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	REMARKS TO STANFORD GRADUATE SCHOOL OF BUSINESS “OWNERSHIP: THE KEY FOR KEEPING ALIVE THE ENTREPRENEURIAL SPIRIT” STANFORD JANUARY 31, 1985

5:00 P.M.

(TIME: 7 MIN.)

THANK YOU ETHAN (STONE).

IT’S A PLEASURE TO BE ON YOUR CAMPUS TODAY.

[Handwritten addition: 1. Packets—Rees, Fortune, Jensen]

[Handwritten addition: 2. WSJ—]

[Handwritten addition: My roll & how we have been characterized]

I SPOKE AT 11 COLLEGE CAMPUSES LAST YEAR TO [Text stricken: ABOUT] 28,000 STUDENTS, [Text stricken: AND I HAVE TO TELL YOU THAT I REALLY LIKE WHAT I’M SEEING IN TODAY’S YOUNG PEOPLE.]

[Handwritten addition: why?]

[Handwritten addition: . . .because I wanted to know what you’re thinking about. The future of this country is with the youth, not with old guys like me. I’ve got one foot in the grave and the other on a banana peel.]

[Text stricken: THERE’S A NEW SPIRIT ON CAMPUS.]

TODAY’S YOUNG PEOPLE WANT TO GET AHEAD, TO MAKE MONEY.

[Handwritten addition: They’ve had their future mortgaged by irresponsible government—I’m not talking about the one we’ve got now. I’m talking about past legislation. Let’s drop this subject and go to one that’s a lot more fun to talk about—making money.]

[Handwritten addition: Not only do you want to make money,] EVEN MORE SIGNIFICANT IS THE DESIRE OF SO MANY [Text stricken: COLLEGE STUDENTS] [Handwritten addition: of you] TO START [Text stricken: THEIR] [Handwritten addition: your] OWN BUSINESSES.

THE QUESTION I’M ASKED MOST OFTEN IS, “HOW CAN I DO WHAT YOU HAVE DONE?”

[Text stricken: TO ME,] THIS INDICATES A REVIVAL OF THE ENTREPRENEURIAL SPIRIT.

AND THAT HAS TREMENDOUS IMPLICATIONS FOR THE NATION AND FOR AMERICAN BUSINESS, BECAUSE [Text stricken: I BELIEVE THAT] MUCH OF OUR PRODUCTIVITY PROBLEMS ARE RELATED TO THE LACK OF ENTREPRENEURISM IN CORPORATE AMERICA.

MANY PEOPLE BELIEVE YOU CAN’T FOSTER THE ENTREPRENEURIAL SPIRIT WITHIN THE CORPORATE STRUCTURE.

BUT I DON’T AGREE, AND I’D LIKE TO SHARE WITH YOU TODAY MY THOUGHTS ON, HOW YOU CAN KEEP [Text stricken: THE] [Handwritten addition: this] [Text stricken: ENTREPRENEURIAL] SPIRIT ALIVE[Handwritten addition: .] [Text stricken: WHETHER YOU OWN YOUR OWN BUSINESS OR ARE PART OF A CORPORATION.]

THE KEY TO MAKING EVERYTHING WORK IS OWNERSHIP.

OWN A SIGNIFICANT AMOUNT OF STOCK IN THE COMPANY YOU MANAGE.

BY PUTTING YOUR OWN MONEY AT RISK, YOU MORE READILY IDENTIFY WITH THE OTHER OWNERS OF THE COMPANY.

IF YOU WORK FOR A PUBLIC-OWNED COMPANY, [Text stricken: REMEMBER THAT THE COMPANY IS OWNED BY THE SHAREHOLDERS] [Handwritten addition: don’t ever forget that the shareholders own the company]—YOU ARE EMPLOYED BY THEM TO MANAGE THEIR INVESTMENT FOR THE BEST RETURN. [Handwritten addition: So am I.]

[Handwritten addition: (expand)]

THE ONLY WAY TO KNOW AND RESPOND TO [Text stricken: THEIR] [Handwritten addition: shareholder] CONCERNS IS TO [Text stricken: SHARE THEM.] [Handwritten addition: be one of them—have your capital at risk, just like they do.] SIGNIFICANT OWNERSHIP IS CRITICAL IF YOU ARE A DIRECTOR OR OFFICER OF THE COMPANY.

BUT I BELIEVE THAT THE OPPORTUNITY OF OWNERSHIP SHOULD BE MADE AVAILABLE TO ALL EMPLOYEES. [Handwritten addition: and that they should be encouraged to become stockholders.]

EMPLOYEE OWNERSHIP IS THE [Text stricken: HIDDEN] INGREDIENT THAT MAKES THINGS [Handwritten addition: more] PRODUCTIVE.

IF EMPLOYEES CAN SEE THAT THEIR DAY-TO-DAY ACTIVITIES IMPACT THEM AS OWNERS, THEY [Handwritten addition: naturally] DO ABETER JOB.

WE HAVE APPLIED THIS PHILOSOPHY AT MESA, AND I BELIEVE IT IS A LARGE PART OE OUR SUCCESS.

95% OF MESA EMPLOYEES ARE SHAREHOLDERS IN THE COMPANY.

OWNERSHIP PUTS EVERYTHING IN PERSPECTIVE.

IT MAKES THE DECISIONS ON TENDER OFFERS—HOSTILE OR FRIENDLY—PRETTY SIMPLE.

YOU DO WHAT IS BEST FOR ALL STOCKHOLDERS. [Handwritten addition: Don’t forget, they own the company.]

[Handwritten addition: (expand on tender offers)]

MUCH OF THE CURRENT UPROAR ON MERGERS AND ACQUISITIONS COMES FROM CORPORATE MANAGEMENTS WHO OWN LITTLE STOCK IN THEIR COMPANIES.

THESE PEOPLE ARE WILLING TO CURB THE M & A PROCESS TO THE DETRIMENT OF SHAREHOLDERS JUST TO RID THEMSELVES OF WHAT THEY PERCEIVE TO BE A PROBLEM—THE CHANCE OF BEING TAKEN OVER.

BECAUSE THESE MANAGEMENTS DON’T OWN STOCK, THEY DO NOT SEE THE BENEFIT OF A PREMIUM TO MARKET TENDER OFFER.

INSTEAD, THEY ARE WORRIED ABOUT LOSING THEIR JOBS, THEIR PERKS, THEIR HUNTING AND FISHING CAMPS, AND THEIR PERSONAL USE OF CORPORATE AIRCRAFT.

AS A RESULT, THEY ARE WILLING TO DENY THE SHAREHOLDERS THE RIGHT TO EVEN RECEIVE AN OFFER—AND ALL TO SAVE THEMSELVES.

[Handwritten addition: How many times have you read “Not in your best interest?”]

[Handwritten addition: (expand TBP philosophy that stockholders can make up their own minds.)]

THE [Handwritten addition: chairman of the policy committee of the] BUSINESS ROUNDTABLE [Handwritten addition: Andrew Sigler w/Champion Int’l.] HAS RECENTLY COME OUT IN FAVOR OF ANTI-TAKEOVER LEGISLATION.

THIS IS A GROUP COMPOSED OF CEOs AND TOP EXECUTIVES OF AMERICA’S BLUE CHIP COMPANIES.

IT INCLUDES SUCH WELL-KNOWN CORPORATIONS AS GENERAL MOTORS, MCDONNELL DOUGLAS AND EXXON.

WE [Text stricken: WERE, HOWEVER, ABLE TO OBTAIN] [Handwritten addition: obtained] NAMES OF THE BUSINESS ROUNDTABLE’S 50-MEMBER POLICY COMMITTEE—THE VOICE OF THE ORGANIZATION.

WE DID SOME RESEARCH AND DISCOVERED SOME VERY INTERESTING FACTS ABOUT THE OWNERSHIP OF THESE PEOPLE.

THE AVERAGE STOCK OWNERSHIP OF THESE INDIVIDUALS IN THE COMPANIES THEY REPRESENT IS 3/100 OF 1% OF THE OUTSTANDING SHARES OF THE COMPANY.

IN CONTRAST, THEIR AVERAGE CASH COMPENSATION IN 1983 WAS OVER $800,000.

MORE INTERESTING, YET, IS THE TOTAL STOCK OWNERSHIP OF THE BOARD OF DIRECTORS OF THE COMPANIES THESE ROUNDTABLE MEMBERS REPRESENT.

AVERAGE OWNERSHIP OF THEIR BOARDS IS 6/10 OF 1% OF THE TOTAL OUTSTANDING SHARES.

IT’S EASY TO SEE WHY THE ROUNDTABLE FEELS UNCOMFORTABLE WITH TAKEOVER PROPOSALS.

THE BENEFIT THEY WOULD DERIVE FROM ACCEPTING A TENDER OFFER WOULDN’T BE ENOUGH TO OFFSET THEIR [Text stricken: COZY] PERKS.

[Text stricken: SO THEY PREFER TO] [Handwritten addition: Instead, they] KEEP STOCKHOLDERS FROM MAKING BILLIONS OF DOLLARS IN PROFIT.

THEIR GOAL ISN’T THE SAME AS THE STOCKHOLDERS.

WITH SIGNIFICANT OWNERSHIP, THAT WOULDN’T BE THE CASE.

BUT WHILE OWNERSHIP IS IMPORTANT, THERE ARE OTHER SIGNIFICANT ASPECTS OF MEETING THE GOAL OF MAXIMIZING SHAREHOLDER VALUE.

BASIC TO BUSINESS SUCCESS IS KNOWING YOUR ASSETS WELL.

YOU MUST BE ABLE TO UTILIZE THEM TO THE BEST ADVANTAGE—TO LEVERAGE WHEN NECESSARY OR RAISE CAPITAL, IF NECESSARY.

KNOW HOW TO DO THE MOST WITH WHAT YOU’VE GOT.

A BIG PART OF THIS IS REALIZING YOUR LIMITATIONS AND RECOGNIZING OPPORTUNITIES.

LAST YEAR WHEN MESA WAS EVALUATING HOW TO ACQUIRE SOME OIL AND GAS RESERVES, ONE OF OUR PEOPLE SUGGESTED THAT WE THROW THE MESA ROYALTY TRUST INTO OUR GROUP OF POTENTIAL ACQUISITIONS.

WE HAD SPUN-OFF THE TRUST IN 1979.

IT TURNED OUT THAT THE MESA ROYALTY TRUST WAS OUR BEST BUY, AND IT HAD BEEN RIGHT UNDER OUR NOSES.

THAT IS RECOGNIZING OPPORTUNITY.

[Handwritten addition: That’s entrepreneurial.]

YOU CAN’T CONTROL WORLD MARKETS OR THE NATIONAL ECONOMY, BUT YOU CAN ANALYZE SITUATIONS AND TAKE ADVANTAGE OF OPPORTUNITIES. [Handwritten addition: You must be flexible and you must move quickly at times.]

THIS IS PARTICULARLY CRITICAL DURING A PERIOD OF TRANSITION FOR YOUR BUSINESS OR INDUSTRY.

YOU MUST LEARN TO MELD VISION WITH ACTION.

MANY EXECUTIVES HAVE VISION, BUT BECAUSE THEY CAN’T OR WON’T ACT ON IT, THEIR VISION BECOMES NOTHING MORE THAN A MIRAGE. [Handwritten addition: They want to see one more card (expand).]

ONE OF THE BRIGHTEST YOUNG MINDS IN THE SILICON VALLEY, APPLE CHAIRMAN STEVE JOB[Handwritten addition: S,] PUT THIS IN PERSPECTIVE IN THE JANUARY 21 ISSUE OF BUSINESSWEEK.

HE SAID: “WHEN YOU ARE LEADING, YOU NEED VISION. WHEN YOU ARE MANAGING, YOU HAVE POLICY.”

AND HE’S RIGHT.

VISION IS VERY IMPORTANT TO LEADERSHIP.

BUT THE ABILITY TO CARRY THAT VISION INTO REALITY TAKES ACTION—AND THAT’S EVEN MORE IMPORTANT.

IT’S CRITICAL IF YOU ARE THE CEO.

BUT YOU MUST DEVELOP THAT ABILITY AMONG YOUR EMPLOYEES, TOO.

BY DEVELOPING MANAGERS WHO CAN ANALYZE SITUATIONS QUICKLY AND COMPLETELY AND WHO THEN CAN MAKE DECISIONS, YOU WILL HAVE DEVELOPED THE ABILITY TO MAKE ADJUSTMENTS IN YOUR OPERATIONS THAT WILL SPELL SUCCESS.

(PAUSE)

I HAVE ONE FINAL THOUGHT TO LEAVE WITH YOU.

THERE IS A GREAT DEAL OF TEMPTATION IN THE BUSINESS WORLD.

IT TAKES YEARS TO DEVELOP A REPUTATION OF INTEGRITY.

SO JUST REMEMBER, YOU DON’T HAVE TO CHEAT TO WIN.

IF YOU HAVE AVERAGE INTELLIGENCE, STAY LATER AND WORK HARDER, YOU CAN WEAR DOWN THE COMPETITION.

THANK YOU.

(WAIT FOR APPLAUSE)

(TAKE QUESTIONS)