Daniel Englander
What Would John D. Rockefeller Do? May 28, 2008 at 1:16 PM
A resolution to separate the chairman and CEO positions at ExxonMobil failed to receive a simple majority today at the energy company’s annual shareholder meeting in Dallas. The resolution was one of four promulgated by descendants of Standard Oil founder John D. Rockefeller aimed at getting ExxonMobil to focus on energy portfolio diversification and environmental conservation. Needless to say, all four resolutions were voted down at the meeting. The Rockefeller descendants collectively own only 0.006 percent of the company’s 5.4 billion shares - this relatively small shareholding was likely part of the reason behind the resolution’s failure. The resolution was aimed at diminishing the power of chairman and CEO Rex Tillerson who has been loathe to move the energy giant from its base in fossil fuel exploration, development and production. At last year’s shareholder meeting, Tillerson famously told the assembly if they were interested in renewable energy, they should move their cash over to Shell.
Only 39.5 of the proxy voters voted in favor of the resolution, down slightly from 40 percent on a similar resolution last year. The question remains, however, if separating the two positions would have resulted in a strengthened focus on portfolio diversification. While Shell and BP have separate spots, neither Chevron nor ConocoPhillips have made that step. The former two companies have made more substantial gains in renewable energy investment and development, while the latter two have largely stayed in the background developing biodiesel joint ventures or investing in pure-play ocean power companies, for example. Still, their contribution has been much more noticeable than ExxonMobil’s.
Florida Power & Light is another company with a unified chairman/CEO position. Lewis Hay III, who occupies those positions at FP&L, announced yesterday the company would invest between $16 billion and $20 billion over the next five years in developing renewable capacity. FP&L has the second largest installed renewable capacity under management in the world, trailing leader Iberdrola by about GW, though it has roughly 22 GW in its development pipeline, mostly in wind power. This brings us to a larger point - whether internal, internecine board warfare is really the necessary component for portfolio diversification. It’s possible that the scale of ExxonMobil’s market share is really what’s preventing it from getting involved in renewables.
It’s king of the hill status among non-state oil companies will allow it weather the peak oil and declining margin storm more ably than some of its smaller competitors. So, really, what’s the point? A similar effect was highlighted this morning with Indonesia’s announcement that it will drop out of OPEC. The cartel’s only Asian member and only member who’s also a net importer of oil, dropped out to protest the cartel’s refusal to rise production in a bid to drop prices. Similarly, as the margin squeeze in the oil industry continues to affect company stock performance, it’s possible we can expect more than a few of the smaller oil companies to become more aggressive in their pursuit of renewable capacity. If we take the assumption that boards of directors are ultimately responsible to their shareholders - the SEC certainly does - then we must also assume one of the only things that will get boards to respond to demands for increased diversification is poor performance. This was demonstrated recently with BP’s announcement to shed its investment in renewables because of declining company profits. Soon, this effect will start moving oil companies - including ExxonMobil - in the other direction.
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One can see the global response of the world’s rich and poor drawing the lines between two competing forces but the unknown variable which is climate and political changes will be the determining factors to the effect that will truly impact the decisions of the world governments new positioning to expand or insure more competitive openest within the Global markets by attaching those same incentives that boosted the Oil industries for over the years will see a shift of strong support for the remove of all subsidizes to be places into the development of a Green technologies market or which fossil fuel 18th century technologies will be forced off the shelfs by popular demand of the worlds governments completed due the effects its as upon the global economy. Failure could result in began development of a World Class Action suits have even the politician would not want to See !
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