Be in harmony with shareholders.

• Position: Views of Daniel M. Tellep, Chairman and CEO of Lockheed Corp. - Special Section: Being a Global Leader

Be in Harmony With Shareholders

When I became Chief Executive Officer of Lockheed Corp. in January 1989, I assumed responsibility for a major aerospace company with $10 billion in annual sales. Some of its better-known products and programs include the Trident Fleet Ballistic Missile; the Hubble Space Telescope; NASA space shuttle operations; aircraft like the C-130, P-3, SR-71, F-117 Stealth Fighter, and our recently won F-22 advanced tactical fighter. Lockheed is a company whose broad business base and advanced technology give it one of the defense industry's healthiest portfolios.

Nonetheless, as I discovered in my first few months as CEO, Lockheed was, quite candidly, far less evolved in its relationship with its shareholders, especially its institutional shareholders. This oversight was made painfully clear when Dallas investor Harold Simmons launched a major battle for control of the corporation.

It is not that we were disinterested or unaware of our institutional shareholders; our efforts were merely misdirected. We had focused on communicating with financial analysts, assuming that they would carry our message to the institutions. But they didn't - nor should we have expected them to do so. Moreover, our previous shareholder proxy experiences had been fairly benign.

So, we sailed into that 1990 proxy contest naively thinking we were in harmony with the majority of our shareholders.

The storm hit at our 1990 annual meeting. We were deluged with five proxy issues - ranging from confidential voting to Simmons's slate of directors. We simply weren't prepared for the onslaught, though analysis of past voting trends on at least two proposals - confidential voting and opting out of Delaware 203 - showed that sentiments of institutional shareholders were rapidly changing.

During the six-week proxy contest, we learned more about our institutional shareholders than we had in the previous 10 years. Gradually, I understood that they were sending two different messages: first, their candid comments on the specific issues; second, more subtle "pay attention to us" themes. When the ballots were counted, a number of large institutional holders went against us. We never should have gotten ourselves into a position in which these institutions felt they had to vote against us to get our attention.

Ultimately, we won on the proposals, and we had learned some valuable lessons, which we began acting on immediately.

Right after the meeting, we wrote to...