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	REMARKS FOR THE EDITORIAL WRITERS SPEECH FORT WORTH TX SEPTEMBER 17, 1988

12:30 P.M.

Thank you, Kyle (Thompson).

[Handwritten addition: Thanks for the book plug. This geologist sells books and makes speeches.]

[Text stricken: “Only when he’s drunk” joke]

[Handwritten addition: Kyle—if we do end up with your mortgage—we will cancel the mortgage.]

[Text stricken: That’s not a bad policy. It never pays to argue with editorial writers, either.]

[Handwritten addition: I have looked forward to this meeting &] I appreciate the opportunity to be with you here today.

I want to hit on several topics. . .may be a little disjointed, but we can round it out with Q & A afterward.

[Handwritten addition: I will] [Text stricken: not speak longer than] give you as much time for questions as I speak. [Text stricken: after is the deal.] Only tough questions please.

The media’s portrayal of me has run the gamut in the past six years, from underdog, to folk hero, to villain. Personally, I don’t think I’ve changed much. [Handwritten addition: I am the same guy.]

In the past, I may have been a little sensitive to all the publicity. . .I thought I had a story to tell, I was convinced I was on the right track to help corporate America. . .I still am.

I was controversial. . .that’s [Handwritten addition: one reason] [Text stricken: why] I made myself available.

Mesa has never had a PR Department, probably never will.

Even during the Gulf, Phillips, and Unocal deals, either I or one of my top management people always talked directly with the media.

When Mesa went public in 1964, our management became accountable to the shareholders. Since the press are a vital part of getting information to the shareholders, it was a natural relationship.

I found out pretty quick, the more calls you accept, the more you get.

I’ve learned that there will be good press coverage and bad press coverage. When you become a public figure by fighting the status quo, you draw a lot of fire. . .It’s just something you have to live with.

I’m sure you’re all somewhat familiar with my deals. But a lot of people aren’t aware of the business philosophy behind the deals.

I wonder if my philosophy would have been easier to sell if I hadn’t been making money from it?

You hear a lot of talk about “bust-up” takeovers, “hostile” takeovers, greenmail, “junk” bonds, “short-term” profits versus “long-term” strategies. . .It’s colorful language and it makes for entertaining reading, but the rhetoric has very little to do with reality.

The reality is that shareholders, the owners of our public corporations, have often-times been disenfranchised by managements who run companies as their own personal empires.

That’s the root of the problem. Since management refuses to run the companies in the shareholders’ best interests, active shareholders are fighting to get the job done.

Fragmented ownership is a problem, but institutional holders of the stock should save the day. . .they have research capabilities, fiduciary responsibility.

This is a populist issue. . .Through pension plans, direct ownership and trusts, over half of U.S. households are directly affected by the success or failure of our public corporations.

Corporate America is where the jobs are and taxes are paid.

50 million people own stock in public owned companies.

Shareholders are owners, not mere investors. Managers, the ones who have the power, are employees.

Managers will do anything to hang on. They have millions of shareholders’ dollars to spend so they can hang on.

They don’t mind spending other people’s money.

Takeover battles are contests to see who’s going to run the company (Unocal remark, Senate Banking Committee, 1985) [Handwritten addition: 22,000 employees. . . .]

[Handwritten addition: There] Would be no takeovers if management did its job. . .keep stock price up.

[Text stricken: Our public market place is greatly undervalued. . . .] [Handwritten addition: Example] $50,000 lot on corner.

[Handwritten addition: Nobody ever invested in a stock expecting to lose.]

[Handwritten addition: An amusing comment by Keith Gollust with Coniston Partners. . .fast buck artist/slow buck artist]

Shareholder activism has proven good for our country. . .for shareholders, taxpayers, employees, communities. . .the entire economy.

The empirical evidence has now been analyzed. . .we’re off the rhetoric and on hard data.

Joe Grundfest at the SEC has shown how jobs can actually be saved by takeovers; Michael Jensen at Harvard estimates that shareholders have gained more than $400 billion from restructuring since 1982; and Bronwyn Hall at Stanford found that R & D spending is not affected by takeovers.

I understand [Text stricken: they passed out] folders with those studies in them-[Handwritten addition: are ON A TABLE OUTSIDE THE DOORS OF THIS ROOM. They’re good reading.]

This isn’t my stuff. . .it’s from respected professionals in their fields.

The results are in, the data have been analyzed.

Some of you are probably well aware of all this. And that brings up another point. . .business news isn’t just for business executives any more.

Remember, 50 million people own stock in our public companies.

Over the past few years, business has gone public.

Takeovers, the bull market, the insider trading scandals, the crash—they’ve attracted the public’s attention.

Quick comment; Insider trading is peanuts compared to hundreds of billions squandered by managements.

People have begun to realize how important Corporate America’s health is to the average man on the street.

If our businesses can’t compete, we lose market share, jobs, tax revenues. . .the whole economy suffers.

Just a few years ago, the only place you could go for business news was the (Wall Street Journal).

Today, every major newspaper has upgraded its business section. So have the television networks. . .and cable stations offer business shows.

[Handwritten addition: This will continue to grow—] I think it’s not only healthy but essential for the public to become knowledgeable about the financial markets.

Business is the backbone of our great economy, and entrepreneurs are its heart.

Our young people are shunning the bureaucracies of giant corporations for more entrepreneurial ventures.

They’re starting their own businesses or working where they can be creative and can make a difference.

A recent Roper poll showed that almost half of the college students asked said they thought owning their own business was a good way to get ahead. . .only a fifth of the adults polled felt the same way.

It’s clearly a new era.

Keep the entrepreneurs on the job (explain)-When somebody makes money, then somebody has to lose (explain).

The “Wall Street Journal” on Wednesday said there are at least 250 schools that offer courses in entrepreneurial studies. . .it wasn’t long ago that there were only 4 such schools.

While FORTUNE 500 companies have downsized and cut more than 3 million jobs since 1982, small businesses have created more than 11 million new jobs. . .that’s 65% of the 17 million new jobs created in the past 6 years.

Now the National Science Foundation estimates that 98% of “radical” product innovations are made by small, entrepreneurial firms.

Entrepreneurs are our future. That’s not to say the FORTUNE 500 companies are doomed. . .they’ll get more competitive by continuing to restructure, downsizing for efficiency.

Size is meaningless, results are everything.

But until recently, managements focused on building empires, “diversifying” out of mature, core businesses. . .[Text stricken: Goodyear example.]

The next battleground is going to be retained earnings—Ford, $11 billion; Boeing, $5 billion—More money than they know what to do with.

I know what they should do with it. . .they should distribute it to the shareholders. It’s the shareholders’ money! Let them reinvest it.

FORTUNE 500 companies had their best profits ever in ’87, yet their dividends are at an all-time low. . .average 3.8% yield.

Average dividends for Fortune 500 companies are only 20% of cash flow. . .that’s $65 billion of $325 billion annually.

(Explain Cash Flow vs. Profits)

I’ll give you an indication of how much they could distribute if they wanted to. . .Mesa distributed $310 million in 1987; Boeing $217 mm; Unocal $117 mm; Goodyear $91 mm.

[Handwritten addition: Those co’s are infinitely larger than MESA]

With today’s 28% tax rate, there’s every reason to push out 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

That’s just one of the changes that shareholders will be fighting for.

Now, the question is, “What next?” The answer, I hope, is “More of the same.”

There’s still a long way to go before Corporate America finishes cutting the fat from the bloated bureaucracies.

They’ve been lobbying Washington for protection for several years now. . .but the Reagan Administration hasn’t been receptive.

The steel industry has been running to Washington since 1968.

As you look at our Presidential candidates, you’ll see that we have real choices in philosophies.

George Bush has surrounded himself with advisors who propose sticking with free market principles. . .the same policy that lead to our phenomenal economic growth for the past 6 years.

Have you seen what Governor Dukakis’ advisors are telling him? They’re saying the United States is destined to be a second-rate nation, that we need to focus on breaking our fall as gently as we can.

This is not something I made up. Yale Professor Paul Kennedy wrote a book recently in which he asks, quote, “How can the United States’ relative decline be made to occur as smoothly and as slowly as possible?” End quote.

This is one of Governor Dukakis’ economic advisors!

Harvard’s Professor Robert Reich is another one. He says entrepreneurs are destroying our economy. Let me read you one of his quotes.

He says, quote, “The myth of the self-made man (should be abandoned because) the opportunistic individual short-circuits progress (and) is no longer appropriate to our place in the world.”

I debated Reich last year in Washington. . . .

I was raised in a little town in Oklahoma where we were taught that all Americans could succeed if they were willing to work hard.

Well, I worked hard. And with $2,500 in 1956 I started my own oil company.

Today, that company is the largest independent producer of domestic oil and gas in the United States.

We employ about 500 people, we pay taxes, and we distribute more than $300 million a year to our shareholders.

Being able to succeed like I have is what America is all about.

America will continue to be the role model for everyone who wants the freedom to succeed, to have a good standard of living and a good quality of life.

It’s up to all of us to keep our capitalist system intact, to promote entrepreneurship. . .to keep the free markets free.

Thank you.

Q & A

(FINAL 9-16-88, 5 P.M.)