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	REMARKS FOR USA’S ANNUAL MEETING WASHINGTON, DC JUNE 27, 1988

7:58 P.M. TO 9 P.M. (FINAL 11 A.M. 6/25/88)

There are about 25 Congressmen, as well as many administration and staff members in the audience. . .we appreciate your attendance.

Your presence here is an indication of how far we’ve come in 2 short years. When we founded USA, issues such as shareholder rights, management accountability, one-share/one-vote and corporate restructuring were rarely discussed.

USA’s primary achievement has been to bring these issues to the forefront of national debate. . .thousands of articles and programs, Congressional hearings and panel discussions were devoted to shareholder rights and corporate restructuring in the past year.

USA’s efforts have had an effect. Legislators and academics see we’re on the right side of the issues. It’s telling when Senators such as Armstrong and Metzenbaum join to build a consensus on restoring shareholder democracy. They voted with us last week against poison pills and golden parachutes.

We owe a lot to Senator Armstrong for challenging the Proxmire/Business Roundtable bill. We won the Golden Parachute amendment by a 97-1 vote and kept the Poison Pill amendment alive with a 57-40 vote.

It looks like the pendulum has begun to swing back. We’re seeing the reversal in the states as well.

The California legislature refused to pass anti-shareholder legislation, calling instead on Congress to set minimum standards for shareholder rights. More recently, Colorado rejected anti--shareholder legislation after a superb effort by USA’s local chair, Don Wood. Presently, Texas is considering pro-shareholder legislation that, if passed, will be a landmark victory for shareholder rights.

Texas could become the corporate capital of America with such legislation. Some state is going to do it; it’s just a matter of time.

Activist shareholders have played a big part in all this. They’ve turned up the heat under corporate managements to reestablish shareholder rights. The votes at this year’s corporate annual meetings were a great success. USA Chair Richard Foley’s anti--poison pill proposal at Santa Fe Southern was the first ever to receive a majority of voting shares. An anti-greenmail proposal at Gillette also won a majority. Three other companies accepted confidential voting under shareholder pressure.

Active shareholders have also forced a restructuring of American corporations that has caused management to focus on results, not size, to create value for shareholders, not empires for their own parochial interests.

Countless studies available today show how restructuring helps business, shareholders and the entire economy. Restructuring has played a major role in expanding our economy:
—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 almost 83% capacity, highest in 8 years

A recent Fortune issue shows how companies restructured, cut fat and dramatically increased productivity and efficiency. Fortune 500 profits soared to all-time highs in 1987.

The pendulum has begun to swing the other way. . .But like in any period of dramatic change, there’s an iron-headed group that has to be dragged kicking and screaming into it. They have a vested interest in maintaining the status quo. . .these guys are easy to spot.

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.

We’ve made a lot of progress on the shareholder rights issue. We’ll continue pressing our agenda. Much remains to be done.

The next battlefield is retained earnings.

Corporate profits have soared. . .But what are CEOs going to do with the profits? Fortune 500 dividends are at an all-time low, averaging only 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.

We practice what we preach at Mesa. . .distributed $310 million in 1987; 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

More than half the households in the United States are directly affected by the success or failure of Corporate America. So USA’s is clearly a grass-roots effort.

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

Our agenda is simple, based on basic capitalistic principles. . .free enterprise. . .stockholders own public companies; managers are employees.

USA will continue working for:
—One-share/one-vote
—Confidential ballot
—End to management abuses such as poison pills, golden parachutes and unrestrained perks

USA will continue its efforts to establish minimum federal standards for shareholder rights, and to encourage states to adopt pro-shareholder attitudes.

And we will continue pressuring managements to distribute retained earnings to shareholders rather than spending the money on wasteful diversifications.

USA will do the heavy lifting. . .testify before Congress, lobby for shareholders rights and give speeches.

But we will be calling on you when we need individual support. . .like right now.

The SEC is set to make a decision on the one-share/one-vote issue by next week.

Although the commissioners appear to be leaning toward mandating one-share/one-vote, they’re getting a lot of pressure from Senator Proxmire and the Business Roundtable.

We need you to write or call the SEC as soon as possible. . .write a letter tonight, call first thing tomorrow. . .your input is critical.

We only call on you like this when it’s important. . .some of you may remember our NYSE one-share/one-vote victory during our first year. . .we are effective.

We also need you to make more calls, write more letters to Senators Armstrong, Proxmire and others on the bill before the Senate. . .we’re not out of the woods on that one yet. . .our Hotlines today probably helped a lot.

There is one last thing we need you to do, since our strength is in our numbers. . .recruit new members.

Tell them that, if after a year they don’t feel they’ve gotten their money’s worth, I’ll give it back.

Thank you all for coming.