Exxon Mobil Defeats the Rockefellers

Exxon Mobil’s (XOM) Chairman and CEO Rex W. Tillerson convinced shareholders to vote down a series of nonbinding proposals initiated by the descendents of Standard Oil’s founder. Exxon and Mobil were two of the seven children emanating from the antitrust breakup of Rockefeller’s Standard Oil. The current generation of Rockefellers wanted Exxon to improve corporate governance, commit to reduce greenhouse gases, and seriously venture into alternative energy.

The New York Times “Exxon Rejects Proposals Backed by Rockefellers” reported that Tillerson told shareholders the company’s focus should not deviate from developing more oil and gas reserves. Tillerson preaches that hydrocarbons will still be the world’s primary energy source for decades. The Rockefellers believe Exxon’s energy focus is too narrow and Exxon will suffer when oil and gas become less dominant sources of energy.

The Rockefellers contend that separating the chairman and CEO roles would allow the Board to broaden Exxon’s view of energy and prepare for the future. While Tillerson is probably right in the short term, he is not very wise politically. He is showing a degree of arrogance that will not play well when the political tides turn next year in Washington. A serious business venture in alternative energy would surely enhance Exxon’s political standing in Washington.

Beyond politics, a position in alternative energy could be of serious importance to Exxon. While the best sources of oil have always been in politically unstable areas, the level of nationalization and local violence appears to be increasing. The major integrated oils don’t really own reserves, they merely control leases. And host countries are changing the rules at will, so the leases become meaningless.

The importance of the giant western integrated oil companies may be waning. In a very basic way they are like homebuilders. They provide financing, project management and logistics, and sell the product; but the development and maintenance are subcontracted to the oil service industry. Russia has told western oil companies that they will buy technology and services, but Russia will always own the product.

General Electric (GE) has shown they could earn real money in wind power and real political points by reducing greenhouse gasses. Exxon should learn from GE’s experience.

No Disclosures.

Comments

[Jase:]

Exxon ought to acquire First Solar.

2008 May 30 12:18 PM

[LongOfTooh:]

It's my understanding that a number of years ago ExxonMobil made a significant investment in alternative energy and then sold it. Does anyone have any knowledge of who ExxonMobil sold it to? Thanks

2008 May 30 01:24 PM

[tntgators:]

I think Google is making too much money and they need to start working on solar powered computers! Get real folks. A company should do what it does best and let the green companies of the world do what they do best.

2008 May 30 04:09 PM

[User 158320:]

I don't think the state should confiscate oil company revenues & divert it to other energy sources.

I think the Rockefellers & Al Gore should invest their own money in "alternative energy" and leave oil alone.

I think all energy should be free of income redistribution taxes.

2008 May 30 05:58 PM

[Brighteyes:]

I am happy that Exon Mobil did not fall into the same trap as GE otherwise XOM would be doing second rate serials on TV, selling the Plastics Division and selling our stock at $32 per share. I am also glad that XOM knows what busness they are in and knows how to run it. I think all shareholders should be investors and leave the management of the company to the managers.

2008 May 30 07:34 PM

[Gari N. Corp:]

GE's example is interesting, though something of a triumph of spin over substance, given how much money it makes from coal power, oil services, incandescent light bulbs and the like. Exxon's rather edgy bet is that policymakers are smart enough to see through such initiatives. GE's success in this rebranding, which has held much better than, say, BP's, is partly down to the sprawling nature of its businesses, as well as the absence of a Texas City-type accident. But that it succeeded should be worrying to Exxon.

2008 May 31 01:31 PM

[Brad O'NEILL:]

Im a share holder of xom and I am very glad that Rex is sticking to his guns on this issue. Companies should do what they are best at. Rex has done a fantastic job of creating value for his shareholders and providing energy for our country and the world. If you would like to invest in wind power or solar energy sell some of your shares and do it. The bottom line is the Rockefellers and the Catholic associations are not interested in the health of xom they are interested in social responsibility which is admirable but is something that shouldn't be forced on a company. Anyone who has watched XOM manuever in this environment should be impressed with the top notch management that has continuously returned value to their shareholders. I expect the company to adjust rapidly when the next form of energy is discovered but for them to be expected to spend their profits in an effort to find a product to replace their golden goose seems silly to me. Even if a new form of energy were to appear today how many years would it take to remove all the gas using vehicles and replace all the gas stations around the world?

2008 May 31 10:12 PM

[Steven Ward:]

Last time I looked the US used only 1.5 percent of its total crude consumption for power generation. The rest went to transportation fuels and chemicals.

Somebody, anybody, please explain to me how any oil company diverting funds to wind power and solar will give the public lower gasoline and diesel prices. Yet, evertime a politician opens there mouth they want to tax Big Oil and plow the funds into green power generation technologies. They are using their wind power to blow sunshine up our exhaust pipes.

2008 Jun 02 03:37 PM