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NOTES FOR REMARKS TO LAW & BUSINESS, INC. SEMINAR
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(TIME: 6 MIN.)
THANK YOU, ED (GREEN). [Handwritten addition: Gulf Arb of the year in 1984.]
A. IT’S A PLEASURE TO BE HERE TODAY.
B. (PERSONAL COMMENTS, HUMOR)
C.
D.
[Handwritten addition: Great day to be in NY. . .but with an $80 offer it would be a great day anywhere. . .]
A. IF THERE’S ONE THING THAT WILL “REVITALIZE” AMERICAN BUSINESS, IT IS PUTTING THE SHAREHOLDERS’ INTERESTS FIRST.
B. MAXIMIZING SHAREHOLDER VALUE WILL SOON BECOME ONE OF THE MOST IMPORTANT CONCERNS OF MANAGEMENTS THROUGHOUT CORPORATE AMERICA.
C. WE MAY GET [Handwritten addition: some] CREDIT FOR KICKING THIS PLAY OFF.
[Handwritten addition: The shareholder is the forgotten person in corp. And yet there would be no free enterprise system as we know it without the
shareholder they are the cornerstone.]
[Handwritten addition: Maximizing Values]
D. [Text stricken: IT] SHOULD ALWAYS HAVE BEEN MANAGEMENTS’ TOP PRIORITY, BUT UNFORTUNATELY, THAT HAS NOT BEEN THE CASE IN MANY COMPANIES.
E. TODAY, WE’RE SEEING A GROWING WAVE OF SHAREHOLDER DISCONTENT IN WHICH THEY ARE [Text stricken: FORCING] [Handwritten addition: starting to force] MANAGEMENT TO RECOGNIZE THAT SHAREHOLDERS ARE THE TRUE OWNERS OF THE COMPANY.
F. THIS DISCONTENT IS SURFACING IN A VARIETY OF BUSINESSES.
G. WE’VE WITNESSED IT AT GAF, CHOCK FULL O’ NUTS, TRANS WORLD CORP. AND SUPERIOR, TO NAME A FEW.
H. MORE RECENTLY, WE’VE SEEN IT AT GETTY.
I. THESE SO-CALLED SHAREHOLDER “UPRISINGS” MAY COME FROM FOUNDING FAMILY STOCKHOLDERS, A GROUP OF MAJOR SHAREHOLDERS. . .OR THEY MAY COME FROM INSTITUTIONAL INVESTORS.
J. I BELIEVE WE’LL SEE INSTITUTIONAL INVESTORS BECOME INCREASINGLY VOCAL.
K. THEIR FIDUCIARY RESPONSIBILITIES REQUIRE THEM TO ASSESS MANAGEMENT’S PERFORMANCE AND CALL FOR CHANGES IF THEY ARE NOT GETTING MAXIMUM VALUE FOR THEIR INVESTMENTS.
L. AND INSTITUTIONAL INVESTORS HAVE THE RESEARCH CAPABILITIES THAT ALLOW THEM TO JUDGE A COMPANY’S POTENTIAL FOR INCREASING VALUE TO SHAREHOLDERS.
A. AND REGARDLESS OF WHAT SOME PEOPLE HAVE SAID, THE ACTIVITY IS TO THE INDUSTRY’S BENEFIT. . .BECAUSE IT IS PART OF A VITAL RESTRUCTURING PROCESS.
B. THE RESTRUCTURING COMES AS A RESULT OF SEVERAL PROBLEMS THAT PLAGUE THE INDUSTRY. . .PROBLEMS THAT HAVE DEVELOPED AND INTENSIFIED OVER THE LAST DECADE.
G. TAKE THE MAJOR OIL COMPANIES, FOR EXAMPLE.
[Handwritten addition: We have a new no. 3.]
H. THEIR COMBINED EQUIVALENT PRODUCTION REPLACEMENT IN 1982 WAS 64%.
I. ON THE OTHER HAND, THE INDEPENDENT OIL COMPANIES REPLACED 125% OF THEIR COMBINED EQUIVALENT PRODUCTION.
J. GRANTED, SOME OF THE MAJOR OIL COMPANIES DO BETTER AT REPLACING THAN OTHERS.
K. SHELL OIL COMPANY, FOR EXAMPLE, REPLACED 109% OF PRODUCTION IN 1982, WHILE STANDARD OF CALIFORNIA REPLACED ONLY 60%.
[Handwritten addition: Texaco 28%.]
L. MOST MAJOR OIL COMPANIES, HOWEVER, ARE NOT REPLACING THEIR RESERVES, AND THOSE RESERVES REPRESENT THE SHAREHOLDERS’ ASSETS.
A. IN MY ESTIMATION, THE CRUX OF THE PROBLEM IS THAT FEW MANAGEMENTS HAVE A MEANINGFUL OWNERSHIP IN THEIR COMPANIES.
B. THEY DON’T HAVE THE SHAREHOLDERS’ INTERESTS AT HEART BECAUSE THEY ARE NOT SUBSTANTIAL SHAREHOLDERS, THEMSELVES.
C. I HAVE GOT TO TELL YOU THIS STORY WHICH TOOK PLACE LESS THAN A WEEK AGO IN WASHINGTON. (SENATOR — SEC — INSIDER — ETC.)
D. MANAGEMENTS BELIEVE THAT THEY—RATHER THAN THE SHAREHOLDERS—OWN THE COMPANY.
E. AS A RESULT, THEY REFUSE TO CONSIDER IDEAS TO ENHANCE SHAREHOLDER VALUE.
F. WHAT THEY’RE REALLY MORE CONCERNED WITH ARE BONUSES, POWER, PERKS AND MAINTAINING MANAGEMENTS’ POSITION IN THE COMPANY.
G. THAT ATTITUDE ISN’T TOO SURPRISING WHEN YOU STOP TO THINK THAT THESE PEOPLE ARE GENERALLY JUST PROFESSIONAL ADMINISTRATORS CONCERNED ONLY WITH PERPETUATING THE ORGANIZATION THEY INHERITED.
H. THEY DON’T HAVE THEIR OWN MONEY AT STAKE, SO THEY AREN’T CONCERNED WITH WHAT HAPPENS TO THE TRUE OWNERS OF THE COMPANY, THE SHAREHOLDERS.
I. BUT IT’S THIS KIND OF ARROGANCE OR IGNORANCE ON THE PART OF MANAGEMENT THAT IS BECOMING INCREASINGLY UNACCEPTABLE TO SHAREHOLDERS.
J. I’M ALSO CONCERNED ABOUT THE NUMBER OF DIRECTORS ON BOARDS THAT ARE [Text stricken: NOT] [Handwritten addition: barely] STOCKHOLDERS. [Handwritten addition: and beholden to management.]
K. MANY OWN LITTLE STOCK AND SOME OWN NONE AT ALL IN SOME MAJOR U.S. CORPORATIONS.
L. IT SEEMS REASONABLE THAT DIRECTORS SHOULD PUT EITHER A MAJOR PORTION OR ALL OF THEIR DIRECTORS’ FEES BACK INTO THE COMPANY’S STOCK.
A. OWNERSHIP IS OUR PHILOSOPHY AT MESA, AND THAT INCLUDES OFFICERS AND OUR BOARD OF DIRECTORS.
B. WE ALSO BELIEVE THAT EACH EMPLOYEE SHOULD HAVE THE OPPORTUNITY TO BECOME A STOCKHOLDER.
C. IN THAT WAY, EVERY PART OF OUR BUSINESS IS GEARED TOWARD ONE GOAL—MAXIMIZING THE VALUE OF THE SHAREHOLDERS’ INVESTMENT.
D. AND IT WORKS BECAUSE EACH MANAGER, DIRECTOR AND EMPLOYEE GAINS WHEN THE SHAREHOLDER GAINS.
A. THE FACT THAT MANY SHAREHOLDERS HAVE SPOKEN UP AND DEMANDED THEIR RIGHTS AS TRUE OWNERS OF THE COMPANY HAS STIMULATED THE MINDS OF MANY OTHERS.
B. [Text stricken: IT IS INCREDIBLE HOW FAR WE’VE COME] [Handwritten addition: It was interesting we got] WITH THE GULF STOCKHOLDERS. [Handwritten addition: Not surprising, we had a saleable, a bit complicated maybe but none the less a saleable idea.]
C. AT FIRST, WE WERE VERY SUSPECT IN THEIR EYES.
D. BUT AS TIME PASSED, THEY BEGAN TO UNDERSTAND THE ISSUES AND THAT WE WERE SERIOUS WHEN WE SAID WE’D SHARE IN THE GAINS
WITH EACH STOCKHOLDER. [Handwritten addition: & that we were trying hard to maximize values from an eroding reserve base.]
[Handwritten addition: And I would have to report that all the Gulf stockholders are better off by a measurable amt.—explain $5.8—.]
E. [Text stricken: IN FACT, WE RATHER LOOK FORWARD TO THE PROXY FIGHT IN MAY.]
F. YOU’D BE SURPRISED AT THE NUMBER OF LETTERS I RECEIVE FROM STOCKHOLDERS OF OTHER COMPANIES, TOO.
G. THEY USUALLY SAY SOMETHING ABOUT, “HAVE YOU TAKEN A LOOK AT OUR COMPANY AND WOULD YOU CONSIDER BECOMING A SHAREHOLDER—AS SOON AS POSSIBLE.”
H. I RECEIVED ONE RECENTLY FROM A WOMAN WITH TEXAS INTERNATIONAL.
I. NOT ONLY DID SHE ASK ME TO TAKE A LOOK AT THE COMPANY, BUT SHE ALSO GAVE ME A PLAN TO FOLLOW THROUGH ON. [Handwritten addition: Just rumor it up will really help and it doesn’t look like you are doing anything right—We would be forever grateful & would work for you if you decided to go into politics.]
(PAUSE)
D. TO ILLUSTRATE MY POINT, LET ME GIVE YOU COMPARISONS PREPARED BY [Text stricken: DONALDSON,] [Handwritten addition: John S. Herold] [Text stricken: LUFKIN & JENRETTE] ON [Handwritten addition: 5 companies] [Text stricken: 8 DIFFERENT COMPANIES].
[Handwritten addition:
]
1. Exxon
38
78
2. Mobil
31
89
3. Socal
37
84
4. TX
45
101
5. Unocal
38
80
(PAUSE)