for CBS, Karmazin has been asking pointed questions about TV, cable, and especially the Westinghouse corporate operations, which, he suggests, could use some pruning. "I'm having an awful lot of fun going through the building on 52nd Street to pare down costs that had been attributable to radio," he says impishly. "I'm not making a lot of friends, but I couldn't care less." One CBS executive describes Karmazin as "an outside agitator." Says another: "Mel is relentless."

How Jordan really feels about the whirlwind in his midst isn't clear. "I've always believed that constructive conflict is the way organizations grow and develop," he says cautiously. Jordan and Karmazin say they like each other, but they couldn't be more different. "Mike is the buttoned-down, soft-spoken McKinsey guy with his goals, assumptions, objectives, and bullet points," says a well-placed insider. "Mel is colorful, very blunt, unabashedly no-nonsense, combative, challenging." Here's another key difference: While Karmazin's Infinity shares easily outpaced the S&P 500, Jordan's Westinghouse stock has lagged well behind the market, growing by a paltry 28% since he became CEO in 1993.

None of that should matter if Jordan succeeds in driving up the stock price of CBS Inc., the media company he will run after Westinghouse spins off its remaining industrial assets later this year. He's done a superb job assembling TV, radio, and cable assets, and has a topnotch team in place to manage them. For his part, Karmazin says he's not interested in running CBS. But he wants results, and he's not known for being patient. Asked about Jordan, he says, "He's a terrific guy. He's a very nice man. I like him a lot." Then: "My interest is in getting the stock price up." Don't touch that dial--this story isn't over yet.

REPORTER ASSOCIATE Ani Hadjian