It is often said that ExxonMobil marches to its own drummer. That Rex Tillerson, Exxon’s chief executive, got a raise last year, when other majors cut back, is just one more example of that.
Mr Tillerson received a 10 per cent raise in 2008, to bring his compensation package to $23.9m, as Chevron’s chief executive saw his compensation fall 39 per cent and the head of the third biggest US major, ConocoPhillips, watched his total compensation fall 42 per cent.
Given the severe drop in commodity prices, combined with a drop in demand for oil and natural gas amid the global ecnomic downturn, cutting back seems prudent. At $19.3m, Dave O’Reilly’s reduced compensation as chief executive of Chevron seems more than enough. And the $29.4m in reduced compensation paid Jim Mulva, chief executive of Conoco, seems just plain out of line, given the company has entered the downturn in worse shape than the other majors, laying off 4 per cent of its global workforce and scaling back capital spending this year to $12.5bn, from $15.3bn in 2008.
Indeed, if how a company is situated amid the downturn is used to measure what its chief executive is worth, Exxon’s should be paid far more than the others. In 2008, Exxon brought in a record $60bn in cash flow from operating activites, which it managed with a more than 50 per cent return on average capital employed in its exploration and production division.
The company is so well placed financially that the industry is expecting Exxon to take advantage of others’ weaknesses in the downturn by “buying” a growth strategy, with one major acquisition, or several smaller ones. Whether the company can obtain the right assets through such an acquisition spree, to move the needle, might well determine how big Mr Tillerson’s raise is in 2009.