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DRAFT OF OPENING STATEMENT
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Chairman Wolens and members of the committee, thank you for inviting me to testify today on legislation which I believe would severely hinder the rights of shareholders of Texas corporations.
I’m general partner of Mesa Limited Partnership [Text stricken: which is] based in [Handwritten addition: Texas] [Text stricken: Amarillo] I’m also founder and chairman of the United Shareholders Association.
— USA has more than 58,000 members nationwide, including 8,000 [Text stricken: here] in Texas.
[Handwritten addition: Mr. Eagan must hav been trained by Moon Landreau]
[Handwritten addition: Comment about Mr. Eagan’s testimony — RJR. Ross Johnson — $17 billion — sold for $25 billion — $8 billion difference I heard “The directors got the $110 a ahare (425 billion), they had an auction” Let’s expand that philosophy — auction —.]
[Handwritten addition: Confidential vote MLP is only Co. cost less than $20,000, with 176,000 stockholders]
— There are over 3 million shareholders in Texas who own stock directly. When you count insurance and retirement funds, one out of every two people in Texas are benefited by stock ownership.
The legislation you are considering today is identified as anti-takeover, but it is more accurately characterized as anti- shareholder
[Handwritten addition: Voting rights have to be voted on — ownership is ownership — buy a car and vote to see if you can drive]
[Handwritten addition: “Long term stockholders sell to arbitragers — they are short term stockholders” [Text illegible: I ask where did the stock come from that all owed the arbe to buy?]]
That’s because this bill is intended to confiscate the most fundamental right of shareholders — the right to freely decide when and to whom to sell their stock.
A number of other states have considered similar legislation. In every case, management interests pushing the legislation claim it is designed to protect shareholders. But shareholders have not lobbied for these bills.
The Texas legislation is no exception. I saw an analysis of the bill the other day. It was headed: “Texas Shareholder Rights Law.”
At first I thought this might be something really worthwhile. But once I started reading, I realized it was the same old management protection legislation that has been pushed through in other states.
If this bill were truly pro-shareholder, it would allow shareholders to vote on golden parachutes and poison pills. It would ban greenmail; guarantee one share, one vote; and it would require confidential proxy voting.
These are the issues that shareholders care about — issues that force managers to be accountable to owners.
The purpose of this bill is to protect the management.
[Handwritten addition: The management wants tenure — wouldn’t it be nice if you had tenure?]
We are never going to get competitive by passing legislation. The pressure to compete must come from the owners — that’s how our system is designed to work.
When managers don’t perform we must have a way of replacing them, just like we do football coaches. Just like you are accountable to voters — managers must be accountable to owners[Handwritten addition: , their stockholders.]
This bill would provide job tenure to management at a time when Texas most needs competitive corporate leadership.
Both major provisions of this bill, the control share section and the five-year freeze-out, would effectively give management veto power over sale of the company regardless of whether a majority of the company’s shareholders wanted to sell.
The prepared text that I have submitted to the committee cites some of the overwhelming economic evidence showing how managers’ increased accountability to shareholders during the 1980s has driven corporate America’s impressive gains in productivity, competitiveness and profitability.
The evidence also demonstrates that bills like this one threaten to reverse this progress.
I really thought [Text stricken: the] management[Handwritten addition: s] [Text stricken: lobbyists] would think twice before trying to pass this legislation in Texas.
Texas has earned a reputation as a promoter of free-enterprise capitalism. In Texas, it’s still possible for a young person with energy, ideas and ambition to get a start in business and have the opportunity to achieve great success.
That doesn’t mean it’s a risk-free environment and everyone is guaranteed success. But there is opportunity, nurtured by an entrepreneurial spirit which is still unique to Texas.
In Texas, we don’t seek protection from a competitive challenge. We encourage and savor challenges.
Texas has had its ups and downs. I don’t deny that, or discount it. But in Texas, we’ve always gotten up, dusted off[Handwritten addition: ,] [Text stricken: our pants,] and returned to the battle.
The anti-shareholder legislation couldn’t be more at odds with these Texas traditions. This bill entrenches management, removing the incentives for performance that comes with exposure to the basic pressures of a free market.
This bill is protectionism, pure and simple. Its passage would tell executives of our publicly owned companies that once they get to the top of the corporate ladder, their jobs are guaranteed. No risk, just rewards. And it would tell Texas’ 3 million shareholders that their rights aren’t [Handwritten addition: a] priority.
Texas is on its way to recovery because of two things: our abundance of entrepreneurs and our competitive spirit.
Our Texas businesses need vigorous leadership — not tenured bureaucrats who are accountable to no one.
The Texas legislature and members of this committee face a major responsibility in deciding how to respond to this issue. [Text stricken: You can take the course of least resistance and approve the measure, as other states have done.]
[Text stricken: Or, you can] [Handwritten addition: I hope you] reject this protectionist approach and support the state’s larger interests by promoting shareholder rights and upholding the free-enterprise in Texas.