“We have seen that in this country in the last few years, particularly
on Wall Street, with the rise of the old human frailty of greed. This occurs
when people begin to serve only their own needs to the detriment of everyone
else.” – Lee R. Raymond, Exxon Mobil CEO until his December 31,
Exxon Mobil is sending retiring CEO and chair, Lee Raymond, off to
his golden years with one of the most lavish exit packages in history, a bonanza
worth an estimated $398 million total, according to news reports last week.
No honest measure of Raymond’s personal “performance”
can justify this unconscionable windfall. Exxon’s record-breaking $36
billion in annual profits last year had far more to do with refinery bottlenecks,
politically-driven tax breaks and geopolitical events than managerial effectiveness.
Payouts as immense as Lee Raymond’s reveal that the many corruptions
of corporate governance have hardly changed since Enron collapsed into bankruptcy.
Corporate boards are continuing to fail what Warren Buffett has called the “acid
test” of corporate governance reform—the need to confront skyrocketing
executive pay .
Corporate boards are enabled in their decision to continuously ratchet up CEO
pay by “compensation consultants” whose companies reap the lion’s
share of their earning from the human resources service contracts they get from
the same CEOs. This presents a conflict of interest uncannily reminiscent of
the auditor/accounting/consulting conflicts that ailed Enron and so many other
In addition, interlocking relationships among corporate boards make a mockery
of any claim to independence. Exxon Mobil’s compensation committee is
chaired by W.R. Howell, who has also served on the boards of Halliburton, Williams
Companies, Pfizer and American Electric Power. Most corporate
boards are stuffed with former or current top executives—all nominated
by the company’s own CEO.
This is unlikely to change any time soon. The CEO club known as the Business
Roundtable and the U.S. Chamber of Commerce are working to block SEC consideration
of new rules that would allow shareholders to nominate their own candidates
to corporate boards.
Even the most basic of corporate governance reforms—the separation of
the roles of CEO and chairman—has stalled in the current political climate.
The end result: Corporate boards continue to pay top executives whatever they
want, regardless of what the owners—the shareholders—might think.
We live, as some observers note, in an era of “imperial CEOs.”
New SEC chair Chris Cox has called on companies to more fully disclose executive
compensation, certainly a worthy step in and of itself. But Cox ought also to
be banging the drums for a proposal advanced by pension funds and other large
institutional investors, who want companies to put their executives’ compensation
packages up for a shareholder vote.
This reform could actually make a difference. British companies have been required
to seek shareholder approval for executive pay packages since 2002, one reason
British CEOs at similarly-sized companies are paid about half of what their
American counterparts receive.
Another modest reform in corporate governance system comes from Coca-Cola.
The company, a serial executive-pay abuser, will now endeavor to tie boardroom
pay more closely to company performance, a move intended to align the interests
of directors and shareholders. We’ve heard, of course, this pay-only-for-performance
song before. Back in the early 1990s, attempts to align executives and shareholders
resulted in an explosion of stock options—the “steroids of corporate
greed” that led countless executives to devote quality time to cooking
the corporate books. But even Warren Buffett, who sits on Coke’s board,
says that this time it’s the real thing. We’ll see.
In the meantime, Exxon’s sordid recent history suggests that relying
on the traditional measure of CEO performance—shareholder return—isn’t
going to be enough. Exxon last year funneled $25.4 billion back to its shareholders—over
two-thirds of its record-setting $36 billion in profits. So comforted, few shareholders
have complained about either Raymond’s bloated retirement package or the
tragic legacy of corporate short-sightedness certain to harm generations to
During Raymond’s tenure, Exxon Mobil practiced an unprecedented level
of greenhouse gangsterism. The company funded some 40
public policy front groups that, in turn, waged a multifaceted public relations
campaign by proxy, attacking the nonprofit tax status of the company’s
leading environmental critics and mounting vicious attacks on independent scientific
experts in government and academia.
Exxon’s over-the-edge assault made the company a pariah even among other
corporate giants—Shell, Texaco, BP, Ford, GM and DaimlerChrysler—in
the business coalition trying to make the case for the uncertainties of global
The coalition fell apart in 2002, but that didn’t much matter. Exxon’s
friends were, by then, already inside the White House. Less than three weeks
after taking office, Dick Cheney met with Raymond to begin mapping out a secretive
energy strategy that would soon shower the company with new tax breaks and other
lucrative forms of largess.
Raymond and Exxon Mobil also provided critical support to key ideologues of
the military-petroleum complex. Raymond remains the board vice chair at the
American Enterprise Institute, the neoconservative think tank that pushed the
now-discredited case for war in Iraq. Between 2000 and 2003, AEI received $960,000
in funding from Exxon Mobil.
All this influence peddling under Raymond has cost us time. We could have been
and should have been taking measures to protect our national security by fending
off impending climate calamities and reducing our perilous dependence on foreign
oil. Thanks in ample part to the oil addiction of the world’s biggest
energy company, we did not.
A generation ago, before talk about “peak oil” became commonplace
and before CEO pay levels soared through the ceiling, top Exxon executives made
sure their company plowed profits back into exploration, R & D and capital
expenditures for new equipment—investments needed to align the company
with the future. Today, with massive new investments needed in diverse energy
sources necessary to smooth the transition ahead, the world’s biggest
energy company is missing in action.
Lee Raymond’s years at Exxon have also left a terrible legacy of social
and environmental destruction only partly catalogued in shareholder resolutions
over the years. Under Raymond, the firm bloodied its hands dealing with the
corrupt regime in Equatorial Guinea, was implicated in human rights violations
in Aceh, Indonesia, was charged with environmental racism in Chalmette, La.,
and Beaumont, Tex., and discriminated against gays and lesbians. Yet so long
as the petroprofits were good, most shareholders could have cared less if the
company was considered a social pariah.
Raymond’s successor—Rex Tillerson—has already been dubbed
“TRex” by shareholder activists. He apparently has little interest
in guiding the company in a new direction. That’s no surprise. Yet it’s
unclear that the company can continue to rely on a giant cloud of public relations
to shield its shareholders from the uncertain consequences ahead.
Charlie Cray is the director of The
Center for Corporate Policy in Washington, D.C., and co-author of The
People's Business: Controlling Corporations and Restoring Democracy (Berrett-Koehler,