ExxonMobil, the world’s biggest publicly listed oil and gas company, told regulators that it was cutting back the annual bonus of Rex Tillerson, its chief executive. Tillerson certainly makes enough already; indeed, his salary is going 7 per cent next year – to $2.2m.
But his 2009 bonus is being cut 40 per cent to $2.4m. The bottom line is that the company has not done as well this year as in the past. In the third quarter, for example, Exxon’s profit plunged 68 per cent on the grim outlook.
This is not Tillerson’s fault. Times are tough for everyone, with commodity prices off last year’s highs and the much of the world having been in an economic recession for the bulk of 2009.
In fact, Exxon is doing far better than its peers, which are cutting costs, jobs and selling assets. Exxon has, by contrast, invested $19bn through the first three quarters.
Yet plunging profits – whatever the reason – should not be rewarded. And bonuses should not get so out of hand that chief executives are being paid far more than their worth.
The most significant bonus of 2008 was that of Aubrey McClendon, chief executive of Chesapeake Energy, one of the US’s biggest natural gas producers, who received a bonus of more than $75m after Chesapeake’s falling stock price forced him to sell more than 90 per cent of his shares to meet a margin call from his creditors.
By contrast, Mr Tillerson’s bonus last year was $4m. And yet Exxon had the highest return on capital employed of 2008 and the second highest total shareholder return. Keeping things in perspective is why Exxon is able to spend through the lean times and others are not.
OIl and gas executives: Are they worth it? (FT, 30/11/09)