Governance

Strong governance is essential to the long-term viability of ExxonMobil's business. Within the Company's robust governance framework, a rigorous risk management approach is applied to identify and address risks associated with its business, including the risks related to climate change. 

Report Jan. 5, 2021

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Governance

Climate change risk oversight

ExxonMobil's Board of Directors provides oversight of key risks, including strategic; reputational; financial; operational; safety, security, health and environment (SSHE); and legal compliance matters. The Board has a well-established and rigorous enterprise risk framework to oversee risks faced by the Company, including those related to climate change. The Board receives insights on risks and potential mitigations on relevant issues from both Company and external experts.

The Board routinely reviews the Corporation's environmental  approach and performance. These reviews include briefings with  internal and external  subject-matter experts on scientific and technical research, public policy positions, emission reduction performance, and new technology developments. They also include at least one session each year where the full Board engages on the latest developments in climate science and policy. In addition, directors engage directly with  shareholders to gather insights and share perspectives on issues of importance to the Company, including discussions regarding risks related to climate change.

The Board evaluates climate risks in the context of other operational, market, financial and reputational risks and considers the interactions of these additional factors. The Board is supported by its committees, which take more in-depth reviews of the context and interdependencies in risk evaluation. The role of these committees is described in greater detail below.

Led by the Lead Director, the Board also oversees the Company's response to critical issues. Recently, for example, the independent Lead Director, along with the full board, provided oversight as management guided the Company's response to the COVID-19 pandemic through a series of actions that helped protect its employees, the communities in which  it works and people around the world.

Beyond the Board, the Management Committee, including the Chief Executive Officer, provides oversight of strategic risks and participates in briefings to broaden understanding and assess safeguards and mitigation options.

Coordination and support of board committees

As described above, the  Board oversees a  broad spectrum of interrelated  risks with assistance from its committees. This integrated  risk management approach facilitates recognition and oversight of important risk interdependencies more effectively than  relying on risk-specific committees. Consideration of climate-related risks is integrated within the activities of the committees.

Finance and Audit Committees

The Finance and Audit Committees oversee risks associated with financial and accounting matters. The Audit Committee also periodically reviews ExxonMobil's overall risk management approach and structure, which is applied to risks related to climate change, among other business risks.

Board Affairs Committee

The Board Affairs Committee oversees matters of corporate governance, including Board evaluation and director refreshment. It also coordinates identification of external experts, including those addressing the energy transition, to provide insights to the Board and sets the criteria for shareholder engagement with directors.

Compensation Committee

The Compensation Committee reviews executive compensation, which is designed to incentivize executives to maximize long-term shareholder value and requires decision-making that includes careful consideration of current and future risks, such as those related to climate change.

Public Issues & Contributions Committee

The Public Issues and Contributions Committee (PICC) oversees operational risks such as those relating to safety, security, health, lobbying activities, and expenditures and environmental performance, including actions taken to address climate-related risks.

Integrating risk management into executive compensation

Senior executive compensation is determined by the Compensation Committee. The compensation program is designed to incentivize effective management of all operating and financial risks associated with ExxonMobil's business, including risks related to climate change.

Performance shares with long vesting periods and a strong tie to Company performance are among the key design  features that support this objective. Executive compensation is designed to support long-term sustainability of Company operations and management of all aspects of risk. Specifically, performance in managing risks related to climate change is recognized in two performance dimensions that are linked to the Company's performance share program:  (1) Progress Toward Strategic Objectives, which includes reducing environmental impacts as one of five objectives, and (2) Safety and Operations Integrity, which includes environmental performance in addition to safety and controls. These performance dimensions are shown in the schematic on the right. The executive compensation program requires that these longer-term risks be carefully considered at all levels of the organization, ensuring stewardship beyond the Board and executive level, and is fundamental to success across the Company. Details on the executive compensation program can be found in the annual Proxy Statement.

Board composition and evaluation

The Board is comprised of independent directors and the CEO. All members of the Audit, Board Affairs, Compensation and PICC committees are independent.  Each highly qualified director brings a diverse perspective. The majority have scientific, technical and/or research backgrounds, creating  a collective skillset that is well qualified to oversee climate-related  issues.  In addition, the Board benefits from the experience of a director who is a recognized expert in climate science.

The Board acts as a collective body, representing the interests of all shareholders. While individual directors leverage their experience and knowledge in Board and committee deliberations,  Board decisions and perspectives reflect the collective wisdom of the group.

At least annually, the Board and each of the Board committees conduct a robust and thorough evaluation of their performance and effectiveness, as well as potential changes to the committees' charters. The independent Lead Director, as part of the role's recent enhancements, leads the evaluation.

The ExxonMobil Board of Directors, as of May 1, 2020. From left: Angela Braly, Kenneth Frazier, Joseph Hooley, Ursula Burns, Samuel Palmisano, Darren Woods, Douglas Oberhelman, Steven Reinemund (since retired), William Weldon, Susan Avery and Steven Kandarian

Board refreshment

The Board prioritizes its refreshment process and values a diverse slate of experienced and qualified Board members with the ability to serve over a period of many years.

ExxonMobil’s refreshment process has been successful in identifying diverse, experienced and qualified Board candidates; four of the last eight most recently elected independent directors were female or racial/ethnic minorities. As of April 1, 2020, the average tenure of independent directors up for election in May 2020 was 6.1 years, well below the S&P 500 average of 8.0 years.1

Qualifications sought for director nominees are documented in the Board’s Guidelines for the Selection of Non-Employee Directors available on exxonmobil.com. Important director competencies, built from these qualifications, include experience in risk management and global business leadership, as well as financial and operational experience and scientific, technical or research experience.

Most recently, Joseph Hooley, former Chairman of the Board, President and Chief Executive Officer of State Street Corporation, joined the Board in January 2020 and enhances the Board's investor perspective.

Public Issues and Contributions Committee (PICC)

Members of the Board of Directors and senior executives toured the integrated manufacturing complex in Beaumont, Texas, in February 2020 as part of the annual Board trip.

The Public Issues and Contributions Committee (PICC) plays an integral role in the Board’s oversight of climate-related risks. Like other committees, the PICC is able to work on key issues in greater detail than possible by the full Board. 

The PICC is comprised of three independent directors who are appointed by the Board, and reviews and provides guidance on the Corporation’s policies, programs and practices on key public issues of significance. It regularly reviews ExxonMobil’s safety, security, health and environmental performance, including actions taken to identify and manage risks related to climate change. The broad and diverse set of backgrounds and areas of expertise of the individual PICC members ensures the committee is able to effectively evaluate and inform the Board on dynamic and complex issues.

The PICC, along with other members of the Board, makes annual site visits to operating locations to observe and provide input on operating practices and external engagement. In February 2020, the PICC and other members of the Board and management visited ExxonMobil’s integrated manufacturing complex in Beaumont, Texas, which consists of a refinery, chemical plants, and lubricant blending and packaging facilities.

The visit included an overview of chemical and refinery operations, and highlighted the site's manufacturing complexity, reliability and process safety performance. The visit also included a tour of the central control building and operating units and the construction site of a project to increase the capacity to refine light crude oil produced in the United States. During the tour, directors reviewed firsthand the mitigating actions ExxonMobil has taken to address the risks of potential flooding along the Neches River where the refinery is located. Directors also had the opportunity to hear from employees and external guests, including elected officials and local/community leaders.

Through these visits, the PICC and directors review the effectiveness of the Company’s risk management process and receive additional insight into how the Operations Integrity Management System (OIMS) helps protect employees, nearby communities, the environment and physical assets. The PICC uses this information, along with reports on safety and environmental activities of the operating functions, to provide recommendations to the full Board.

1 Spencer Stuart (2019). 2019 U.S. Spencer Stuart Board Index, page 5.
https://www.spencerstuart.com/-/media/2019/ssbi-2019/us_board_index_2019.pdf