Exxon and Mirror Image Boards

The corporate governance at Exxon has once again been in the news.  As the WSJ has reported, the company is engaged in a campaign to defeat a shareholder proposal calling for the separation of chairman and CEO.  As the article noted, Exxon "took the unusual step Monday [May 12] of sending an email to institutional investors asking them to reject a shareholder measure to shake up the company by pushing it to name an independent chairman." 

What did the email actually say?  "As discussed in more detail in the enclosed proxy responses, the ExxonMobile Board believes that the decision as to who should serve as Chairman and Chief Executive Officer is the proper responsibility of the Board."  The email also invited investors to contact the company for further discussions.

Exxon has reason to be concerned.  The same proposal received 40% of the vote during the prior year.  Moreover, at least three proxy advisory firms have recommended that shareholders support the proposal, with Proxy Governance the most recent. 

Why are shareholders up in arms?  The stock price has risen from the low $80s earlier in the year to over $90, so its probably not the stock price. According to the WSJ article:  "Shareholders backing the measure want the chairman free to focus on long-term planning, in part to provide a new perspective on the future of energy, including renewable fuels and the availability of crude oil." 

As we have noted in the past, ExxonMobile has been all but tone deaf on the issue of green house gases.  We have wondered on this Blog about the role of the board in allowing this attitude to be such a strong part of the company's public persona.  We have likewise noted that the board is not very diverse, not only in terms of race/gender (of the 11 directors in the proxy statement, there are two women and one person of color) but also in terms of age (two in their 50s, six their 60s, and three in their 70s) and background (most have backgrounds similar to the CEO).  In other words, the board looks much like the CEO, except that it is older.  One has to wonder whether it is the kind of board that can provide the CEO with important feedback on issues of growing importance to the world community such as green house gases.

In opting to support the separation, Proxy Governance noted that if ExxonMobile continues its "my way or the highway" approach, the company could find itself in the midst of a "shareholder revolt."  The management at ExxonMobile are in dire need of some good advice on how to deal with the public and with shareholders.  Boards need diversity so that they can provide top corporate officials with a wide range of advice.  Mirror image boards are less likely to do that.