The company would not comment, but insiders said an agreement was struck early last week and the upcoming board vote is a mere formality.
If the board signs off, it will mark the first time the nation's largest magazine publisher has tapped someone outside Time Inc. to fill its top editorial post, now held by Jason McManus, 60.
"It's a pretty earthshaking message to be sending out internally," said one top editor. "Are we now saying you can no longer build your career here, that we're just like every other magazine company that rewards job-hopping?"
But other insiders argue that Mr. Pearlstine, 51, an outgoing, charismatic editor, will bring new visibility to a position many felt was reduced in status after the 1989 merger of Time Inc. and Warner Communications.
The editor in chief was removed from the Time Inc. board in December 1992 as part of a restructuring. That policy is not expected to change.
Mr. Pearlstine will have one thing his predecessor never had: close ties to Time Warner Chairman-CEO Gerald Levin. Both men graduated from Haverford College outside Philadelphia and have been active alumni, serving together on the board of managers from 1986 to 1989.
Mr. Pearlstine, who left as executive editor of the Journal in June 1992, now is chairman of Friday Holdings, an investment company he formed in early 1993.
The Jordan Edmiston Group, New York, has been retained to dispose of Friday Holdings, Ad Age has learned. The investment group had received cash backing from QVC, Paramount Communications and investor Richard Rainwater. However, the partners have not met for a year.
In addition to BIS Strategic Decisions, a market research company purchased from Nynex Corp. for an estimated $10 million late last year, Friday Holdings also had a Media & Technology Group that published a newsletter and directory of new-media alliances.
But plans to start a new-media magazine were dropped; work began on breaking up the company.
That led to the July departure of Exec VP Peter Eldredge, a former Newsweek publisher.
Mr. Eldredge was vacationing in London last week, but industry executives said he has talked with Chris Meigher about joining Meigher Communications.
Other fallout at Friday Holdings included last week's announcement that Managing Partner John Geddes, a former assistant managing editor on the Journal and now president-CEO of BIS, will join The New York Times in early October as business editor. He will succeed William Stockton, who has moved to a special projects post.
The recruitment of Mr. Pearlstine is seen as a blow to Henry Muller, former managing editor of Time. As Time's corporate editorial director, he was considered a possible successor to Mr. McManus. It's also a blow to Walter Isaacson, Time Inc. editor of new media and a former Fortune associate managing editor, and Time Managing Editor James Gaines.
Mr. McManus has more than a year remaining on his contract. He could not be reached.
"I just think Levin was unhappy with McManus," a top editor said.
Richard Clurman, author of "To the End of Time" who is working on a book about Dow Jones & Co., said: "McManus has said for some time he wants to retire ... I think the idea is to change the Time culture."
Mr. McManus, editor in chief for the past seven years, was the quintessential Time careerist. He rose through the ranks, becoming managing editor in 1985. Two years later, he was tabbed to succeed the legendary Henry Grunwald as editor in chief.
Mr. Pearlstine was executive editor of Forbes in 1978-80, then returned to the Journal. In 1983, as managing editor, he oversaw the dramatic redesign that added a third section to the nation's largest daily paper and increased coverage on marketing and media.
After leaving the daily, he was a highly successful consultant for the launch of SmartMoney, a joint venture between Dow Jones & Co. and Hearst Corp.