Boone Pickens Homepage           Electronic Publishing Center
	REMARKS FOR THE AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS SAN FRANCISCO, CA JUNE 24, 1988

Thank you, Bob (Edwards).

[Handwritten addition: No smoking-Fortune remark TBP-]

Any Mesa unitholders?

[Handwritten addition: My career started before 82 (explain)]

I’ll talk today about Corporate America’s problems. . .offer some solutions.

Corporate America is in the middle of a major overhaul. . .long overdue.

We’re seeing a transformation of American corporations:
—Focus on results, not size;
—Create value, not empires

Problems started just after WW II. . .professional manager.

Separation of ownership and control. . .founders’ entrepreneurial spirit was replaced by bureaucratic professional managers.

Managements seemed intent on building huge bureaucracies. . .GM 14 layers, Japanese 5:
[Handwritten addition: Lot of funny stories about GM—]
—Perot’s snake story in Fortune in March

Managers insulated from owners. . .poison pills, golden parachutes, anti-shareholder legislation.

No matter how poorly management performs, there’s little that shareholders can do about it.

But once the pendulum swings too far, watch out!

I formed the United Shareholders Association in August ’86 to upgrade shareholder awareness. . .Non-profit; not much experience with non-profit.

USA does nothing for Boone Pickens in takeovers. . .contributions plus honorariums now well over $1 million.

Corporate America is slowly starting to change. . .active shareholders are making a difference, forcing restructuring.

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.

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

Restructuring’s effects are easy to find:
—16 mm new jobs since ’82, leading to lowest unemployment rate 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

Restructuring is not a passing trend. . .an ongoing process. . .Major MLP restructurings in ’70, ’72, ’79, ’82, ’85. . .still doing it!

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

Why has this happened? Stockholders are realizing they are owners, not passive investors.

Stockholders have been lethargic; they have a responsibility as owners.

They must demand accountability of managements. . .no other way to get the job done.

Active shareholders are getting results.

Recent Fortune. . .Fortune 500 companies restructured, cut fat and dramatically increased productivity and efficiency:
—Profits soared to all-time highs in 1987

But entrenched CEOs continue to try to turn the tide.

These guys are easy to identify. . .No stock; Big salary; Big bonus; Big mouth:
—And they have one other thing. . .anti-shareholder amendments in the bylaws

Go back to 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. . .406 shares.

The next battlefield. . .retained earnings.

Corporate profits have soared. . .But what are CEOs 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. . .I don’t trust them.

Fred Hartley on raising the dividend. . .What!? Give people money?

[Handwritten addition: Practice what we preach—]

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 distribute a higher percentage of cash flow.

How about 50% instead of 20%. . .change the game up:
—Dow would go to 3000
—Prevent a 1989 recession
—Upgrade standard of living for millions of Americans

Can you imagine what that would do for pension accounts?

[Handwritten addition: It would help 50 mm stockholders-]

In conclusion, the shareholders rights movement is here to stay. . .the United Shareholders Association [Handwritten addition: has been and] will be a major part of the movement.

We do the heavy lifting. I testify before Congress, lobby for shareholders rights, etc.

[Handwritten addition: Vote this week 97-1-57-40-Prox on TBP]

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

Go to annual meetings. . .Make and support proposals to stop greenmail, install confidential voting, and remove golden parachutes and poison pills.

Write or call legislators to support shareholders rights. . .[Text stricken: 47] [Handwritten addition: 50] million U.S. shareholders. . .That’s a lot of constituents!

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

USA is the shareholder’s watchdog. . .Only organization in D.C. looking out for shareholders.

If you are interested in joining USA, our brochures [Text stricken: are at the back of the room.] [Handwritten addition: can be picked up at the registration table.]

[Handwritten addition: After 1 year if you aren’t satisfied I’ll give your money back.]

By joining, you’ll be doing your part in putting corporate control and wealth back where it belongs, in the hands of the owners, the shareholders[Handwritten addition: , just like the people in this room.]

[Text stricken: And if you don’t get your money’s worth, I will give it back.]

Thank you.

QUESTIONS & ANSWERS