Texaco’s Meeting Turns Into No-Holds-Barred Verbal Bout

One suggested a public tarring and feathering. Another rebuked Texaco’s officials for wasting time “soliciting sympathy.” A third urged that they be fired for waging a “vendetta” that has undermined hopes for a settlement.

And a fourth challenged them to “take off those Brooks Bros. suits and get down to the oil derricks.”

For Texaco shareholders, Tuesday’s annual meeting here was the first occasion to quiz management publicly since Texaco filed voluntarily a month ago for protection under the bankruptcy code.

They weren’t in a mood to spare feelings.

For more than an hour, their frustration surfaced in a barrage of tough questions the likes of which are almost never raised at corporate annual meetings. Most were concerned with Texaco’s defense of itself against a record $10.5-billion judgment awarded to Pennzoil by a state jury in Houston.

The tone was set with the first question. “You have steadily adhered to the policy that Texaco has done no wrong, and yet in this context you then turn around and offer Pennzoil $2 billion (to settle the case),” said stockholder Kenneth Bishop of Denver. “Why do they deserve a bloody cent?”

After noting that he shared Bishop’s feelings, Texaco Chief Executive James W. Kinnear replied: “Litigation is expensive, and it is having a bad effect on the operations of this company.”

Kinnear and Texaco Chairman Alfred C. DeCrane Jr. fielded questions with aplomb and a sense of humor that was uncharacteristic of Texaco top management until Kinnear’s ascension to the top four months ago. But anyone who expected a major announcement at the meeting was disappointed.

Shareholders had whipsawed Texaco’s stock all week in anticipation of a major announcement at Tuesday’s meeting. On the New York Stock Exchange, Texaco was the second-most active issue traded Tuesday, as 3.29 million shares changed hands. The stock closed down 87.5 cents at $37.125.

Instead of announcing a settlement with Pennzoil, as some shareholders and analysts had hoped, Texaco’s two top executives spent nearly an hour chastising Pennzoil’s “wildcatting in the Texas court system,” defending their April 12 bankruptcy filing and trying to reassure shareholders that “we are not here to preside over the liquidation of this company.”

“The ox is in the ditch,” Kinnear told shareholders. “This management is going to get him out.”

Defends Action

Had the company not filed for protection under Chapter 11 of the bankruptcy laws, Kinnear asserted, Pennzoil would have been “in the driver’s seat, and your interests would have finished a distant last.”

Not everyone bought the argument.

“It looks to me like this company is really in a bad situation,” said shareholder Thomas Moran, who said he recently sold 26,000 shares of Texaco because “I just can’t be supportive” of management any longer. “I’m afraid the time for a settlement may be (over).”

Nor did Kinnear’s philosophical arguments appease those who said they or their elderly relatives were put in a financial bind by the elimination of dividends after Texaco filed for bankruptcy protection.

Calling the discontinued dividends “the single biggest problem that we have,” Kinnear said: “Nothing is nearer and dearer to my heart than getting these dividends flowing again.”

His interest is partly personal. A large part of his pay and that of his executive team is tied to the company’s dividends.

Repeatedly quizzed about the prospects for a settlement or a takeover of Texaco or Pennzoil, Kinnear said Texaco hasn’t been approached by anyone seeking to take it over. He said he considers recent Wall Street reports about a possible takeover by corporate raiders T. Boone Pickens and Robert Holmes a Court “just rumor.”

Those rumors picked up steam last week as Texaco stock rose sharply in heavy Wall Street trading.

When Thomas Bradley, a shareholder from Denver, demanded to know why Texaco hasn’t put a quick halt to the Pennzoil court fight by trying to take over the much smaller oil firm, Kinnear said the two companies months ago signed a standstill agreement barring both from attempting a takeover of the other while the case winds its way through the courts.

He said Texaco will file its appeal of the 1985 Texas court judgment to the Texas Supreme Court this month and it expects a hearing in that court--assuming one is granted--in the fall.

As for a settlement, Kinnear said “we’re not crazy people. If we get the opportunity to make a reasonable settlement, we’ll do it.”

He declined to say whether the two sides are bargaining now. But he sought to assure the shareholders that more than personality differences separate the two sides.

“When you try to split a $7.5-billion baby in half, you’ve still got a very large baby,” he said, referring to the size of the jury award excluding punitive damages.