by Tom Sanzillo*
Last week, columnist Chris Tomlinson of the Houston Chronicle contrasted solid shareholder support for a new direction at ExxonMobil with the discordant pronouncements and leadership of the company’s CEO.
In the same week, The Coalition United for a Responsible Exxon (CURE)—a group of investors with $2.4 trillion in assets—provided a comprehensive review of the company since its May annual meeting, including its most recent investment plan. CURE gave ExxonMobil a D- rating.
Both Tomlinson and CURE called for the appointment of a new chief executive to run the company in line with shareholder interests. CURE also laid out a blueprint for a new CEO.
Tomlinson made it clear that the bureaucratic behemoth that is ExxonMobil is not about to yield to a majority vote of its shareholders. He pointed to a recent speech by CEO Darren Woods. ExxonMobil’s leader has made it clear since the vote took place that there will be no changes.
The downward cycle that Woods inherited from Rex Tillerson has continued. ExxonMobil’s board has ignored the warning signs made clear according to their own metrics, the company’s stock price and bottom line. They continually tout their leadership and financial prowess even as it slips. They continually claim industry dominance with regard to the quality of their reserves, even as other companies plainly produce more oil and gas and do so with qualitatively better wells. This year, the company fell out of the Drucker Institute rankings of the top 250 most effectively managed companies, even as the price of oil rose and stock performance improved.
ExxonMobil’s corporate jewel off the Guyana coast is so loaded with provisions that shortchange the government that a leading oil industry consultant has called the contract one-sided. If the Guyana contract were not so tortuously unfair, it is doubtful that the project would be sufficiently profitable to warrant such significant capital investment.
Further strengthening the case for a change of leadership are the class-action lawsuits brought by shareholders who question the massive failure of the company’s investments in Canada’s oil sands and its tenuous claims of a bonanza in the Permian Basin. The backdrop to these cases is littered with company statements that vacillate in their accounts about the size and quality of the assets involved. Whether the lawsuits succeed in the courtroom, the substantive issues raised should give pause to ExxonMobil’s board of directors.
In 1990, shareholders voted overwhelmingly to reject resolutions pressing Exxon to improve its environmental stewardship. In 2021, shareholders voted overwhelmingly to support environmental and climate resolutions and added new board members. In the post-board meeting environment, shareholders were asked to wait six months so the new board could develop new plans. Six months have passed, the plans are now available, and the new boss is same as the old boss.
The question at the top of the 2022 agenda at ExxonMobil is how long Darren Woods should remain CEO. He represents all that is wrong with the company. As Tomlinson suggests in his editorial, the new board members need to forge an alliance and demand new leadership—or they should quit.
*Tom Sanzillo is IEEFA director of financial analysis.
