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	REMARKS TO THE CHICAGO WORLD TRADES ASSOCIATION CHICAGO IL MAY 23, 1989

[Handwritten addition: Competing with the Bulls & Pistons plus Montreal & Clagary.]

Thank you, George (Ryan)

[Handwritten addition: Have something in common *Maybe — Candidate for Gov. 1990.]

It’s a pleasure to be here in Chicago. Some of you may know me as an oilman and a geologist; others know me as a shareholder advocate. I also invest sometimes in Japanese companies. I see myself as all of these. It’s kind of like a jack of all trades; master of none.

I’d like to begin by sharing with you the latest [Text stricken: oilman’s] [Handwritten addition: Banker/Oilman’s] joke from Texas. [Handwritten addition: Could have been worse joke]

I’ve been asked to speak about my recent experience in the Japanese markets.

[Handwritten addition: And I have some other things I want to talk about tonite.]

I’ll start by giving you a little background [Handwritten addition: on] [Text stricken: to] the investment we’ve made in Koito Manufacturing. Some of you are probably already familiar with Boone Co.’s position.
— Boone Co. separate from Mesa.
— Koito is a major automobile parts manufacturer which makes lights for Toyota and Nissan cars.

In a recent newspaper article, it was stated that I was taking my shareholder rights crusade overseas, and that my arrival in Tokyo’s market was comparable to the arrival in 1853 of U.S. Commodore Matthew C. Perry, who demanded that cloistered Japan open to the world.
[Text stricken: — You know, I’m discovering that just might be true.]
[Handwritten addition: — All of that is good stuff but—]
— To be brutally frank, I made the investment expecting to make a profit.

In a little while, I’ll talk about the shareholder rights movement here in America because I believe it’s the formula to restoring our competitive edge in a global economy ... whether it be with the Japanese or the Germans or the British.

Our investment in Koito started taking shape last November when Kitaro Watanabe flew from Tokyo to Amarillo.
— 10 meetings.
— 20.2% investment; largest shareholder.
— Trip to Japan; speech to the American Chamber of Commerce in Japan; press conference.
— Meeting with Takao Matsuura, president of Koito; asked for board representation; [Handwritten addition: (]trust vs. ownership.[Handwritten addition: )]

When I returned to the states, I asked myself, “Why doesn’t Koito want me on the board?”
— If someone made a 20.2% investment in Mesa, I guarantee you we’d offer them a seat on the board.

I think they don’t want me on the board because they don’t want an outsider seeing their system from the inside.

Draw the line here on the Gringo and there won’t be another. [Handwritten addition: Explain]

I’ve found that the Nikkei Stock Index is a sham.
— 70% Japanese companies locked up the stock.
— [Text stricken: No] [Handwritten addition: Small] float.
— Demand greater than supply.

I’ve been enlightened by my experiences with the Japanese. I’m discovering firsthand that our trade environment is not a two-way street. [Handwritten addition: I apologize to all the CEOs that I said went to Wash. to get protectional legislation — I was wrong— you did need help]

And, I think my experience reflects U.S.-Japan trade relations on a much broader [Text stricken: level] [Handwritten addition: scale].
— I’ve always believed in free trade and global markets, and I still do.
— I’ve made hundreds of speeches encouraging the Japanese and others to come to the U.S. because they are good competitors.
— And, that makes for better products and services by U.S. companies.

Our two countries will not experience fair trade relations until Japan opens up its markets. It is the second largest economic power in the world, and the Japanese can’t close [Handwritten addition: thier economy] [Text stricken: themselves] off to others.

The U.S. certainly hasn’t closed itself off. In fact, we may have become to[Handwritten addition: o] easy with our trade partners.

When we go into Japan and other foreign markets, we must have the same access as they have in the United States. The competition can get so fierce that it really is a trade war — [Text stricken: and that beats the hell out of the other kind of war.]

But we need the Japanese & they need us — #1 Economy & the #2 Economy must be trading with each other. Just to keep everything on the up and up.

Japan should get place[Handwritten addition: d] No. 1 in Section 301 of the Trade Bill. Remember, Section 301 requires the government to retaliate against foreign countries if they don’t take measures to remedy their unfair trade practices.
— This will really get their attention.

We all need to realize that we’re in the midst of some significant changes globally.

Military might [Text stricken: will become] [Handwritten addition: is being] de-emphasized while economic might [Text stricken: will be] [Handwritten addition: is being increasingly] emphasized.

Clearly capitalism and democracy is winning all over the world. We have the system. Now the challenge will be for the U.S. to make its economy the most competitive and efficient.

Now I want to talk a bit about the shareholder rights movement that you’re hearing so much about. [Text stricken: It began with the entrepreneur.]
— The [Text stricken: shareholders right] movement is here to stay. [Handwritten addition: (]America has 50 million stockholders.[Handwritten addition: )]

There are several issues that stockholders must push for if we’re to make America’s corporate managements more accountable.
— Confidential vote
— Opening up proxy process
— Eliminate poison pills
— Eliminate golden parachutes

Let’s take a moment and look at where we’ve been and how we went off track.

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.
— Unemployment about 5%; the lowest in 15 years; [Text stricken: no coincidence.]

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

Corporate America started seeing changes just after World War II
— Our entrepreneurial 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 or even had a financial stake.

These inefficient corporate bureaucracies stifled entrepreneurship and destroyed morale.

To correct its inefficiencies, Corporate America needs younger, entrepreneurial-minded leaders in charge. These are the kind of leaders who will succeed in competing in free trade markets.

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

[Handwritten addition: my generation of managers have been mediocre at best.]

And no matter how poorly managements perform, there’s often very little shareholders can do to remove them.

We can start restoring U.S. competitiveness by making managers accountable to the owners.

We must reestablish [Text stricken: the fact] that shareholders are the owners of public companies, [Text stricken: not] [Handwritten addition: and] managers [Text stricken: . They’re the] [Handwritten addition: are the] employees.

That’s one of the reasons why I formed the United Shareholders Association in August 1986 — to upgrade shareholder awareness.
— Based in Washington DC.
— Non-profit; 60,000 members; 50 states.
— Don’t overlook this movement; it has broad bi-partisan support.
— It’s a populist issue with 50 million people owning stock in publicly-owned companies; large group of voters.

What we’re seeing is a restructuring of American corporations.
— The goal for American business should be that size becomes meaningless, results are everything.

Another issue that we’ve been addressing, and one that I think Japan also will address, is that of cash buildups.
— Two major U.S. corporations — one with $10 billion and another with $5 billion.
— That’s more money than anybody should have just laying around, especially for mature industries.

Restructuring has helped FORTUNE 500 companies have the best profits ever, but dividends are still near an all-time low ... average 3.6% yield
— Japan dividend rates are even lower.
— They’re simply 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 in 1956 with $2,500
— 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 stockholders ... doubled reserves in 3 years, and still growing.

I believe the United States can avoid a recession in the years ahead 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.
— 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.

Shareholder activism in the United States is here to stay.

This [Text stricken: process] will make our [Handwritten addition: companies and] country more competitive than ever before. We have the blueprint for success. Management must realize that its job is to perform for the stockholders.
— Employees, communities, etc. will do better than ever.

Importance of Corporate America [Handwritten addition: Explain]

What has happened in Corporate America throughout the 1980’s will make its way into Japanese businesses in the 1990s. It better if they want to stay competitive and really make the big leagues.

As Japan continues to compete in the world economy, the idea of shareholder rights will become more and more widespread.

As a matter of fact, shareholder rights will become a worldwide issue as all of us compete in a global economy.

In a global listing of stocks, the Japanese can’t make the list under their present structure.

We’re going back to Japan next month.

Koito is holding its annual meeting on June 29th, and we’re going to be there.
— Only one can attend; taking Bea and three others.

No doubt you’ll be reading about us. I believe we’ll do just fine because we understand who owns the company — the stockholders.

We’re now about to see if the Japanese are willing to compete in the open league or choose a course of closed markets.

Thank you. [Text stricken: Now I look forward to your questions.]