from Minnesota Public Radio Welcome to a program from the Minnesota meeting Forum series. Minnesota meeting is a nonprofit corporation which host a wide range of public speakers. It is managed by the Hubert Humphrey Institute of public affairs at the University of Minnesota. This program features of debate on the topic corporate takeovers who wins who loses now, here's moderator Ted Weyerhaeuser chairman of Minnesota meeting to introduce the participants in the debate and to explain the ground rules today or when Jacob and Ray plank are supremely qualified to talk about the issue of corporate takeovers H is very successful in his own way and in his own business. Irwin Jacobs chairman of the board and CEO of Monster Ink and president and CEO of Jacob's Management corporation. Irwin Jacobs is one of this country's most skillful and successful takeover practitioners. Right flank is chairman of the board and CEO of Apache Corporation and its founder and co-chairman of stakeholders of America a National Coalition of CEOs that is organized to counter hostile takeovers to erase search dissemination of information and government action. Because today is program will be in the form of a debate. I have asked the dean of the Hamline University law school. Dean Steven young to join me and assist in the program. He sits on the podium with us. The format being used today is as follows. There will be a 10-minute presentation by mr. Jacobs followed by a 10-minute presentation by mr. Plank. Presentations will be followed by a 5-minute rebuttals by each of the speakers starting with mr. Jacobs. We will then take written questions from the floor and each speaker will have one minute to respond to the question at this time. It is my pleasure to open the bait for the 10-minute Presentation tomorrow and Jacobs. Thank you. Appreciate the opportunity to do this. The topic today for this form and corporate takeovers who wins and who loses I will focus my remarks on the macro and micro Economic Consequences of corporate takeovers using as the basis for my remarks current economic learning on the subject as well as my observations as a participant and an interested bystander, obviously the 10-minute give them to me to the subject does not provide the opportunity to be exhaustive before identifying the winners and losers in a corporate takeover. It is necessary to define the type of activity that is at issue. I will exclude situations involving the hospital battle for corporate control for a proxy fight or the friendly transfer of a corporate control or management of company agreed to sell part or all a company has assets the company B. Corporate takeovers is there are being referred to in my address or situations where the management of a company a does not agree to the sale of part or all of its assets to another require or bitter and we're the shareholders of company a are not given an opportunity to vote in Management's decision on whether a sale should be made or not. Who are the winners and losers in a corporate takeover, assuming a successful takeover and a corrected correctly evaluated and price transaction by the better certainly successful takeover substantially increase the wealth of the stockholders of the charge of companies the economic report of the president transmitted to Congress and February of 1985 estimated that these benefits range from 16 to 34% increase in the value of the target company's value after making adjustments for the size of the differential between the choir and acquired companies. The study goes on to estimate the game of the choir Corporation to be between 9 and 11% This is certainly been my personal experience as to both the bitter and a seller of shears and take over situations many here today. He would probably benefit from the same process. It restructured and more efficient business is created by the process of redeployment of acquired assets. This is true, whether the businesses are sold to a third-party or run by a choir for those who are employed by the restructure identity. They have a more viable future. They have a more viable future employer for those who do not remain early termination from a business that is not providing an adequate return on the assets employed is often better is often a better solution than lingering employment with a business that is becoming increasingly less viable many of the managers and staff that currently operate the many Enterprises in which I'm involved have previously been employed by businesses, which I acquired Selecting this group of people. I have sought out the most effective and qualified people for the positions, which we needed to be filled this process of calling evaluation and redeployment has given rise to the Ascension of a staff which outperforms the management of companies which were required for those who did not remain employed who did not remain employed after the restructuring General termination and relocation benefits have been provided. My example is well known as the AMF situation with today. We have accrued up to 15 million dollars. Up to this point in benefits for people that have been Let Go Local communities and economies gain when production and distribution resources are combined in existing facilities or new facilities to be built as a result of a merger. Certainly one communities gain can be another communities loss or potential loss. However, as stated above it is simply not good economics to believe that an efficient inefficient facility will provide a source of jobs and revenues for a community forever the factors which made the underutilization of corporate assets a good acquisition. The first place will have already acted to undermine the long-term benefits of the acquired corporations employment in this area. That's it is only a matter of time that when the same you cannot make pressures would have been felt by the community under prior management the decision as to where to move the restructure production may have been different under the previous management, but the same company may have decided to restructure relocate as production distribution or management facilities in a manner similar to the new management. Certainly General Motors showed no overwhelming loyalty to an existing Community or Locale in deciding where to locate at Saturn plant and plans at AMF it already been under way for the change prior to men Stars acquisition. On a macroeconomic level the evidence is all so strong that takeovers generate aggregate net benefit to the economy at least so is the finding stated in the economic report of the president certainly the redeployment of assets to higher and better use as they are sold or integrated into the choirs businesses produce his net economic benefits When ministarke wired beacons, it was abundantly clear to us that many of the warehouse facilities that were you lies by Beacon since moving and storage business has had far too great a value for other purposes to be used as beacons deployed them. Consequent consequently these assets cast Kelly a rigorous program of redeployment of these assets was implemented by Men start to liberate the higher and better use in one instance a building that was used by bacon for storage was sold to a major insurance company to renovate and uses corporate headquarters. The capital markets also benefit from the new source of money generated selling shareholders with investment capital and ham seek out other sources to read a play the capital The Prudent investor will invest wisely and the input investor will not but the churning effect of investment causes the market to operate efficiently. take over activity also permits and promotes what the noticed Economist Joseph schumpeter describing is what capitalism socialism and democracy is the process of creative destruction a series of editorials in the Wall Street Journal on July 5th and 6th and 12th of this year describe how the Takeover process augments this process, but in brief simply state that the theory provides a capitalism must be in a constant state of change reflects new consumer goods new methods of production or Transportation new markets new forms of industrial organization must replace the old ones for the system to survive corporate governance under existing laws is bureaucratic and self-perpetuating incumbent management interest inherently conflict with shareholder interest pain Management's comfortable and come and see is pitted against the shareholders rights to see Maxima shareholders values realized Of course management that owns significant shares in the company will not run into this and here in Conflict. But my observation has been that most companies that are of interest to me and is in a choir have no significant management shareholdings. The Takeover process permits the capitalist system to be driven by an Innovative forces that challenged the ineptness tag of policies of self-preservation the question that turns to one of who wins and who loses when they better have been successful in acquiring the target company the previous analysis of winners and corporate takeovers generally finds many conomic made benefits in activity, but it should not be assumed that all take over car made in heaven or the Dolphins are successful. Assuming a balanced legal environment in which poison pill prefers do not become cyanide pills or vigilante groups of incumbent corporate executives are not successful and bowling Congress into ill-advised legislation. The marketplace is still the best system to determine which bit deserve success. Someone will not succeed but still will have net economic benefits. I believe the shareholders and the economic system the benefit from the various doings and undoing of t-boone Pickens of the oil industry. Although he has not been a successful dinner and numerous undertakings. In a failed takeover attempt in Walt Disney Productions in with Saul Steinberg was involved. I had first-hand knowledge that this in other pressure resulting in the destruction of the company into a much more efficient and well-run business not only have the company and its remaining employees benefit from this restructuring, but the shareholders have seen their stock go from the low forties to just under $100 a share in less than one year and while time will have to bear me out on this. I do not believe the shareholders of CBS were ill-treated by the marketplace rejection of Ted Turner's almost laughable been for CBS. Similarly some successful bids may have been ill-timed are overpriced. But here again, the marketplace is a quick and unforgiving scorekeeper. When a bitter puts his money on the line on act not required of or commonplace to management resistance games. The marketplace will soon eliminate that better is a viable player. Obviously. I've spoken rather favorable terms about the merger and acquisition activity that precipitated by takeovers. I believe takeovers will continue in the near future if the market is permitted to be the driving force and not interfered with by the installation of to too many or too severe elbow legal obstacles. However, takeovers are not nearly as important factor in the hole we conomic system as they've been given credit for in the public Arena mergers and Acquisitions are historically cyclical nature and we are currently in a peek. However is noted in the president's report the large dollar volume of recent mergers versions. An acquisition activity is attributed primarily to the substantial increase in the size of individual transactions and not substantial increase of number of transactions himself access to the large Capital Pools by corporate Raider through the use of so-called junk bonds, or as I prefer to call them high yield bonds is an important favorable development in a takeover field and also gives rise to the illusion of a much greater activity However, the fact that no Corporation no matter how heavily capitalized is immune from the market forces of the corporate takeover is extremely positive development in my estimation because large corporations tend to become the most bureaucratic and unresponsive to shareholders needs and rights. I make these observations and statements concerning the benefits of takeovers activity is an obvious. He can have a beneficiary of the process. I do not apologize or shy from that fact. For I feel that I have taken the necessary. You can have Mike risk and martial mind and other resources in a matter with the marketplaces favor had I not been the success in implementing the asset redeployment progress of which I have referred. I would not still be around to come another time. Well, then who loses? Well, then who loses from the corporate takeover process? Certainly the fat and Sassy manager who refused to accommodate minimum wage and needs of the shareholders is a loser. Although I might say parenthetical that was golden parachutes being passed out with ever-increasing amounts of Golden Fleece is hard for me to Envision these managers of having lost some jobs are lost as we structuring consolidation take place. But as mentioned above these jobs were probably on the Block anyway because he conomic forces are simply accelerated by takeover process in any event. No job is necessary existence forever. another group Another group of losers can perhaps be identified? Those are the shareholders of the companies in which incumbent management becomes obsessed with the concept of Defending itself from a takeover and therefore pays too little attention to the fundamentals of good operation, which in my judgment is the best defense ever invented certainly the long-suffering Fair holders of Control Data Corporation can gain little solace in knowing that their corporate management have been leaders in providing economic and governmental stimulus to anti-takeover measures on that note. I will end my formal presentation. It was afternoon during the Ferber further commentary by then with more discussion of propriety of local businessmen spending in order to miles of time worried about defending themselves from the precede evil takeovers. Thank you. Thank you. Mr. Jacobs. Should I will now turn the volume over to blank. Thank you, 10 ladies and gentlemen, thank you all for the opportunity to discuss winners and losers from hostile takeovers. I have really two fundamental problems with hostile takeovers. One is the question of underlying ethics. And the Ender is the major question of what sauce is good for the goose ought to be good for the gander and the table is not even the way it is. The Ballgame is presently playing. I think we all know who the big winners are in the hundred billion dollar year surge of carpet of Siege of carpet America. However, I'd like to focus on the devastating consequences of hostile takeovers specifically my questions will support three points one. There are many more serious losers than there are winners to heighten public understanding and participation are absolutely vital Third Federal legislation is required. Americans have long accepted the interest in Conflict require guidelines to protect us from over-reaching self-interest. In a world of expanding population, for example, our fragile ecosystem is necessitated pollution abatement. and control for current and future Generations what DDT did to the mosquitoes it also did to the Songbird in the eagle and the eagle for years, we didn't understand who the losers were and so it is with hostile takeover is it is the enormity of the spoils that drives the propagandists to hold the public and our legislators at Bay. This tactic diverts attention from the true losers. And it's a bus skits the necessary buildup to face the issue and take a stand. It is in that context that I joined this confrontation. Throughout history mankind is organized Nations and cities churches and associations corporations and Partnerships to enhance the quality of Independence and the sense of decency as well as the interdependence of living and working together. Each structure contains a specified methodology including the means to provide for accountability and the replacement of leadership. The attempt to disrupt institutional order outside the principles of self governance is Terrorism. Terrorism is comprised of either or both mental intimidation and physical violence. The only missing element in hostile takeovers is physical violence. The casualties of this Warfare the clothes plants the last jobs the interdependent businesses and disrupted communities are every bit as present in war and hostile takeovers. It is equally important that propaganda neutralize any uneasy populace while the bower power buildup precedes. Hitler cried out that Supreme Aryan blood in adjacent countries are Austria for example was represented by rotten leadership. It was justified. He claimed the Nazi Germany move to override other systems of self-governance. I say that's unethical I say it's criminal sound familiar in the Holy takeover Wars make no mistake about it the charge of poor self-serving Management on directors and neglected shareholders. They say yet our research today and stakeholders in America suggest that those companies hit have had an average rate of return on Equity of 16% or well above the companies traded on the New York Stock Exchange in average. When a Trader buys his first shares and before he discloses his intent to purchase at a higher price those first two cell do not realize writable benefit their several categories of equity shareholders, and the Raiders games are established primarily by seeking a basis in a lower cost than that received by the shareholders on average. Those shareholders are among the ranks of the losers. As the Raider approaches the 5% reporting plateau. I don't attend a lot of business days before disclosing his presence. He moves quickly to build his group's position benefiting from disguised intent. And now I'm unavailable to other shareholders under the present application of full disclosure intended to direct equal opportunity to all pent potential beneficiaries from the second Plateau. The Raider late is a smokescreen by berating and belittling management and directors for owning fewer shares than the Raider. This propaganda is the company by charges of self-serving mismanagement instant experts on the Affairs of other corporations were people have given their lifetime to running that business as well. If the resistance of two corporate terrorism is to strong. The Raider is likely to Green mail out starting protection money from the existing shareholders. The losers are clear. If the Raider should have to leave some of the jewels behind investment bankers are quick to attract other takeover artist to strike again st. Regis Disney Phillips petroleum, Romano's twice. When a corporation is put in play its own bonds drop immediately to be followed by lower credit ratings. Common shareholders. Yes, but the other side of that tutor is the debt holder. Meanwhile, the Raiders Swagger's home with a bigger Club to bash the goodies out of the next victim. After all is interest on the borrowed money and his legal in investment fees are likely to be deductible probably gain may be taxed at lower capital gains rates are even lower as in the instance bun of Mesa vs. Unical and the treatment of the gain on those shares sold at $72 a share as dividend income taxed at 7% Weather in my industry oil and gas the devastation is easy to measure in a loser is to identify while the games are in no way a parent within the system. The service to service three and a half billion of Phillips petroleum restructuring debt rising out of the Pickin strike in the icon and Jacob second hit Phillips is selling assets reducing exploration and is terminated 3500 jobs as I recall that win netted in the first wave about 94 million dollars to the Raiders, but there were many more serious looters losers on the gulf red, which drove it to Chevron Mesa cleared 400 million. I believe you your bonus was 18 or 19 point six million in performance units. Pittsburgh last millions and annual contributions to its education and quality of life facilities taxpayers supporting the university may now have to assume the cost heretofore carried by golf in its Research Center. True Chevron gave it to the University of Pennsylvania and it remains to be seen whether a million dollars that a company that gift was an exit gift or will be ongoing. The multiplier of the 16000 jobs lost out of the golf Chevron amalgamation based upon the related jobs Witcher lost is tragic. The replacement of the petroleum reserves vital to our public interest in our national interest is more difficult leaving us more readily available to International black male along with carpet black male. That's occasion by the necessity to sell assets to pay down 13 and 1/2 billion dollars worth of debt incurred and leveraging up. Minnesota Wellspring exist to increase the number of quality jobs. So the collaboration of business labor education and government we recognize that new jobs must be netted against those lost from companies leaving or forcibly liquidated. I used to kid Dave Rowe saying that there are enough companies that may want to lead and leave anyway without seeing those that are forcibly being liquidated removed from the state of Minnesota. We agreed however, unanimously within this collaboration that the net gain of jobs is more difficult if corporations are involuntarily removed even this thin blouse of legislation, which we develop during the. Has proved an anathema to the Raiders. Although it may have signed sidelined a few arbitrageurs who is early pouncing on the victim is essential in the process of capitalizing the mud. Is necessary to lever up for a hostile takeover. Once in place that level that legislation was not adequate to prevent the degree mailing a scientific computers though. It may have helped them survive with a heavy debt load. It was not adequate to prevent McCoy perfect from being carted away from Minnesota to Texas but it may have contributed in the negotiations on the sale of Conway. I don't need to be an expert. It may have assisted in the negotiation of a higher price to the shareholders. Also during this. St. Regis was hit at a time. It was considering a 350 million dollar plant expansion which would have added tax base several thousand construction jobs in hundred the permanent jobs in northern Minnesota a foreign Raider. Who am I think of his sir, Jimmy Goldfinger struck first, st. Regis was hit again and again and finally crawled off to White Night Champion International. Last month I spoke with a surf armored Saint Regis CEO. My question was with the plan of Ben milk building Minnesota. He said yes a week later at a Washington meeting is Champions CEO if the plant will be built. He replied maybe later, but we took on a lot of debt clearly the people of Minnesota are the losers during 1984 Dutch substituted from equity for hostile takeovers was 90 billion dollars the rates picking up. It's up to a hundred and fifty billion in the first nine months of this year a study between 59 and 74 points out Japan productivity increased by a factor of 5.3 times that of the u.s. Is difficult. If not impossible to reverse that trip Trend in the face of hostile takeovers. We are all stakeholders in America with a challenge and a duty. Thank you. Thank you. Mr. Blank as each of the two presentations were slightly over the 10 minutes. I would ask that you make your 5-minute rebuttal up to 5 minutes if possible. Mr. Plank, I don't know how you ever built Apache to the extra on your company that you say it is under the theory of what you hope the future of this country runs under governmental environment. But let me set up two facts straight based on your industry and on some of the things you speak about called greenmail. First of all, I have never in my life ever heard of anybody with Green Mill to company take a gun to the cashier and say write the check when I blow your brains out. It's the other way around and I know it firsthand knowledge they come to you and say you take the check or will blow your brains out here will give you the bones of this company in a nice little paper bag when it's over with. Why don't you go on take your money and do something else? What's interesting is I like to find one person in this room including yourself. Mr. Plank that said, it's too much money. I can't take it pay me less. The other thing is we talked about your industry the oil industry one of your leaders in the industry. Mr. Anderson from Marco who has just recently paid compliments to Boone Pickens for the fact of having him straighten out his company only because of the atmosphere which took place in the oil industry. And in fact a loaded 1 billion dollars worth of assets that were totally non-performing and in fact increase the value of their shareholders by doing so You spoke about Disney. You said Disney was Green Mill twice. Maybe you know something about Disney that I don't Disney was greenmail by Saul Steinberg, which turned out to be the best single thing that happened to the shareholders that company he got $62 a share of the stock sales 499 today. I don't see that company suffering one bit based on your scenario. I almost get the feeling that what you would like to see happen is that that's so called and again, I speak to those managers and directors who I classify as an apt and taking care of themselves more than they really care than the ones that you speak to being those that you refer to putting the life and soul into this company. What blows my mind out is how a CEO of a company can draw a million dollars a year out of a company go out there and tell the analyst of the people out in the world by the stock in my company. This is the future. This is where we're going. This is how wonderful it's going to be where he in fact doesn't put $5, but we'll go out there and give his money to somebody else to invest for him. That's who I refer to. I don't know who you're referring to. I don't pretend for a minute that every corporation America is being run poorly. I think this is the best country in the world. I believe in the system always have all my life and I look forward to the system work. Without the governmental interference. Thank you. Thank you are afraid take your finals. Mister Jacobs, I didn't mean that Disney was blackmail greenmail twice. I meant that it was hit twice if I made that mistake. I apologize. 10 minutes is too short a time and so is 5 minutes to develop a thesis. I hope I have laid in the early portion of these remarks a context against which to examine some of the more flagrant elements of the practice and to try to come by a little broader understanding. In the remarks made by my very worthy opponent. I'd like to observe that I don't think under all circumstances is the practice totally reprehensible. I do however feel that there are very many serious abuses and that if these could be corrected. Then you haven't even handed ball game, which better represents not only the single set of shareholders, which I heard highly overemphasized in my view. But the other interests involved which needs to be balanced in which every carpet management must take into consideration as he runs the business for the long-term as opposed to the short-term. the typical practice in moving in on a company Yes to buy a few shares up to 5% with knowledge that you have later intentions with regard to that company, but without disclosing that now. We who are corporate officers and directors have been taught to respect and to constrain ourselves from taking advantage of inside or knowledge. You have created inside or knowledge in the Hostile takeover at Step 1 to the disadvantage of some portion of the share owners. That's true in each step of the way, but also along with it, then goes the process of intimidation the process of intimidation is then to work your way and your will upon the managements of those companies. I happen to have had the opportunity to talk to the chief executive officers of three of them who have felt the sting. In terms of your activities here in the city we could get in for those but I don't think I will at this juncture. There are A number of things for example with respect to the continuity of a series of totally unconscionable actions which tend to obscure and a bus gate the real losers and the corrections that might take to the might take place with respect to the abused. I spoke this morning for example with Bruce Byrne former CEO of them. Continental group and now I'm with that company has been liquidated and having been hit first by Sir Jimmy and second having wound up all the medley with a white knight and then liquidated points out that the interests of the employees might better be served if at the middle management levels and some of the lower ranks the so-called golden parachutes were extended rather than with drying as it exists today, for example, many professionals within a company. Find that their careers are interrupted or they are declared Surplus, but the excess money is in the pension send funds within those companies almost invariably are utilized by the Raider as part of the assets. He liquidates to sell off and sell off to pay down the debt incurred through the process of junk bond said you're going to have to stop me cuz it when I get up there because I need all the time I can get. Okay, the junk bond process is nothing more when you look at it then a bar or sitting outside the window and saying hey rather than borrowing money on my collateral. I'm going to borrow money on yours because I'm going to liquidate your assets and pay it off. At that point the investment banker goes out and says, well that's a very interesting and new thought he doesn't realize that it goes back to financing the Pirates in the days of when the ships were sunk and looted and Bounty was used in dealing with that particular atrocity. Is it over? I'm sorry. I know Irv is writing furiously over there in the spirit of fairness. I think we've got to go into the question and answer. First questions, I would like to put her to both gentleman one after the other perhaps mr. Playing first and then mr. Jacobs. The question comes in what advice would you give to the employees of a badly managed company, which is just become the object of a takeover bid. I think I would suggest that they negotiate with their employer. 4 Golden parachutes Richard Jacobs I get the hell out of copy so fast to make your head spin look for a new job. Anybody that recognizes that problem is a smart person. I'm sure there's a place for him somewhere. A related a related question what for mr. Playing first and then from Mister Jacobs what generally happens to Pension funds after a company is taking over are they milked? I think we need a lot more research to know what is what generally happens. But what often happens is that the pension fund to the extent that it has Assets in excess of those required to pay for example, $20,000 a year, which may be guaranteed are indeed liquidated as I mentioned earlier and used in the pay down of the assets. I think this is unfortunate and it should be countered perhaps by. The implied contract that I ought to exist between the long-term interest of the employee and that of the corporation or other professional worker who at 45 to 55. Who is services are found redundant or where in the new employer the environment might happen to be inhospitable where they are not put at the degree of extreme wrist that exists under the present circumstances. Thank you. Mr. Jacob. I'll let me give an example of a MF which is first-hand knowledge prior to our make an offer to buy MFA. It said in their last year's documents that they had applied for their funds and over funded pension something the tune of 125 million dollars when we made an offer for their company. They decided to go out and give them self additional benefits at the expense of the shareholders and additional 30 million dollars. We did. In fact get some 97 million dollars back, but it was 30 million less than they had specifically said that was going to get because they management decided that they had a little bit more at the end. Thank you a question for mr. Jacobs. Mr. Jacob doesn't the trend to more hostile takeovers cause managers to become too focused on making a short-term profit and thereby starving needed investment for long-term growth for the economy. Why should they be given a lifetime to make a second choice? They've been around there forever. As I heard Mr. Plank said they put their heart and soul in this thing for their entire life and all of a sudden somebody said to him one day. Hey, you're not doing it. Right what gives them the second chance with which to do it. I can tell you this. This is the only country in the world that we pay people for success rather than failure. Mr. Jacobs, is there an implication in our system is so much of the equity is held by institutional investors that those particular holders are so interested in short-term profit that are market system, which you look to to provide efficiency is not giving the proper signals to management for long-term growth. First of all. When we talked about the institutions you are talking about the people in America. This is everybody's money out there the school teachers the firemen the police funds everybody. They have the ability to tell the money managers what they want done for years. They've been passive they've never even I can give you firsthand where I went to a pension fund that represented stock in a company that said we never ever vote against management or we do not own stock in this company. I asked them. How could they make a business decision based on such an analysis? They said that is what we are told by our clients that was five years ago. I want you to know that that fun today represent some of the largest Union money in America. And today is one of the largest anti-takeover anti take against the defensive moves for companies with an effect vote against more Management's and they vote for on the place and pills that we speak about earlier the system works based on those people that control it out that they just got to be heard and do that thing. Mr. Plank is a manager of a company are your decision shaped by a desire to show good results next month, or are you worried about the future five or ten years from now? We try to balance our decisions both in terms of the short-term Necessities as well as the longer deal and we do support in oil and gas exploration. For example, the necessity to be replacing our reserves over. Of time. Otherwise were liquidating the corporation in the short term for the purpose of showing better results to for sure owners. I think know where is it clearer or more evident that there are trade-offs to be made between long and short term. Then it is in the oil and gas industry or where you're dealing with questions of high Technology based upon research. Mr. Black River several questions for you asking you to acknowledge that there must be some point of bad corporate management which would justify a takeover and if there is how would you determine that level of bad management? Well, I think they're all kinds of situations that warrant bad management and directors who may have been a bit in different from a continuing and that van and they can indeed be shaken up and should be I like to think however that this can be done from within the system and within the guidelines that are able to be recognized in terms of my opening remarks where we observe that corporations, like governments have a set of procedures for self-governance and as opposed to raiding the company to liquidate its assets to fire its people and to increase its profitability through short-term Maneuvers. That's alternatively there is a better way to go about it. Thank you. Mr. Jacob several questions for you regarding the issue of debt is it? True that the one of the major winners in our society of the Takeover phenomenon are those people who the banks in particular and those who issue the debt aren't they winners? The question the related question is isn't too much of that being generated by the Takeover process particular context where Mr. Volker is spoken out to perhaps there. This Society is caring too much debt for our current level of return. Whoever put something at risk should reap the reward whether it's the bank. So the investor where else it is. So whoever ask the question is are they making a profit? Obviously, they wouldn't be around if they weren't too much debt is you speak about the system, you know, I don't know who out there could ever create what is called the perfect solution to make it perfect for everybody. There is no perfect solution when there are losers Believe It or Not There are winners of those losers when somebody loses if somebody went bankrupt someone makes money in the system works. It isn't the Raider isn't me isn't Boone Pickens. There's other people out there if the entire system of vowels when all of this money. Is paid out? If I was to make an offer for AMF paid 300 million dollars in cash. I didn't pay it to the devil. I paid it to the stockholders these people recirculate this money that goes into the bank and whatever Investments they're going to make it goes back into the system and recirculates again if there's a hundred Jillian dollars a dead out there, it goes from one place and move to another it's not been putting mattresses. Mr. Playing on the on the issue of debt to overcoming. I believe some analysis for example has been made which supports the contention that if the price of oil were now to fall to $18 a barrel this so-called more efficient Phillips petroleum could not service the dead on the three and a half billion. I was three and a half billion that came out of the the hit and that's the firing of 3500 employees would not be sufficient to to Carteret. If you have any question as to whether there can be too much debt within a system where this debt is rising at the carpet level now commiserate with the increase of the national debt within our country then I suggest that you talk to some of the lender's here to the agricultural economy or does some of the farmers who find that possibly without that burden of death. We wouldn't be looking at the Electra dacian of the American firm. Thank you. I'm pleased to report that neither. Mr. Plankton. Mr. Jacobs have identified the lawyers as winners in corporate takeovers. A question for both mr. Jacobs and mr. Plank. Mr. Jacobs first. It was an oversight on my Prime. My lawyers are my best friends. Mr. Jacobs will give mr. Plank a chance to reflect. Do you consider yourself? A capitalist one and a related question is doesn't that mean our society places too much power in the hands of too few people. Well, I guess you got to be more specific. I don't know what kind of power do I have everybody here, you know has it isn't like I started out with the truck full of money one day and decided that I was going to go out there and then conquer the world. Let me tell you if I have a high school education and I was with a peddler at 15 years old made a good living all my life, but I was sure in robbing a bank in the middle of night and still anybody's money from him. The system made me based on the free enterprise system and the entrepreneurial Spirit of America is what made me what I am today, so I don't understand where this power that you refer to in a handful of a few people the power basically if you want it looks seriously about it was in the handful of people. I mean, where was there a bigger culprit in the oil industry based on price fixing everything else that went on for years in that industry. These are the same people are out there today. You look back in history tells everything they were the fat and sassy people in the world. Thank you. Mr. Blank. Are you a capitalist? I don't often think of myself as one but I am certainly operate within a capitalist society that I'm very proud to be a member of and with respect to the power. I don't object so much to the concentration and power or its use as I do to the abuse of power and I think the question of abuse becomes more that at least insofar as the carpet manager is concerned whether he is even-handed in terms of recognizing that he represents multiple constituencies multiple constituencies, where in the abusive capitalist power you for example, Overlook the implied contract that exists between the workers who have long-term Career Fairs and seek their rewards on a long-term basis whether it be in research or professionally. And those who are basically moving in for the kill to liquidate the office or liquidate the organization to help other people and haul off the Bucks. I'm not at all persuaded that the abuse of power in the hands of the Raiders does in fact result and I think we would have to have a great deal more research on this in monies that are redeployed in such a matter manner that they result in the greatest benefit to all of mankind are to our our interest to the interests of the Americans as a whole. I doubt it. Japan studies for example, suggests that based on a longer-term investment. You got and longer-term investment and research you're more likely to have to look long-term in your short-term and I'm not so sure that out of the consumerism which we seem to be funding in America. We are not falling behind at a more rapid rate the three Rest of the world and in the interest in for the trade-off of instant gratuity and I don't see corporate managers abusing the power for instant gratification or ego trips in quite the same way that I see those who are presently so affected in occupying this battlefield in terms of their expression of ideologies. Mr. Jacobs will have a question for mr. Plank in a minute, but I want to sleep in for mr. Plank the issue which has been raised of golden parachutes doesn't the increasing use of golden parachutes indicate that management has less to worry about in a hostile takeover. And therefore they should be less reluctant in these situations and less willing to Advocate new federal legislation. Well Boone Pickens has made the argument that he has them in his company as well as other take over it I take over it measures to hold a Raider at Bay so we can either lunch the capital of a Counterattack or I believe bone to negotiate the best price you can have on behalf of your shareholders for all of them is a whole. We don't happen to have them in Apache and I'm pleased that we don't we don't do as other poison pill techniques. We I don't think that the enrichment of golden parachute is is in the final analysis appropriate. I believe you can overuse almost anything in any power system and you want to avoid it here. Thank you. Mr. Jacobs a question from a supply store plank is it or is it not true that you personally get 8% of every dollar that's invested on behalf. Are the shareholders of Apache? I know I don't know where you get that 8% of every dollar invested or the general partner of Apache. Is that correct? Apache Corporation is the general partner of Apache petroleum, and it receives for its services to Apache petroleum. Which by the way consists of about 65,000 investors Apache Corporation gets 8% and a cars has costs against it and that 8% is shared Mister Jacobs with the 25 to 6000 shareholders of Apache Corporation. I read that didn't understand up that someone if they're good. But let me just finally asked you this question who is going to be the check and balance for the system with governmental involvement and legislature to say takeovers. Unfriendly are no good. Who do you propose will make the decision in someone asked you the question earlier. Remember that said, what do you do with poor management? That's not running the business and someone comes along and want to take that company over. How do you come up with a solution to take that company over if in fact, you know, it's being run bad. But the legislature and governmental involvement that's not possible because those directors measure think you're doing a wonderful job. Well the balance in the system believe it or not are the people in this audience and other people like them around the United States at the present time Federal and addressing the matter of legislation the battlefield, which hasn't been joined largely because a number of carpet managers and their Boards of directors really would prefer that they not speak out less. They attract you on that basis, you have to have enough of a confrontation so that the people do answer for themselves the question other winners and losers if you have those answers, then you look to what happened in Washington where the Williams Act has been dismantled where the Secretary of I wear the head of the Securities and Exchange Commission has left creep into the system and agree. I need an antagonist to a point where there is a a shambles has been made of your striking power Advantage without your having to disclose your intent. You have the same away and under in carpet under well any form of Justice in which previously the elimination of competition was regarded as being inappropriate under Justice laws and a Carson of the president of ministration in the guise of freedom of activity that's been put to a shambles and you could wipe out probably all but Exxon and I'd imagine the present Administration would look the other way. It has to be the people here that do something about it by going to their legislators and restoring a balance because the thing is badly out of control now got to help America. Like a chance to think of a question for mr. Jacobs. I have a question for mr. Jacob, which is that what is really wrong with increasing the disclosure of the Raiders and tensions in running the post take over company and what is wrong with extending the time. In which a company has to react to a resistor take over the first question that you said a long time to do what the first question information disclosure by the Raider of intentions. And when I mean you have to say what your intention is now, mr. Plank doesn't believe it but when we go out and file we put on there, what are Intentions are if you look back at every single transaction we ever did you can track it based on that initial filing that we put out there was plenty and ITT. We said we never put a turkey in the oven when public on the fact that we were very upset with it their record speaks for itself. We were an investment. We got out. We were gone. Where where do we make that at disclosure? I don't understand. Thank you. We're about to run out of time. But mr. Plank has a question for mr. Jacobs Jacobs if you're preparing to Deal rather Bland even-handedly with all of the shareholders or maybe you haven't said that would you in fact from a hostile takeover be prepared to see all of the shareholders both those who sold out to you before they knew or we're aware of your intent or both as well as Those whom you Stampede into selling in a two tier tender offer. Are you willing to see all of them on a retroactive basis got the same amount of money for their stock. I never put a gun to anybody's head said you must sell me your stock. I don't understand who we stampeded. I don't even know what you're talkin about. You been listening to the debate on the topic corporate takeovers who wins who loses it featured Irwin Jacobs chairman of the board and chief executive officer of men star Incorporated and president of the Jacob's Management Corporation. Irwin. Jacobs is a well-known corporate writer joining him was Ray plank chairman and chief executive officer of Apache Corporation. He's also the founder and co-chair of stakeholders in America National Coalition of CEOs that attempts to counter hostile takeover attempts Stephen young dean of the Hamline University law school in St. Paul, Minnesota put written questions from the audience to blank and Irwin Jacobs in the last part of the program cassette tapes of this Minnesota meeting program are available for $7.50 each make your check payable to Minnesota meeting and send it to Minnesota meeting. 400 North Robert Street, Suite 1100 Saint Paul, Minnesota 55101. Once again, $7.50 for each kid. Tape make your check payable to Minnesota meeting and send it to this address Minnesota meeting 400 North Robert Street, Suite 1100, Saint Paul, Minnesota 55101. This is the American public radio network.