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	REMARKS FOR THE USA SPEECH DALLAS TX MAY 26, 1988

[Handwritten addition: Q           ]

[Handwritten addition: 1. Mention annual mtg June 26-27]

Thank you, Doug (Miller).

[Handwritten addition: Over 1000 members with Doug’s help.]

Introduce Bea.

[Handwritten addition: Great Turnout—means a lot to us]

My topic today is “Avoiding Another Black Monday.”

The big questions. . .what caused the market crash and how do we avoid another one?

Numerous studies on the crash. . .still no answers.

Everything from trade deficit to computer trading blamed.

Some people [Text stricken: are screaming to ban] [Handwritten addition: talk about banning] computers. . .[Text stricken: about] [Handwritten addition: That’s] like asking to outlaw [Text stricken: the ball point pen or] the telephone.

One thing every study has agreed on. . .the crash was triggered by the Ways and Means Committee tax bill limiting deductions related to mergers and acquisitions.

[Handwritten addition: Sounds wild—but true]

The trade deficit, budget deficit and rising interest rates loaded the wagon. . .the tax bill was the final brick that broke the axle.

The market was [Text stricken: up] [Handwritten addition: at 2700] because investors were anticipating a complete restructuring of Corporate America.

Restructuring liberates assets, returns management accountability. . .includes takeovers, LBOs, recaps.

[Handwritten addition: That means higher stock prices]

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

Some CEOs understood all too well; empires were threatened. . .forced to downsize, forced to manage for shareholder value.

That was 6 years ago. . .Countless studies have since shown how restructuring helps business, shareholders and the entire economy.

Restructuring’s effects easy to find:
—14 mm new jobs since ’82, leading to 5.4% unemployment, lowest in 14 years
—R&D up 100% in the past decade, after no growth the decade before
—U.S. Industry operating at 82.7% capacity, highest in 8 years
—And Fortune 500’s 1987 profits were highest ever

The tax bill threatened to reverse these improvements.

[Text stricken: Today’s primary problem; you can’t make an investment with any certanty of what the rules will be tomorrow].

To avoid another Black Monday. . .Stick with one set of rules. . .let restructuring work its course:
[Handwritten addition: —One set of rules very important]
—Only way to restore shareholder confidence

Congress must set nation-wide, minimum standards for shareholders rights. . .then [Text stricken: step] [Handwritten addition: stand] aside and let the free market work.

States can go one step further. . .get rid of anti—shareholder laws, adopt shareholders rights legislation.

[Text stricken: USA president Jamie Heard outlined a model shareholders rights law at a hearing before the Texas legislature earlier this month.]

[Handwritten addition: We recently gave a blueprint to the Texas Legislature—I’d love to see Texas take the lead—That’s our history.]

The model law would:
—Outlaw greenmail
—Ban golden parachutes
—Eliminate poison pills
—Guarantee one-share, one-vote
—Establish confidential vote
—And Reform proxy process

[Handwritten addition: Some state will do it—(explain)]

These proposals designed to make management accountable. . .force them to maximize value for shareholders, not build empires for management.

Bureaucracy. . . .GM 14 identifiable layers, Japanese 5:
[Text stricken: —Perot’s snake story in Fortune last month]

CEOs. . .total control of assets, but little ownership.
—BRT. . .3 tenths of 1%

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. . .406 shares.

Jack Reichert, chairman of Brunswick Corp. . .told the Chicago Sun-Times:
—“The question really becomes one of ’Do you believe you own the company?’ I feel I own the company because I own it spiritually.”

A lot of people out there wish they just owned stock spiritually on October 19th

[Handwritten addition: The next battlefield—retained earnings]

Management ownership is linked to performance. . .April Fortune studied the 25 best performing companies of ’87. 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.”

[Text stricken: If CEOs were significant owners, they would push out retained earnings; USA’s next battlefield.]

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. [Handwritten addition: I don’t trust them.]

[Handwritten addition: Fred Hartley—raising the dividend—what! Give money to people]

[Text stricken: I’m talking about 500 CEOs, with virtually no accountability, holding the purse-strings on $325 billion; $650 mm each, every year!]

Mesa distributed $310 million in 1987; Boeing $217 mm; Unocal $117 mm; Goodyear $91 mm.

CEOs say they need the money to expand. . .only need 10%, at most 20% equity to build a plant.

With today’s 28% tax rate, there’s every reason to [Text stricken: push out] [Handwritten addition: distribute] a higher percentage of cash flow.

Want to avoid another market collapse? Distribute 50% of cash flow instead of 20%:
—Dow would go to 3000
—Prevent a 1989 recession
—Upgrade standard of living for millions of Americans

But CEOs think retained earnings are theirs. . .Flip chart story.

Wasting of shareholders’ money will continue until we restore management accountability.

USA is working for pro—shareholder laws like the one we proposed here in Texas.

We [Text stricken: will] do [Text stricken: all] the heavy lifting. I testify before Congress, lobby for shareholders rights, etc.

But there is plenty that individual shareholders can do, besides joining USA.

Go to annual meetings. . .Make and support proposals to stop greenmail, remove golden parachutes and poison pills. [Handwritten addition: propose confidential voting.]

Write or call legislators to support USA’s agenda. . .47 million shareholders, 3 million in Texas. . .That’s a lot of constituents!

Action very important now, with Texas considering an anti—shareholder law. . .support USA’s alternate proposal.

Shareholders must unite if they want to regain control of their companies.

USA is your watchdog. . .Advocate.

We have no conflicts. . .we have guts; we’ll take action!

Only organization in D.C. looking out for shareholders.

Our strength is in [Text stricken: our] numbers. [Handwritten addition: 2.6 mm stockholders in Tex.] [Text stricken: corporate managers have our money.] [Handwritten addition: spending your money]

By joining USA, you’re doing your part in putting corporate control and wealth back where it belongs, in the hands of the owners, the shareholders.

[Handwritten addition: Thank you]

[Handwritten addition: Questions]

But there’s one more thing you can do. . .If each of you can leave here today and recruit one other person for USA, then the impact of this session will more than double.
—Tell them if they don’t get their money’s worth, I will give it back

Thank you.

QUESTIONS & ANSWERS