Report Oct. 24, 2018
Report Oct. 24, 2018
ExxonMobil's board of directors
To help ensure our board leadership reflects the interests of our shareholders, board members select an independent director to serve as the presiding director, with the expectation that this person will serve for a minimum of two years. The presiding director serves as a liaison of the chairman and reviews in advance the schedule and agenda for all board meetings, in consultation with the chairman, as well as other materials distributed to the directors. The board currently 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.
Sustainability topics are routinely reviewed at board meetings and typically fall under the purview of the public issues and contributions committee, the board affairs committee and the compensation committee. 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 public issues and contributions committee is charged with reviewing the effectiveness of the company’s policies, programs and practices with respect to the environment, among other duties. 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.
Performance and initiatives
At year-end 2017, nine of 10 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 2017, the board met 11 times.
Board engagement in ExxonMobil operations
Each year, members of the board of directors and its public issues and contributions committee visit an ExxonMobil site to gain a deeper understanding of our operations and to view ExxonMobil standards, principles and capabilities first-hand.
In 2017, the ExxonMobil board of directors visited the Rotterdam, Netherlands petrochemical complex, where they toured ExxonMobil’s state-of-the-art integrated manufacturing site. The Rotterdam refinery is one of the most energy-efficient in Europe, and the adjacent plastics plant is one of the largest production facilities of its kind in the world. The tour highlighted continued investments in and innovative improvements to the complex, including a hydrocracker expansion project. When completed, the hydrocracker facility will produce high-quality lubricant base stocks and ultra-low sulfur diesel to meet current and future customer needs.
In 2017, the public issues and contributions committee visited the ExxonMobil research and engineering laboratory facilities in Clinton, New Jersey. During the visit, committee members toured ExxonMobil algae biofuels and fuel cell carbon capture research laboratories. The directors had the opportunity to meet our leading science and technology researchers, who are pioneering advancements in their fields. The trip included meetings with local educational and civic leaders, including the mayor of Clinton Township and a representative from Princeton University’s Andlinger Center for Energy and the Environment.
Board selection process
Maintaining a board of directors whose members are diverse in gender, race, work and life experiences, geography and fields of expertise is critical to our success 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, which is reviewed regularly by the board. Diversity is a key consideration.
The board affairs committee, supported by an independent executive search firm, looks for highly qualified non-employee candidates with demonstrated leadership, competency and a commitment to represent the interests of all shareholders. Other desirable qualities include:
- Individuals who have achieved prominence in their fields;
- Diversity of life experiences and backgrounds, as well as gender and ethnic diversity;
- Experience and demonstrated expertise in managing large, relatively complex organizations, such as that of chief executive officers or senior executives of a significant company or organization, with responsibilities for global operations;
- Financial and other risk management expertise;
- Experience on one or more boards of significant public organizations or nongovernmental organizations;
- Expertise resulting from significant professional or academically-based scientific or research activities; and
- Experience with cyclical businesses, such as commodities.
Performance and initiatives
To help keep the director selection process collaborative and inclusive, the board affairs committee considers recommendations from shareholders, directors and others. At year-end 2017, 40 percent of the board’s independent directors were female and/or an ethnic minority.
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. Executives understand their compensation reflects how effectively they manage risk and contribute to operations integrity and sustainable growth in shareholder value. ExxonMobil 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.
Performance share awards for the most senior executives have restriction periods that far exceed typical three-year vesting, with 50 percent of shares being restricted for 10 years or retirement, whichever is later. Long restriction periods effectively require executives to have a significant personal stake in the company’s long-term success and align their overall compensation with the experience of our long-term shareholders. Additionally, unvested performance share awards are not accelerated upon retirement and remain at risk of forfeiture. These features 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, the communities and environments in which we operate.
Performance and initiatives
ExxonMobil’s compensation committee carefully considers the feedback on executive compensation it receives from our shareholders. During the 2017 proxy season, the advisory vote on executive compensation received support of 69 percent of votes cast.
ExxonMobil recognizes it is our responsibility to use the company’s earnings to help meet the world’s growing energy needs while delivering value to our shareholders and competitive prices and value to our customers. Our earnings enable us to continue making sizable investments in energy production and technologies that benefit society.
ExxonMobil values the dialogue we have with our shareholders — and the insight provided — throughout the year. For example, the number of engagements with shareholders on environmental, social and governance issues is up 75 percent since 2014. Our direct engagement with shareholders provides an effective forum to address issues and share relevant information, facts and viewpoints.
The board has established procedures for shareholders and other interested parties to communicate with board members. 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.
Every year, shareholders submit proposals regarding the company’s operations or corporate governance. Management and the board consider these proposals and typically seek a dialogue with the proposal sponsor. If the dialogue successfully addresses the concerns of the sponsor, the proposal is often withdrawn. Visit ExxonMobil’s 2017 proxy statement for additional information.
Performance and initiatives
In 2017, we held 68 shareholder engagements on environmental, social and governance issues with institutional investors, pension funds, labor, religious and nongovernmental organizations, representing an estimated 50 percent of outstanding stock held by institutional investors and about 30 percent of total shares outstanding. These engagements have frequently enabled 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 2017 annual meeting, shareholders owning approximately $3.6 billion — or more than 85 percent — of outstanding shares were represented. In 2017, shareholders voted on directors, independent auditors, executive compensation and nine shareholder proposals. The summary table below shows the 2017 proxy vote results.
Consistent with ExxonMobil’s Corporate Governance Guidelines, the board of directors reconsidered a proposal requesting a report on impacts of climate change policies (Item 12) submitted by the New York State Common Retirement Fund, which received a majority of votes cast during the 2017 annual shareholders meeting. In reconsidering the proposal, the company sought input from a number of parties, such as the proponents and major shareholders. The board decided to further enhance the company’s disclosures consistent with the proposal and issued these disclosures in February 2018 in ExxonMobil’s Energy and Carbon Summary and the Outlook for Energy. These enhancements include energy demand sensitivities, implications of 2 degree Celsius scenarios and positioning for a lower-carbon future.
Sustainability Report • Oct. 24, 2018