>>Exxon stockholders vote for business as usual
May 29, 2008, 4:48 pm
Filed under: Fossil fuel

Rex Tillerson, chairman and CEO of Exxon-Mobil, yesterday beat back a mild revolt by an alliance of Rockefeller family members and some institutional investors.

Exxon earned $40.6 billion last year, making it the most profitable corporation in the known universe.

The dissenters want Exxon to take a long-term view, and develop products and services that may keep it profitable as the company’s oil reserves become depleted. They asked that the chairmanship and CEO positions be split up so that the board of directors could take a broader view of the energy business.

Tillerson said, in effect, that there’s nothing wrong with the company’s current narrow focus on the extraction and sale of oil and gas. The majority of stockholders supported him.

What’s interesting about this story is the light it sheds on the tensions within any corporation. In most public companies, managers are rewarded for generating short-term profits, and full-time stock speculators can take advantage of that reality. Long-term investors are better-served through management by long-term objective, and by managers who can see where a company should be 10 or 20 years out.

U.S. courts have held that the fiduciary duty of a corporation is to maximize profits for stockholders. This is why smaller, more agile companies, owned by families or entrepreneurs or based in other lands, are responsible for more meaningful technological change.

During the mid-20th century, the railroads insisted that they were in the railroad business, and didn’t have to worry about competing with other modes of transportation. The result? Airlines and the Interstate highway system destroyed their passenger base. The environmental costs have been severe: Railroads are about twice as efficient, in energy terms, as airlines, and produce about one-third the atmospheric pollution per passenger mile.

Exxon — the double-cross company — is now faced with the same issue: Is it an extractive company or an energy company? This decision isn’t final. It’s pretty clear, though, that an oil company’s policy choices have social and environmental effects far beyond the narrow interests of its stockholders. –Seth Masia


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