All directors are required to stand for election at our annual meeting of shareholders. At year-end 2015, 11 of 12 directors, including the presiding director and all members of the audit, compensation, public issues and contributions, and board affairs committees, were independent as defined by New York Stock Exchange guidelines. In 2015, the board met 11 times, including a board visit to Papua New Guinea to learn more about our Upstream activities and practices in that area.
Corporate citizenship topics fall under the purview of the public issues and contributions committee (PICC), the board affairs committee and the compensation committee, and are routinely reviewed at board committee meetings. While risk oversight is the responsibility of the entire board, committees help the board focus on risk aspects relevant to each committee.
For example, the PICC is charged, among other duties, with reviewing the effectiveness of the company’s policies, programs and practices with respect to the environment. The committee hears reports from operating units on environmental activities and also visits operating sites to observe and comment on current practices. The entire board receives briefings by internal experts on environmental stewardship and climate change.
Board leadership structure
Each year, board members select an independent director to serve as the presiding director, with the expectation that person will serve for a minimum of two years. The presiding director sets the agenda and chairs executive sessions of the independent directors and coordinates with the chairman on the agenda for meetings of the full board. At this time, the board believes the interests of shareholders are best served through a leadership model that combines the roles of chairman of the board and chief executive officer (CEO). With more than 40 years of service in both domestic and international positions with the company, our current CEO possesses in-depth knowledge of the corporation and the challenges of an evolving energy industry. For more information about our board structure, visit our corporate governance page.
Board selection process
Maintaining a diverse board in regard to gender, race, geography, experience and fields of expertise is important for the company to succeed in a globalized market. The board affairs committee recommends board of director candidates in accordance with the Guidelines for the Selection of Non-Employee Directors, and diversity is a key consideration.
Supported by an independent executive search firm, the board affairs committee looks for highly qualified non-employee candidates with demonstrated leadership, competency and a commitment to represent the interests of our shareholders. Other desirable qualities include:
- Experience as the CEO or senior executive of a significant company or organization with responsibilities for global operations;
- Financial expertise;
- Experience on one or more boards of significant public organizations or non-governmental organizations (NGOs);
- Expertise resulting from significant professional or academically based scientific or research activities.
In 2015, 40 percent of the board’s independent directors were female, African-American or from outside the United States. Four of the seven most recent additions to the board demonstrate this diversity. Also in 2015, Doug Oberhelman joined the board following election by shareholders. Currently, the ExxonMobil board stands at 13 directors; an additional independent director candidate has been nominated for election in the 2016 proxy statement. We describe current director qualifications in our proxy statement.
Up Close: Board visit to Papua New Guinea LNG operations
In April 2014, ExxonMobil began liquefied natural gas (LNG) production in Papua New Guinea (PNG), an oceanic country in the southwestern Pacific Ocean that occupies the eastern half of the island of New Guinea and offshore Melanesia islands. Current operations include gas production wells and a processing plant in the highlands; LNG production and shipping facilities on the south coast; and more than 500 miles of pipeline. Over the life of the PNG LNG project, ExxonMobil expects to produce and sell more than 9 trillion cubic feet of gas.
In June 2015, ExxonMobil directors and executives visited the PNG LNG operations to view how ExxonMobil’s holistic approach to managing key sustainability and community issues has been successfully implemented in this unique area. The visit encompassed an overview of the mountainside gas wells and the Hides gas processing plant, as well as a review of the pipeline that transports treated gas from the highlands to the LNG plant. The visit also included a tour of the LNG production and shipping facility, during which board members witnessed an LNG ship preparing for departure.
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Through the visit, the board observed that the transition from construction phase to production is complete and appropriate environmental monitoring programs have been established. For example, the board saw that revegetation of our construction sites is progressing well. As part of ExxonMobil’s biodiversity strategy in PNG, local and international scientific research organizations specializing in tropical forest research are conducting regular biodiversity monitoring to ensure biodiversity values of the upstream area are retained. During the project’s onshore construction, 16 plant and 77 animal species new to science were identified.
In addition to learning more about ExxonMobil’s Upstream operations in that area, the board members had an opportunity to engage with the PNG community through presentations by local employees and villagers, as well as a meeting with the prime minister and the first lady of PNG.
Executive compensation and strategic advantage
ExxonMobil’s business model is reflective of a capital-intensive industry, requiring long investment lead times and a significant focus on risk management. The structure of our compensation program fully supports this business model and is designed as such that it aligns the interests of our executives with those of our long-term shareholders.
Our most senior executives — including the CEO, named executive officers and more than 1,000 other executives in the United States — participate in a common compensation program. Compensation for executives is highly differentiated, based on a rigorous annual individual performance assessment that takes into account several key factors, including results in the areas of safety, security, health and environmental performance, corporate governance, diversity and other goals pertinent to the financial and operating performance of the company. ExxonMobil executives understand their compensation reflects how effectively they manage risk and contribute to operations integrity and sustainable growth in shareholder value.
ExxonMobil’s compensation committee carefully considers the feedback on executive compensation we receive from our shareholders, some of whom have held ExxonMobil stock for more than a decade. During the 2015 proxy season, the advisory vote on executive compensation received 90.1 percent of votes “for” the company’s program as outlined. During our extensive dialogue with shareholders, we also received positive feedback on our newly disclosed performance award matrix, which details how industry-leading operating and financial results over investment lead times of the business are linked to the level of individual bonus and stock-based awards.
Additionally, our stock-based awards have long holding periods, i.e., for executive officers 50 percent vests in five years and the other 50 percent vests in 10 years from grant date or retirement, whichever is later. Unvested stock awards are not accelerated upon retirement and remain at risk of forfeiture. These features of the compensation program provide executives with a strong incentive to maintain a sharp focus on operations integrity, which in turn protects the safety and security of our employees and the communities and environments in which we operate.
For more details on our executive compensation program, see ExxonMobil’s 2016 proxy statement.
Communicating with directors
Constructive engagement allows us to identify areas of opportunity and improvement throughout our business. ExxonMobil’s directors encourage open and transparent communication on corporate citizenship topics. Individuals can email our non-employee directors through the corporate governance page of our website or send written correspondence in care of the secretary of the corporation. ExxonMobil employees work with directors as appropriate in responding to these letters and emails. Directors will sometimes request that senior managers meet with shareholders to address particular topics.
We value the dialogue we have with our shareholders on a variety of governance, social and environmental topics throughout the year. Management considers suggestions and engages with shareholders as appropriate. Our direct engagement with shareholders provides an effective forum to address issues, share relevant information and viewpoints, and align on the facts. In 2015, we had 42 shareholder dialogues with institutional investors, pension funds, and labor, religious, and NGO organizations. These dialogues have generally allowed us to reach common ground with our shareholders, in some cases avoiding the need for more formal shareholder proposals at the annual shareholders meeting.
At the corporation’s 2015 annual meeting, shareholders owning approximately 3.5 billion — or nearly 84 percent — of outstanding shares were represented. In 2015, shareholders voted on directors, independent auditors, executive compensation and eight shareholder proposals. The summary table below shows the 2015 proxy vote results.
We seek to report transparently on issues important to our shareholders. The Corporate Citizenship Report, Outlook for Energy and this website help communicate the company’s strategic outlook, performance and risk management practices. In some cases, we publish additional reports to provide further information about certain issues. In response to our shareholder proposals, in 2014 we published three such reports — two on climate change and one on unconventional resources — which provide shareholders an enhanced description of global energy demand and supply, climate change policy, carbon asset risks and unconventional resource development. These reports continue to inform shareholders on how we evaluate and manage risks associated with these issues.