St. George of The Small

The Amex chief speaks up for a neglected constituency

Small business. The term conjures up visions of Mom and Pop enterprises, like laundries and corner groceries. But firms with revenues of $5 million to $350 million, which would have been Big Business 25 years ago, are considered fairly small or at most middling in these inflationary days. Unlike the community of large corporations, the mass of these outfits seldom speaks with one voice on issues that affect them. Now someone wants to be their champion: Arthur Levitt Jr., chairman of the American Stock Exchange, where 95% of the 964 listed companies have revenues under $350 million. He proposes to form a lobby that would be patterned after the Business Roundtable, whose members include the chiefs of 190 of the nation's biggest corporations. His organization, Levitt says, would be open to "any company under the FORTUNE 500."

Small companies have special needs, Levitt argues. Government regulations are an especially heavy burden on them. By Levitt's reckoning, the cost of complying with environmental, safety and other rules comes to $32 per $100,000 of sales for companies with less than $100 million in revenues, vs. $4 for larger corporations. Because small companies are not as well known and therefore need to broaden their shareholder base and increase ownership of their stock, they prefer cuts in capital gains taxes rather than the increased depreciation allowances advocated by big companies. Says Levitt: "Our kinds of companies don't have the assets to depreciate that large companies do."

As a St. George of small business, Levitt, 48, son of a New York Democratic politician who was the state's unbeatable comptroller for 24 years, may be making a virtue of necessity. The American Stock Exchange, after all, has long been a home for smaller companies. When he became its chairman in January 1978, he inherited a roster of restless firms whose ambition was to grow large enough to be listed on the Big Board, the New York Stock Exchange. Levitt, who now earns more than $200,000 a year, says he discovered that these companies had "little representation in government and very little control over their own destinies. I felt the Amex could become a spokesman for that neglected constituency."

Levitt has lobbied for the Small Business Investment Incentive Act, which would give a 10% tax credit to individuals for investments in new issues of firms with a net worth of $25 million or less.

He prods the heads of Amex-listed companies to lobby, too. When the Amex co-sponsored a management conference in Washington last month, the 150 chief executives who came were urged to invite a Congressman to dinner. The Amex also invites two dozen or so of its company presidents to attend briefings held for businessmen by members of the White House senior staff every six weeks.

Often Levitt visits Amex-listed companies and attends their annual meetings.

He is used to packing bags. After graduating from Williams College in 1952, he dabbled in magazine promotion in Manhattan; he shared an office with Novelist Joseph Heller and read part of the first draft of Catch-22 as it came out of Heller's typewriter, frequently on company time. Later he was a securities salesman for a small Wall Street firm that--after many mergers--became Shearson, Hayden Stone; in 1969 he rose to its presidency.

By the time Levitt accepted the Amex job, the No. 2 exchange had substantially slowed the flood of losses it had in the mid-'70s. The Amex has not stopped the drain entirely; in the past year 81 firms have disappeared from its roster, some to go to the Big Board. But, Levitt says, "we have 200 companies listed here that qualify for the other exchange that for one reason or another see fit to stay."

The Amex reputation as the home of the smaller, chancier "hot stock" was rekindled last year with the go-go trading in gambling stocks and this year's flurry in Canadian oil and gas companies. Daily trading volume now approaches 4 million shares, more than double the level of four years ago. Last week the exchange's market value index hit a near record level of 198.99, up 32% since Jan. 1; meanwhile, the New York Stock Exchange index has risen 9%. Levitt sees the Amex's bullish numbers as signs that his message may be getting through to investors: Think small.

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