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May 05, 2008


Mike Brown

At a BSR conference a number of years ago, I was struck by the "head in the sand" approach taken by a senior Exxon/Mobil engineering manager. The company strikes me as a classic example of a dominant organization that has developed a severe case of tunnel vision. Odds are that even if they make a move into renewables, they will do so with huge question--who's the customer? A classic situation well described and analyzed by Clayton Christiansen in The Innovator's Dilemma.

Jim Leemann

It is always interesting to watch the behaviors of wealthy trust babies. Before we all get teary-eyed and “green” with envy for these trust babies, let's first recognize that the real reason for their behavior is more about ensuring their trust does not run dry than saving the planet by forcing Exxon Mobil to invest in alternative fuels R&D and establish an "independent" chairperson of the board to ensure this happens. Even with an “independent” chairperson, I don’t see how this individual could force an alternative fuels agenda on the company, but stranger things have happened.

With the increasing growth in the number of trust babies in this particular family, it would indeed make sense to take steps to ensure the longevity of one’s source of wealth and income. Wouldn't we all like to be in their situation?

The question is whether the Rockefeller's shareholder resolution will actually lead to growing their wealth versus their historic position of preserving their wealth. It would seem these trust babies believe they know better what is best for Exxon Mobil than the leadership of the company knows. This belief flies in the face of Exxon Mobil's performance since the beginning of the Fortune 500 list in 1954, not to mention all the years since its inception as the Standard Oil Company of Ohio in 1870.

So why doesn't Exxon Mobil simply spend a few billion on alternative fuels and pacify these trust babies? Maybe, just maybe, Exxon Mobil has studied and continues to study alternative fuels and has concluded, at least for now, this is not the space where Exxon Mobil or its shareholders want to see the company’s profits spent. A snapshot of this analysis is revealed in Exxon Mobil’s February 2006 publication entitled Tomorrow’s Energy – A Perspective on Energy Trends, Greenhouse Gas Emissions and Future Energy Options at http://www.exxonmobil.com/Corporate/Files/Corporate/tomorrows_energy.pdf. Self serving you might say, then Google the costs associated with wind, solar, hydro, biofuels, ethanol, nuclear, etc. and learn that none of these alternative sources of fuel can compete with oil and gas and in all likelihood will not compete with oil and gas for the next hundred years, as much as Al Gore and the enviros would like for us to believe.

Let's face it; Exxon Mobil is a profit making enterprise tasked with creating as much revenue as it can to deliver dividends to its investors, including these aforementioned trust babies. Believe me, if Exxon Mobil saw that investing in alternative fuels would deliver the returns expected in this industry, they would be in this space in a heartbeat. By the way, if the price of oil continues on its meteoric path, the viability and economic return on these alternative fuels might likely become more appealing causing significant investment in this space. But until that happens, it is fantasy to believe a capitalistic enterprise is going to invest in the alternative fuels space to any significant degree. From a fiduciary point of view, it would be irresponsible for Exxon Mobil or any other publicly traded enterprise for that matter to significantly spend money in this space, at the moment. This isn’t to say no funds should be placed toward R&D in this space, but to force a company like Exxon Mobil into this space without thinking through the consequences is financially reckless.

For me, this shareholder resolution is more about Power, Control and Money than it is about alternative fuels. Alternative fuels just happens to be a politically popular, feel good vehicle for these trust babies to impose their will on a company that hasn’t paid much, if any, attention to them over the years. If their shareholder resolution passes on May 28th, it will be interesting to watch how the market responds. I wonder if these trust babies have thought through what they will do if their Exxon Mobil stock drops. With over 99,000,000 shares of Microsoft stock (Q 4 2007) in their trust portfolio, I don’t think any of us needs to worry too much about their life style changing.


I don't know who you are Jim Leemann, and I truly don't mean to offend, but your sense, or should I say lack of sense, regarding any social, environmental or global responsibility on the part of the world's largest transnational corporations is truly stunning.

And I'd LOVE to take you up on your bet about alternative fuels being competitive with oil in the next hundred years. Too bad we won't be around to settle; pretty safe way to state a claim.

Will O'Neill

In Jim Leemann's defense, I cannot blame him for taking a cynical view of the shareholders who are demanding this change. It is not unreasonable to question their motives as they are understandably concerned about the long-term profitability of Exxon. However, it IS unreasonable to think that alternative sources of fuels are not going to be compete with oil in the next hundred years.

If these powerful shareholders are concerned about their future wealth, why would they not want the company to explore developing technologies. It would not be a successful long-term strategy to wait for major technological breakthroughs and forfeit profits from developing markets.

Patrik Marckert

Joel, I think you have several good points in this post. I am puzzled by the Exxon strategy compared to their competitors - BP and Shell in particular. Dedicating only a tiny share of their profits could mean a huge influx in the renewables area, and huge potential long term gains for their shareholders.
Even Google and other investors, coming from outside the energy field, sense this. As I discussed in a blog post (link), renewable energy investments now amount to USD100billion per year.

And you can't overestimate the importance of the negawatt concept. And investors is going to realize that. Since last year, capital influx have exploded into the energy efficiency investment segment. Investments in Power And Efficiency Management Services increased by 454% compared to last year! And it's gonna keep growing. Last year, I predicted this development (link 1, link 2).


Joel...you need permalinks and maybe a "read more" code. Technicalities aside, as usual, this is a timely commentary. So frustrating to see that gas companies are not moving on the clean tech issue when they should.

Wil Keenan

Nice article - as always. I just wanted to share this link with all of you - It is a profile of the oil industry's top 10 players using the HIP Methodology. (www.hipinvestor.com)


Wil Keenan


Jim Leemann

Well the Exxon Mobil proxies are in and the Rockefeller Trust Babies have nothing to fear for at least another year. Regarding the Trust Babies effort to separate the Broad Chairman and CEO to held by two people instead of one (Proxy Item # 5), the proxy vote results were 39.5 For and 60.5 Against.

Regarding the proxy votes related to the environment and alternative energy here are the results:

13. Community Environment Impact – 10.8 (For) 89.2 (Against)
14. ANWR Drilling Report – 8.4 (For) 91.6 (Against)
15. Greenhouse Gas Emissions Goals – 30.9 (For) 69.1 (Against)
16. CO2 Information at the Pump – 7.0 (For) 93.0 (Against)
17. Climate Change and Technology Report – 10.4 (For) 89.6 (Against)
18. Energy Technology Report – 9.4 (For) 90.6 (Against)
19. Renewable Energy Policy – 27.5 (For) 72.5 (Against)

Source: Definitive Proxy Statement to the U.S. SEC Schedule 14A Exxon Mobil Corporation. http://www.sec.gov/Archives/edgar/data/34088/000119312508078618/ddef14a.htm#toc87659_26 and Summary of 2008 Proxy Proposal Votes at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=115024&eventID=1825185

These results not only show the sentiment of Exxon Mobil’s leadership, but the voting positions of shareholders that own more than 4.4 billion shares of Exxon Mobil outstanding stock.

As I penned earlier, reading the Definitive Proxy Statement confirms that Exxon Mobil is quite aware of alternative energy prospects and is devoting human and financial resources to evaluating these technologies along with cleaner technologies for oil and gas consumption. So to imply the demise of the world’s largest petroleum company due to their lack of, in your opinions, an alternative energy vision is just factually incorrect. It appears your objective is to use Exxon Mobil as the “tipping point” for convincing everyone to jump on-board the alternative energy band wagon. Based on the above proxy vote results, this will likely turn out to be a monumental task to accomplish.

The proxy vote results are quite telling when it comes to the opinions of the individuals and institutions that own Exxon Mobil shares. Bottom-line the shareholders are very satisfied with Exxon Mobil’s current direction when it comes to the environment and alternative energy. Fortunately, at least for now, the governance of publicly traded companies remains intact.

max johnson

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Very interesting article...


This is a problem of the global elite making up rules that suit them.

Way can't the government just step in with legislation that can tackle these problems before they even become issues.

Well, I say that but I know its not possible. Maybe if we elected a completely new government that was not in the pockets of these huge multinational companies we would stand a chance.

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