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For Exxon Holders, Profit Is Not Enough

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For Exxon Holders, Profit Is Not Enough

May 24, 2008

Hundreds of Exxon Mobil Corp. investors will gather Wednesday at the Morton H. Meyerson Symphony Center in Dallas. Attendees of the annual shareholders meeting should expect Exxon’s own Bengal Traders brand coffee, visual displays that tout the company’s latest technological breakthroughs — and a clash between activists and management over the future of the company.

In some ways, it is an odd time for discontent among the Exxon faithful. With crude-oil prices at record levels, Exxon’s stock hit a record high this week. Dividends are up. Profits are unprecedented.

By these financial measures, Rex Tillerson, the chairman and chief executive, should expect to hear a chorus of hosannas from some investors for his recital of the past year’s accomplishments. But the activists are focused on the future. They worry Mr. Tillerson isn’t preparing enough for what many expect to be a turbulent time in the energy markets.

The debate on the future of energy isn’t academic. Exxon believes that in 2030, just as today, about 60% of the world’s energy demand will be met with oil and natural gas. (The rest is largely coal, nuclear and hydropower.) Therefore, the company directs the vast majority of its capital budget to finding, extracting and selling oil and gas.

Most activists believe governments will soon mandate carbon-emissions constraints in order to curb global warming. This will lead to the swift rise of nonfossil fuels such as wind, solar, nuclear and biomass.

Exxon faces a raft of shareholder resolutions aimed at both steering the company toward a greener future and forcing change at the top by appointing an independent chairman.

These votes have been gathering momentum. In 2003, a proxy resolution to split the chairman and chief executives roles received 22% of the vote. Last year, it got 40%. Another proposal, to require Exxon to set specific goals limiting greenhouse-gas emissions, was favored by 31% of shareholders last year. Both are back on Wednesday’s ballot. A new proposal would require Exxon to take a hard look at sustainable-energy technologies.

Offering vocal support to all three measures are descendants of John D. Rockefeller, the founder of Exxon-forerunner Standard Oil. Not only are they using their name to draw attention to the resolutions, the family and its retinue have been on the road in recent weeks urging institutional investors to cast their shares in favor of change. Exxon management opposes these resolutions, arguing that its record speaks to its ability to adroitly handle complex energy markets.

These resolutions are non-binding. If one attracts a majority of votes, Exxon could simply ignore it. But precedence and good corporate governance suggest otherwise. Two years ago, a shareholder resolution calling for the resignation of any Exxon director who doesn’t get a majority of votes passed and was subsequently adopted by the board.

Exxon management might take solace in another shareholder resolution offered this year. The item proposes eliminating nonbinding resolutions altogether because they’re “a primary tool of ‘activist’ or ‘nuisance’ shareholders.” Exxon advises a vote against this measure, stating that suggested change is “the best way to carry out reform of the shareholder proposal process at this time.”

Write to Russell Gold at [email protected] and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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