Why Pickens prospects on Wall Street
A Texas oilman and legend on Wall Street, T.Boone Pickens Jr. is perhaps the most colorful corporate raider of his time. Though he has a comfortable Panhandle twang and uses expressions like ``meaner than a junkyard dog,'' he's not a ``good ol' boy'' - at least not as he defines the term. Far from it. Good ol' boys, Mr. Pickens says, are the Fortune 500 chief executives who fly their plush private planes to corporate hunting lodges and tell each other that their businesses are threatened by foreign competition, government regulation, and, worst of all, shareholders who just don't understand what business is all about.
Whether it is a convenient excuse or a deeply held conviction, Pickens has linked his success as a corporate raider - and enrichment - with a crusade to make corporate executives more accountable to their shareholders.
``The reason you've seen so many deals'' in the past few years, Pickens told the Monitor recently, ``is that managements have done such a poor job. Consequently the assets of a company can be purchased very cheaply in the stock market.''
Already a canny dealmaker from his hard-scrabble years in the oil industry during the 1950s and '60s, Pickens learned to exploit those management shortcomings, buying huge chunks of stock in corporations much bigger than his own Amarillo, Texas, Mesa Petroleum Company.
He has taken on Cities Services (now part of Occidental Petroleum), Gulf Oil (now part of Chevron), Phillips, Unocal, and others, so rattling managements that they have precipitated major changes that have usually caused stock prices to climb.
In the process, Pickens has become the point man in a national debate over the value - or harm - of corporate raids and restructuring.
Many corporate chiefs, labor unionists, and civic leaders decry the activities of raiders such as Pickens, Carl Icahn, Sir James Goldsmith, Irwin Jacobs, and others. They blame raiders for everything from loss of local jobs and community income to forcing executives into abrupt decisions that hurt a company's long-term competitiveness.
Raiders (``I'd rather be known as a major shareholder,'' says Pickens) counter that they are in the vanguard of restructuring American industry to make it more efficient.
It is a debate that will not be settled soon, despite a continuing series of congressional hearings on the subject, hearings which intensify each time a major employer is threatened in a community.
Mr. Pickens raises a spirited defense of his activities and of ``shareholder rights'' in his new autobiography, ``Boone'' (Houghton Mifflin Company, Boston, $18.95). His book will interest readers who have followed the merger wave, the debate over corporate management, and the oil industry.
Although the book is rather short on literary style and content, it is a useful and straightforward account of Pickens's career as an oilman-cum-financier. It is his version of events and therefore is selective.
Pickens is a vocal critic of entrenched corporate bureaucrats, corporate perks, bonuses, and waste, and executives who fail to buy shares in the companies they manage. This is perhaps to be expected from an entrepreneur who has had to struggle to build a business and whose fortunes are tied up in the performance of that business.
It will be interesting to see if Mesa Petroleum or his other companies remain lean and daring 20 or 30 years from now. After all, most of the big oil companies that Pickens has targeted also were started by aggressive young entrepreneurs. They became great defenders of the status quo only after becoming big and successful.
Those who oppose Pickens on ideological grounds have been given ammunition in recent months from the massive insider-trading scandals involving investment bankers and arbitrageurs, many of whom facilitated this decade's merger wave. While decrying the greed and ``stupidity'' of inside traders, Mr. Pickens contends it is just a sideshow.
``What takes place in inside trading,'' he says, ``is peanuts compared with what managements and CEOs [chief executive officers] have taken from stockholders'' in perks, unjustified bonuses, and mismanagement.
This plainly annoys Pickens - has for some time. Each of his target companies has somehow been mismanaged - or so Pickens says.
But his raids also stem from his strategic assessment of the oil industry. Pickens in convinced that ``the United States is the most perforated country in the world.'' Virtually all of the oil under the surface of the Lower 48 states has been found, he contends. Therefore, there is not much the US can do to replenish the reserves it is pumping out of the ground.
For an oilman, this means the US oil industry is experiencing consolidation, if not outright liquidation. It is simply too expensive to drill for oil in the US. The cheap oil is in Saudi Arabia.
Drilling for oil in the US will not resume in earnest, he says, until oil crosses $30 a barrel.
If an oil company is looking for oil it can often buy it less expensively by taking over another oil company; otherwise, Pickens says, an oil company should break up its oil properties into royalty trusts and let shareholders enjoy dividends from the sale of this oil as the reserves are depleted.
Any oil company that doesn't follow this course, he argues, is guilty of simply perpetuating its own bureaucracy and denying shareholders adequate return on their investment.
That assessment by Pickens leads to only one conclusion, which is made fairly explicit in the epilogue of his book. With his newly organized Mesa Limited Partnership and a separate joint venture called, Boone Company, Pickens has amassed billions of dollars in financial backing.
It won't go into oil-well drilling.