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	REMARKS FOR THE USA SPEECH COLUMBUS OH OCTOBER 18, 1988

Thank you, Bonnie (Aziz). . .Bonnie and Sal have done a great job organizing the Columbus chapter.

My topic today is “Black Monday: A Year Later. . .” I’ll talk about what effects the crash had and what the future of our market looks like.

As you know, right after the crash there was a lot of wild talk about another Great Depression. And we heard a lot of dark humor. . .“Thank you, Paine Webber.”

Well, there weren’t many people throwing themselves out of windows after Black Monday. . .most people saw there were fundamental differences between the Crash of 1929 and the Crash of ’87.

In 1929, the market rose on speculation, rather than on companies’ fundamental values.

In 1987, the Dow rose because of real changes in corporate America. . .the Bull Market was the result of restructuring, which was making companies more profitable, more competitive and, therefore, more valuable.

Restructuring includes takeovers, LBOs, spinning off assets. . .such as Tenneco’s recent sales.

A lot of studies have been done to determine what caused Black Monday, and they’ve come up with numerous theories.

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

The market was up because investors were anticipating a complete restructuring of corporate America. . .The tax bill threatened to stop the restructuring movement.

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

Well, the tax bill has been abandoned and the market has struggled back to a fairly respectable level. . .and the U.S. economy has chugged along, almost unaffected.

The market and the economy seem to contradict each other. . .one struggling, the other prospering.

But there are sound reasons for their performances.

The economy continues to do relatively well, in part because restructuring has continued. . .although not at the pace it should be.

But the market is being held back because the same people who pushed for the Ways & Means Committee tax bill are still out there, fighting to stop the restructuring movement.

The people behind it are the CEOs of the FORTUNE 500 and Business Roundtable companies.

CEOs have insulated themselves from the shareholders. . .poison pills, golden parachutes, state anti-takeover legislation.

Over the years, they’ve created huge, bureaucratic empires:
—Perot’s snake story in “Fortune” last March

Blame for America’s competitive decline clearly belongs to Fortune 500 CEOs.

These CEOs are the shortest of short-termers. . .big salary, bonuses and perks. . .little ownership.

Example; Campeau’s takeover of Federated Department Stores.

Federated CEO Howard Goldfeder. . .37 years, $800,000 salary, big bonus. . .owned only 3,000 shares; 32 ten-thousandths of 1% of the company.

The best of all was Newmont’s Gordon Parker... had 406 shares... not even round lots.

Jack Reichert, chairman of Brunswick Corp., has a unique theory of why managers don’t need to own stock. He 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 owned stock “spiritually” on October 19th.

But shareholder activism, especially after the market collapse, has started to force managements to be accountable.

FORTUNE 500 companies are getting more competitive by restructuring... they’re downsizing for efficiency.

It used to be that managements focused on building empires, “diversifying” out of mature, core businesses. . .Goodyear example.

The takeovers and restructuring we’ve seen in the past 6 years have simply been a reversal of managements’ poor diversification schemes.

If we are to avoid another market crash, we must continue restructuring.

Also, to prevent another crash and prevent the recession so many people are predicting for 1990, CEOs must free up retained earnings.

That will be the next battleground. . .Ford, $11 billion; Boeing, $5 billion. . .More money than they know what to do with, and that has historically been a disaster.

Restructuring helped FORTUNE 500 companies have their best profits ever in ’87. . .but dividends are still near 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.

I’ll give you an indication of how much they could distribute if they wanted to. . .Mesa (started in 1956 with $2,500. . .) distributed $310 mm in 1987; Boeing $217 mm; Unocal and Phillips about $115 mm; Goodyear $91 mm.

With today’s 28% tax rate, there’s every reason to push out more money to shareholders.

If CEOs would distribute 50% of cash flow instead of 20%:
—Dow would go to 3000
—Prevent a 1990 recession
—Upgrade standard of living for millions of Americans. . .50 million U.S. shareholders, 2 million here in Ohio.

But CEOs will continue wasting shareholders’ money until we restore management accountability.

We must re-establish that shareholders are owners, managements are employees.

So USA has set some goals for shareholders rights.

One-share, one-vote. . .SEC victories in ’86 and ’88. . .BRT fighting the SEC, showing their true colors.

Confidential vote. . .(MESA example)

Proxy process reform

USA will do all the heavy lifting. I testify before Congress, lobby for shareholders rights, etc.

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

Make and support proposals to stop greenmail, remove golden parachutes and poison pills. . .USA can help you.

Write or call state legislators and Congressmen.

And, since this is a big election year, be sure to vote for officials who will fight for shareholders rights and the free market.

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... he has come out in support of USA’s shareholder rights issues.

Governor Dukakis, on the other hand, has taken up managements’ rhetoric.

One of his top economic advisors, Harvard Professor Robert Reich, is even telling him the free market system is destroying our economy.

Let me read you one of Professor Reich’s 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.”

From everything I’ve seen and read about the two Presidential candidates, it’s clear to me that George Bush is pro-shareholder, while Mike Dukakis is clearly pro-management.

America’s 50 million shareholders represent a huge voting population. . .we must unite if we want to restore Corporate America’s health.

USA is your watchdog. . .Advocate. . .30,000 members, 50,000 by 1-1-89.

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

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

Thank you.