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	REMARKS FOR THE AMERICAN ASSOCIATION OF INDIVIDUAL INVESTORS SAN FRANCISCO, CA JUNE 24, 1988

Thank you, Bob (Edwards).

I’ll talk today about Corporate America’s problems. . .offer some solutions. Corporate America is in the middle of a major overhaul that’s 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 with the emergence of the professional manager. It created a separation of ownership and control. . .founders’ entrepreneurial spirit was replaced by bureaucratic professional managers. Managements seemed intent on building huge bureaucracies.

Managers insulated themselves from owners with 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. USA does nothing for Boone Pickens in takeovers. My contributions plus honorariums are 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 about 83% 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. . .there’s no other way to get the job done.

Active shareholders are getting results. A recent Fortune issue showed how 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 one other thing. . .anti-shareholder amendments in the 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 bonuse)s. . .owns only 3,000 shares; 32 ten-thousandths of 1% of the company.

The next battlefield. . .retained earnings.

Corporate profits have soared. . .But what are CEOs going to do with the profits? Dividends are at an 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. The remaining $260 billion is left to managements’ discretion. . .I don’t trust them.

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

In conclusion, the shareholders rights movement is here to stay. . .the United Shareholders Association will be a major part of the movement. We do 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, install confidential voting, and remove golden parachutes and poison pills. Write or call legislators to support shareholders rights. There are 47 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. It’s the only organization in D.C. looking out for shareholders.

If you are interested in joining USA, our brochures are at the back of the room.

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.

And if you don’t get your money’s worth, I will give it back.

Thank you.