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	TBP SPEECH ENTREPRENEURSHIP - A KEY TO SUCCESS JUNIOR CHAMBER OF COMMERCE MIDLAND, TEXAS JANUARY 19, 1982

TUESDAY, 7 p.m.

I. I am particularly pleased to be speaking to the JCs tonight. Your organization symbolizes the strength of the free enterprise system which is entrepreneurial spirit combined with service to the community by the private sector.

A. America's economic growth was attained primarily because of the entrepreneurial spirit—a willingness to take risks to achieve greatness.

1. Individuals have been willing to invest their time and money in a free market for the opportunity to earn a profit, unencumbered by government interference.

2. Indeed, this was a basic precept in America from its early founding until modern times.

B. However, beginning with the "New Deal," America lost some of its willingness to take risks as government assumed the role of "provider."

1. The result was a decline in productivity and loss of world economic leadership.
a. An example is in energy. We lost our self-sufficiency because of government regulation and price controls which stiff led the search for new reserves.

C. Fortunately, the nation's entrepreneurs, though perhaps fewer in numbers, did not lose, their spirit, and we have seen a reawakening of the free-enterprise spirit.

1. Nationally, President Reagan has renewed this spirit and reminded citizens that it truly works.
a. Decontrol of: crude oil pricing, for example, has increased supply and stabilized pricing.

2. In Texas, Governor Clements has brought a free-enterprise/good. business approach to state government resulting in the most effective statehouse in America.

II. The concept of entrepreneurship can also be applied successfully within the framework of corporations.

A. Mesa Petroleum. Co. has achieved phenominal growth during its 18 years' existence. The paramount reason for the Company's success is its underlying management philosophy which embraces this concept.

1. I would like to share some of the details of this philosophy with you this evening.

B. We believe that management's primary responsibility is to enhance the investment of our shareholders. This requires that both management and employees be totally dedicated to making the shareholder No. 1.

1. The key to Mesa's success is its people—they are tremendously dedicated which comes from being properly motivated with basic entrepreneurial concepts.
a. This can be done most effectively by giving all employees a "cut of the pie"—everyone likes to make money—it is a very strong motivational tool. In fact, I am sure it is the strongest—and by creating a team concept with everyone working toward a common goal.

(1) Over 95% of Mesa's employees are also stockholders. This is achieved through a stock purchase plan.
(a) Mesa matches dollar for dollar the employee's contribution which can equal 6% of his salary.
(2) Also, each employee participates in a noncontributory profit sharing plan which has been invested heavily in Mesa common stock and is currently invested primarily in Mesa Royalty Trust.

(a) Since its inception through December 31, 1981, the plan has averaged 23% annual gain on investment.
(b) From 1964 through 1981, Mesa contributed $10.3 million to the plan, and employees made $5.4 million.
(c) In 1980, 26% of our employees made more from their Profit Sharing Trust than they did on salary.

(3) Our key personnel are also holders of stock options. You will find that Mesa's management looks at situations very much like stockholders and not like professional managers perpetuating their jobs.

2. Another important factor in motivation is leadership.
a. I think I have been successful in instilling entrepreneurial instincts or nurturing them in most of our people.
(1) They are willing to take risks. They assess risks well and can make decisions quickly. I believe this has a great deal to do with success.
b. It is important to show your people that they are No. 1. You lead them to that point and leave no doubt in their minds.

(1) You must instill a total sense of professionalism. If you look like a busher, you will play like one.
(2) It may sound corny, but if you believe, then your employees believe.
(3) A tradition of winning perpetuates itself.

c. One of the most important aspects of motivation relates to the young people in your company.
(1) How do you train them and make them feel a part of the team? The answer is simple—include them!

3. Good communications are vital if employee motivation is to be channeled toward a common goal.
a. We have a new employee meeting which I conduct in our corporate headquarters and in each division.
b. Communications at Mesa is an ongoing thing. Besides in the office, it is happening in elevators, the hallway, in cars on the way to the airport, in Company planes.
(1) It extends to our fitness center in the corporate headquarters where, in addition to staying physically fit, we find that we discuss a lot of business.

C. The result is a highly motivated, cohesive team working toward the same goals.

1. Consequently, Mesa enjoys extremely high productivity from its employees.
a. Mesa is historically a leading company among the Fortune 1000 in the ratio of assets to employees. We currently have assets of approximately $2 billion and 800 employees.
b. We have a small group, working hard. There are no warm bodies—everyone is a contributor—and we keep selling this theme.
(1) Our people are given responsibility and the authority to get the job done. Fewer people with more authority increases productivity and enables the Company to react more quickly to opportunities than the competition.
(a) Fewer and more productive employees mean we are able to pay more.

D. Again, basic to all of Mesa's management philosophy is the concept of putting the shareholder's interest first.

1. Too often, company managements are more concerned with their own preservation than enhancing their shareholders' investments.

2. Companies with that attitude do not command a reasonable P/E ratio such as Mesa enjoys because their shareholders lack confidence in their ability to "make things happen."

E. Perhaps this "shareholder first" policy is best illustrated by the results themselves.

1. Mesa was a leader in establishing the royalty trust concept as a means of ensuring that shareholders receive the full value of their assets.
a. The royalty trust grants each shareholder a direct ownership interest in producing properties, providing a direct income stream which forces the stock market to recognize the value of the underlying assets.

2. Mesa has been a leader in recognizing the importance of replacing reserves.
a. The Company believes that reserves represent the depletable assets of the shareholders and therefore must be replaced. Mesa has replaced reserves over its 18-year history.
b. According to a report by L. F. Rothschild, Mesa has been either No. 1 or 2 in the industry in percentage of natural las and oil production replaced in each of the last three years. (Note: You may not want to mention that '81 reserves are up at this time as we may want to make a press release.)

3. This "shareholder first" policy is also reflected by the results of a hypothetical shareholder's investment in the Company's common stock.
a. A $10,000 investment in 1964 would have grown to $284,000 as of December 31, an approximate 2,742% increase or 21% compound annual rate of growth.

III. Managements of many large corporations are now saying that they want to institute an entrepreneur-type management.

1. More and more, they are realizing that many smaller companies are better managed and more efficient.

IV. With an improved political climate providing more incentive for the risk taker, a rejuvenated confidence in the ability of free market forces to improve the lifestyles for all Americans, and the increasing recognition by corporate managements of the need for entreprene urship within their companies, the nation may well be on the road to regaining world economic leadership.

IV. Along with financial success also comes social responsibility within a free-enterprise system.

A. It's my feeling that people who have been successful in business have a responsibility as individuals or through organizations such as the JCs to provide personal and economic leadership to help our society meet its humanitarian, educational and cultural obligations.

B. I would be pleased to answer any questions.