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	REMARKS TO THE SOUTHWEST PENSION CONFERENCE NEW ORLEANS LA MAY 9, 1988

Thank you, Bill (Warren).

[Handwritten addition: Sounds like another ship leaving without me.]

Mesa stockholders here today?

[Handwritten addition: Remember we have the only confidential vote in Corp. Am.]

Here to talk about Corporate America’s problems. . .[Handwritten addition: and the proxy process is just one of those problems. Today’s WSJ—Proxmire unusual phenomenon Demos with big bus.] offer solutions.

Corporate America is in the middle of a major overhaul. . .long overdue. . .hard part just beginning.

We’re seeing a transformation of American corporations:
—Focus on results, not size;
—Create value, not empires

Problems started just after WWII. . .professional manager.

Separation of ownership and control.

Managements seemed intent on building huge bureaucracies. . .GM 14 layers, Japanese 5:
—Perot’s snake story in Fortune in March

Now, managers are insulated. . .poison pills, golden parachutes, anti-shareholder legislation.

No matter how poorly management performs, there’s little that shareholders can do about it.

That’s one of the reasons [Text stricken: my wife Bea and] I formed USA in August ’86. . .upgrade shareholder awareness. [Handwritten addition: Non-profit not same method to help TBP contributions plus honorariums now well over $1mm.]

Things slowly starting to change. . .Large shareholders and institutional investors are making a difference, forcing restructuring.

First speech I made on restructuring. . .L.A. in 1982. . .guy said he wasn’t sure what I was talking about. . .Symphony.

He wasn’t the only one who didn’t understand the issue back then. . .many people still don’t.

Managements understood all too well; empires were threatened. . .being forced to downsize, [Handwritten addition: forced to] manage for shareholder value.

[Handwritten addition: In other words managements were getting a clear signal—the natives were getting restless.]

Restructuring is not a passing trend. . .an ongoing process. . .Explain MLP restructuring.

It’s a rethinking of the old conglomerate theory. . .size syndrome. . .Goodyear example.

Five years from now, Corporate America may need to take another direction. . .restructuring gives flexibility to change with the times, stay competitive.

With current restructuring, we’ve returned to the basic principles of capitalism. . .based on creating value for owners.

Why has this happened? Stockholders, especially large institutions, are realizing they are owners, not passive investors. [Handwritten addition: and they do have a fiduciary responsibility that must be carried out.]

[Text stricken: USA playing a big part.]

[Handwritten addition: We are getting results]

Recent Fortune. . .Fortune 500 companies restructured, cut fat and dramatically increased productivity and efficiency:
—Profits soared to all-time highs in 1987

Should be no surprise.

Countless studies show restructuring helped Corporate America and economy. . .created value for America’s 47 million shareholders; millions more in pension plans like yours.

But there’s a crowd out there fighting change. . .being left behind at the station. . .Iron—headed CEOs won’t accept change, won’t take advantage of it.

This crowd is easy to identify. . .No stock; Big salary; Big bonus; Big mouth:
—And one other thing. . .anti-shareholder amendments in the bylaws

Go back to the ownership point:
—BRT. . .3 tenths of 1%

Example; Campeau’s takeover of Federated Department Stores.

Federated CEO Howard Goldfeder. . .37 years, $800,000 salary (before bonuses). . .owns only 3,000 shares; 32 ten-thousandths of 1 % of the company.

Gordon Parker with Newmont. . .back then owned 406 shares (Not even a round lot).

Management ownership is linked to performance. . .April Fortune studied the 25 best performing companies of ’87. Fortune quote:
—“These outfits share a striking characteristic: Management and members of the board of directors own significant chunks of the stock, giving them a strong voice in running the show and a stake in the outcome.”

The new battlefield. . .retained earnings. . .USA will be active.

Corporate profits have soared. . .But what are they going to do with the profits?.
—Dividends at all-time low. . .average 3.5% yield
—Average dividends for Fortune 500; 20% of cash flow. . .that’s $65 billion of $325 billion annual cash flow

Remaining $260 billion is left to managements’ discretion.

I’m talking about 500 CEOs, with virtually no accountability, holding the purse-strings on $325 billion; $650 million each!

Mesa distributed $310 million in 1987; Boeing $217 mm; Unocal $117 mm; Goodyear $91 mm.

With today’s 28% tax rate, there’s every reason to push out a higher percentage of cash flow.

Push out 50% of cash flow instead of 20%:
—Dow would go to 3000
—Prevent a 1989 recession
—Upgrade standard of living

Institutional investors must provide leadership in restoring shareholder rights:
—Research capability and fiduciary responsibility

USA is doing what it can, but we need your help.

[Handwritten addition: Simple agenda—
1. One-share          one-vote
2. Confidential vote
3. Access to proxy process
4. Outlaw greenmail—poison pills]

[Text stricken: In conclusion. . .restructuring is here to stay.]

[Handwritten addition: We’re doing the heavy lifting in Washington—Please get involved]

[Handwritten addition: The shareholder rights movement is here to stay]

The data has been analyzed, the results are in and the restructuring philosophy has been almost universally adopted.

Resisting it will only postpone the cure. . .not a matter of now or never; it’s inevitable!

Can’t legislate against it. . .it’s driven by economics! It may be painful at times, but our country will be better off as a result.

Thank you.

QUESTIONS & ANSWERS