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	REMARKS FOR TRIDENT SERVICES’ USA SYMPOSIUM GRAND RAPIDS MI MAY 2, 1988

(15 TO 20 MINUTES)

Thank you, Gary (Miltner).

Introduce Bea.

I’m going to talk briefly about Corporate America’s problems. . .and suggest some solutions.

Problems started just after WWII. . .professional manager.

Managements seemed intent on building huge bureaucracies.

The restructuring we’re seeing today is a reversal of that strategy:
—Focus on results, not size;
—Create value, not empires

Used to be that no matter how poorly management performed, there was virtually nothing shareholders could do about it.

Slowly starting to change. . .Large shareholders are making a difference. . .forcing restructuring of Corporate America.

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 restructuring issue back then. . .many people still don’t.

Restructuring includes. . .takeovers. . .LBOs. . .Recaps. . .selling off unproductive units.

Restructuring is not a passing trend. . .an ongoing process.

Five years from now, Corporate America may need to go in another direction. . .restructuring gives flexibility to do creative things, stay competitive.

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

Why has this happened? Stockholders, especially large shareholders and institutions, are realizing that they are owners, not passive investors.

Countless studies show restructuring is making America more competitive. . .more efficient, productive, profitable.

Not just a matter of competitiveness. . .Had to happen for survival.

Quick fix. . .CEOs 55 to 65. No CEO should serve past 65.

There’s a crowd out there fighting change. . .being left behind at the station.

Easy to identify. . .No stock. . .Big salary. . .Big bonus. . .Big mouth:
—And one other thing. . .anti-shareholder amendments in 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); 6-tenthousandths of 1%.

April Fortune studied 25 best performing companies of ’87 and concluded management ownership is linked to performance. 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 next battlefield. . .retained earnings.

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. . .can be worse than giving Congress a surplus.

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 earnings.

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

Significant impact on Michigan. . .about 3 million shareholders.

In conclusion. . .restructuring is here to stay.

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

Managements that don’t adjust to the change are going to be run over by it.

Thank you.

QUESTIONS & ANSWERS