The article noted,
"The descendants of John D. Rockefeller -- the founder of Standard Oil, forerunner of today's Exxon Mobil Corp. -- are publicly calling on Exxon to change its corporate governance and take a hard look at the future of global energy supplies.
A majority of 300 adult members of the wealthy Rockefeller family, influential shareholders of Exxon, voted to support four shareholder resolutions at the company's annual meeting in late May. The proposals include urging the company to create an independent chairman post, cut greenhouse-gas emissions and examine whether Exxon should take a more active role in developing sustainable energy technologies.
While most of these issues have been raised before by shareholder activists, the addition of voices from the Rockefeller family, who are well known for supporting environmental causes, adds considerable weight to the calls for change. Several members of the family will be holding a news conference Wednesday to discuss their concerns about Exxon's direction."
Call me, well, sceptical, but isn't this all really beside the point? The Rockefeller family was directed to spin Standard Oil into pieces due to John D.'s overzealous competitive spirit. Not to mention business practices later seen as unfair.
ExxonMobil is now a public company. Isn't it the height of arrogance for the great-grandchildren of the company's founder to be dictating strategy to this very successful petroleum-based energy giant?
For the record, the Journal article notes,
"Rex Tillerson serves as both chief executive and chairman. Exxon management opposes all four resolutions.
According to people close to the family, the Rockefeller clan is generally pleased with Mr. Tillerson, who became chairman and chief executive in 2006 and has led Exxon, the largest U.S. company by market capitalization, to several quarters of record-breaking profit."
Indeed, as the nearby Yahoo-sourced price chart for ExxonMobil, BP, Chevron and the S&P500 Index demonstrates, ExxonMobil has outperformed the index and other majors over the timeframe from the 1970s to 2008. That's 38 years!
The Rockefeller family ought to be pleased with where Tillerson, his predecessor, Lee Raymond, and those before them led the largest shard of the once-unified Standard Oil Trust.
Then we read in the Journal piece,
"They are concerned Exxon's senior management has tunnel vision and is too absorbed with the challenges of daily management of multibillion dollar oil and natural-gas projects to ask hard questions about the future of fossil fuels. Mr. Tillerson and other Exxon executives have said they believe oil and gas will represent the vast majority of energy consumption for decades.
Ken Cohen, Exxon's vice president of public affairs, said senior management has held numerous meetings with Rockefeller members and disputes the view it isn't searching for new fuel sources. "We are focused on delivering the energy the world runs on today, reliably and safely and with a lower environment footprint. In addition, we are focused on research and development activity ... looking for the step-change breakthrough that would improve the economics of various alternatives."
Ms. Goodwin, co-director of an environmental research institute at Tufts University in Boston, is supporting a resolution calling on Exxon to set up a task force to examine the likely impact of global climate change and how Exxon could make a difference if it took "leadership in developing sustainable energy technologies." "
By now, on Friday morning, as I am writing this post, there have been several media responses similar to mine. The Journal published a fairly scathing editorial this morning calling the Rockefellers' demands into questions on several counts. Larry Kudlow and Joe Kernen of CNBC did the same last night and this morning.
I wrote this post in November of last year addressing this exact issue with respect to BP, a major competitor of ExxonMobil, and this one just this past February, addressing the changing dynamics of the oil industry.
To me, several themes seem relevant here.
First, of course, is the question of what would possibly give a group of inexperienced investors in ExxonMobil, who just happen to be descended from the company's founder, the gall and right to tell the current management how to run the company? None of these Rockefeller's have worked at ExxonMobil, or, it seems, anywhere in the oil sector. What gives them the basis to disenfranchise other, poorer shareholders and tell the company's management to run the firm according to the whims of the privileged offspring of the founder?
Isn't this precisely why Standard Oil was broken up in the first place? To dilute Rockefeller influence on the company?
Then there's the obvious alternative for the Rockefellers- sell their interest in the company and invest in some green energy enterprises elsewhere. Or start their own. Use their family's investment and venture capital arm to do this and let other shareholders continue to hold ExxonMobil while the latter is managed according to the judgment of its current CEO and his team.
Additionally, as I wrote in my BP post of last year, there's the question of why a current petroleum giant would have any particular advantage in wind or solar energy generation and transmission. It would seem that neither of these renewable energy sources share much of any technology with oil exploration, refining and distribution. Thus, it's a likely waste of shareholder resources for an oil firm to go chasing after other energy sources. This is precisely the type of mistake that Tillerson and his team should avoid, and prevent a small group of vocal environmentalists with an axe to grind, who happen to be the progeny of the company's founder, from forcing him to make, to the detriment of other shareholders.
Finally, there's Schumpeterian dynamics at work. As my February post noted, ExxonMobil is currently on the way to becoming more of a refiner and distributor of oil and its refined products, as it fails to find and own sufficient reserves to replace its recent production.
In the current environment of nationalistic lockups of oil reserves in the ground, it could well be that ExxonMobil pumps out its own petroleum assets, refines them and what it can buy on the open market, such as it will be, and perhaps even go out of business with one last large dividend, as its reason for being simply evaporates.
That's what happens to companies whose best operating environment and salient reason for being disappears. Then shareholders can use their proceeds to buy other equities which they feel may bring them consistently superior returns.
Why anyone thinks that ExxonMobil, in a return to its futile diversification of the 1970s, will have better luck this time as simply a rich investor in completely foreign technologies, is beyond me. But clearly, the Rockefeller kids don't understand this, and probably aren't even old enough to remember how Lee Raymond, Tillerson's predecessor, shut down those wasteful experiments thirty years ago.
And, by the way, among the Exxon Enterprise businesses were solar, with which I consulted, as part of the Wharton Applied Research Center team. It was a waste of time and money then. So were the many information services businesses which were supposed to replace oil-intensive activities in the new age of the 1980s and beyond.
Maybe some of these Rockefeller offspring should go back to school and learn some history about the last time their family founder's company tried the route for which they are now agitating.
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