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	REMARKS FOR THE USA SPEECH given at San Francisco, CA 1 February 1989

Thank you, Jim (Milner), and I want to thank Gary Shemano from Bear Sterns, which is co-sponsoring this event.

I'm here tonight to talk about the problems I see in Corporate America and to offer a few solutions. The cause of Corporate America's competitive problems can be described in one word: management ... It's not the workers, it's the leadership.

Corporate America is in the middle of a major overhaul that is long overdue. The problems started just after WW II, as entrepreneurial founders began being replaced by professional managers; a no-risk mentality emerged. Therein began the separation of ownership and control. Now, no matter how poorly management performs, there's little that shareholders can do about it. Managers are insulated from the shareholders with things like poison pills, golden parachutes and anti-shareholder legislation.

There must be a system where CEOs can be dismissed if they don't do an acceptable job ... like football coaches, or like politicians who stand for re-election. That's why I formed the United Shareholders Association in August 1986, to upgrade shareholder awareness.

A new era of shareholder rights has begun. Shareholders are restoring management accountability, re-establishing that shareholders are owners, and that managers are employees. We are seeing a transformation of American corporations, with a new goal, where size is meaningless and results are everything. They are restructuring for efficiency, trimming Corporate America's fat and providing vitality for the entire economy.

There's a new study out by Steven Kaplan at the University of Chicago that shows how companies that have restructured are proving to be substantially more profitable than their industry peers. That's good for the country; productivity and efficiency create more jobs, higher wages and increased tax revenues.

But restructuring is also creating a public outcry That happens when you force a change on the status quo. There will be a lot of Congressional hearings ... they'll probably tinker with the tax codes and corporate regulations. But the deals will continue, because they are economically driven.

I'm not saying every deal is going to be a good deal. Some of the deals will be good, some not so good ... but the market will weed out the bad ones. That was the determination of a new study by SEC chief economist Kenneth Lehn. The study shows how companies that make bad acquisitions become targets themselves.

Other studies show that, despite the rhetoric, restructuring has been a phenomenal success. 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.

Just look at our economic performance since 1982, when restructuring heated up:
— Lowest unemployment in 14 years
— R&D up 100% in the past decade, after no growth the decade before
— And U.S. Industry is operating at 84.4% capacity, highest in almost a decade

But management still gives you the "short-term long-term" argument, saying takeovers sacrifice long-term growth for short-term profits. What they're really saying is "Give us more time to make the same mistakes."

FORTUNE 500 CEOs are the real short-termers, with their big salaries, bonuses and perks, but little ownership.

Look at Campeau's takeover of Federated Department Stores. Federated CEO Howard Goldfeder was with the company 37 years, had an $800,000 annual salary plus a big bonus ... and he owned only 3,000 shares; 32 ten-thousandths of 1% of the company.

Jack Reichert, chairman of Brunswick Corp., has a unique theory of why managers don't need to own stock. He told the Chicago SunTimes:
"The question really becomes one of 'Do you believe you own the company?' I feel I own the company because I own it spiritually."

Don't you wish you owned stock spiritually when the market crashed? Managers don't think like shareholders because they don't take the same financial risks ... So active shareholders have to force management to perform.

The fact is, there would be no takeovers if management did its job. It's really very simple ... keep the stock price near asset value and there will be no takeover.

The latest target of public concern is corporate debt, but the fears are unfounded. Over-leverage assumes two things that I won't accept ... dumb borrowers and dumber lenders— Maybe one, but not both.

Imposing limits on corporate debt would very likely prove disastrous to the stock market. If Congress is genuinely worried about corporate debt, it should put equity financing on level footing with debt by eliminating the double taxation of dividends.

Which brings me to the next battleground, retained earnings. Look at Ford, with $10 billion in retained earnings, and Boeing with $5 billion. That's more money than they know what to do with, which has historically been a disaster.

Restructuring has helped FORTUNE 500 companies have the best profits ever, but dividends are still near an all-time low with an average yield of only 3.6%. 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, distributes more than $300 million annually. Compare that to Boeing's $245 million; Unocal's $115 million; Phillips Petroleum's $175 million; and Goodyear's $100 million.

Distributing a higher percentage of cash flow leaves plenty of cash for corporate growth. Again, look at Mesa. We've distributed nearly $1 billion to our stockholders and doubled reserves in 3 years, and we're still growing.

Want to avoid another market collapse and keep our economy moving forward? Distribute 50% of cash flow instead of 20%: The Dow would go above 3000, you would prevent the recession so many economists are predicting for 1990, and you would upgrade the standard of living for millions of Americans.

And if Congress would eliminate the double taxation of dividends, the amount of money that could be pumped into the economy would be phenomenal.

This is a populist issue. There are 50 million U.S. shareholders; California has the most, with more than 6 million. If you include pension funds and trusts, half of all U.S. households are directly affected by the stock market.

In conclusion, shareholder activism and restructuring are here to stay. This process will make our country more competitive than ever before. We have the blueprint for success. Both stockholders and management have a responsibility to make sure restructuring continues. Stockholders must continue their activism.

Management must realize that its job is to perform for the stockholders.

The formula is really that simple.

I'll be doing my part; I'm too old to change. And there is plenty that you 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 your Congressmen.

USA is your watchdog. Our monthly newsletter, the USA Advocate, keeps you up to date on our issues. we have a growing base of support across the country, with 58,000 members.

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 in the hands of the owners, the shareholders.
Thank you.