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	REMARKS TO THE PROFESSIONAL INSURANCE AGENTS OF TEXAS DALLAS TX MAY 4, 1989

(20 to 25 minutes)

[Handwritten addition: Pass SB 255 HB 2554]

[Handwritten addition: I agree with you on John Montford]

Thank you, Bill (Preston).

I want to talk to you today about two things that I think are important to us as Texans.

First, I want to talk about the future of the Texas economy, especially in relation to the oil and gas industry.
— As you know, the state of the oil industry affects all of our state’s businesses, including the insurance industry.

(Frog joke)

[Handwritten addition: Maybe I should forget about running for Gov.]

I know you have other activities to attend this morning so I’ll keep my remarks short (Dad’s remark... best speech ever).

Texas economy improving:
— Tom Brown story; “Damn tired of it.”

Good reasons for the brighter outlook... but my optimism is for a diversified Texas economy, not another oil boom.

The price of oil has improved, but I personally am looking more toward natural gas for the future. [Handwritten addition: of my industry.]

The oil price collapse was rough on us all, but it has worked to strengthen the Texas economy.

A couple things happened when times got tough... Businesses restructured, became lean, efficient and competitive to stay alive.

And as oil profits plummeted, our economy began diversifying.

Entrepreneurs opened their own businesses and succeeded in expanding the state’s economic base.

Texas’ biggest asset is its entrepreneurs.

Hard to quantify, but we have more in Texas than anyplace in the world... the spirit that made Texas great.

In addition to restructuring and promoting entrepreneurship, Texas must work to continue to provide a good business climate... taxes low, regulations in check.

So what it comes down to is a three-pronged offensive for economic growth.

First, we need to continue restructuring existing businesses to become as competitive and efficient as possible.

Second, we need to encourage entrepreneurship [Handwritten addition: Story on how much is enough... “Pig trough”] Never discourage an entrepreneur.

Third, we must continue attracting out-of-state businesses and helping our existing businesses... The key is to keep the Texas business climate attractive.

But there’s no need for giveaways... With our low property costs, no state income tax and a highly skilled workforce, we don’t need to subsidize business with taxpayers’ money.

If Texas has the leadership to pursue these three avenues, we will be the model for the entire country.

Now I’m going to shift gears and talk about an issue that I’m very committed to, and that is shareholder activism.
— Again, this is an issue that concerns your businesses too.

Some of you already know me as an advocate for shareholder rights.

Earlier this week I was in Austin testifying before the House Committee on Business and Commerce on the so-called “Texas Shareholder Rights Law” — HB 2554.
— Management entrenchment device
— Anti-shareholder
— Anti-Texas

Shareholder rights didnt start with America’s big businesses. They began with the entrepreneur.

Entrepreneurship has been very important for the American economy:
— Entrepreneurs have created thousands of small businesses in the last seven years.
— In turn, small businesses have created most of the 19 million new jobs that the U.S. has added since 1982.

But unfortunatly, the entrepreneurial spirit has been slow to spread to America’s large corporations.

Corporate America started seeing changes just after World War II.
— Our entrepreneural founders were replaced by professional managers and slowly a “no-risk” mentality emerged.

We began to see a separation of ownership and control.
— The people running the company were not the same ones who owned it.

And, many companies diversified out of the business they knew best.
— Companies built huge bureaucracies.

These inefficient corporate bureaucracies stifled entrepreneurship and destroyed morale.

To correct its inefficiencies, Corporate America needs younger, entrepreneurial-minded leaders in charge.

That’s not going to happen overnight, because corporate managements have too much to lose.

No matter how poorly management performs, there’s often very little shareholders can do to remove them.

The way to restore competitiveness os to make managers accountable to the owners.

We must reestablish that shareholders are the owners of public companies, and managers are employees.

That’s one of the reasons why I formed the United Shareholders Association in August 1986 — to upgrade shareholder awareness.
— Based in Wahington D.C.
— Non-profit; 60,000 members; 50 states

Don’t overlook this movement. It has broad bi-partisan support and it’s a populist issue with the 50 million people who own stock in publicly-traded companies.

That is a large group of voters.

Corporate America is changing slowly... Shareholders are exercising their rights to force managements to perform.

Managers are working harder, making companies more profitable, more efficient, more competitive.

What we are seeing is a transformation of American corporations:
— The goal should be that size becomes meaningless, results are everything

Restucturing focuses management’s attention on what the company does best, the core business:
— Goodyear example

Another issue that we’re addressing is that of retained earnings.
— Two major U.S. corporations — one with $10 billion and another 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... average 3.6% yield:
— They’re not returning profits to the owners

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

I started Mesa — the company I now am general partner of — In 1956 with $2500.
— Today, Mesa distributes more than $250 million annually.

Distributing a higher percentage of cash flow leaves plenty of cash for corporate growth.

Look at Mesa... distributed nearly $1 billion to our stockolders... doubled reserves in 3 years, and still growing.

I believe the United States can avoid a market collapse and keep our economy moving forward. The way to do that is to distribute 50% of cash flow instead of 20%:
— Dow would go above 3000
— Prevent a recession
— Upgrade standard of living for millions of Americans

You might ask, “Does this really affect that many people?”

If you include pension funds and trusts, half of all American households are directly affected... 50 mm shareholders.

In conclusion... shareholder activism in the United States is here to stay... this process will make our country more competitive and entrepreneurial than ever before.

We have the blueprint for success.

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

The formula is really that simple.

Thank you.