What’s tougher than running Exxon Mobil Corp.?
Not much, at least not much in corporate America. So if President-elect Donald Trump is turning to the business world to help staff his Cabinet and lead the nation, he’s fortunate to land Rex Tillerson, chairman and CEO of the oil giant.
Every public official, from dog catcher to the president, is expected to meet general ethical principles. Those include loyalty to the public, transparency and duty of care — another way of saying competency.
In other words, can he get the job done?
That question doesn’t get enough attention, given the concerns over Tillerson’s ties to Russia and the wealth he’s accumulated in Exxon stock. But his competency gene may be especially valuable in a Trump administration, because Tillerson won’t be baited by a tweet.
Disciplined and deliberate, he has cut deals with foreign leaders around the world, often in dangerous places. He’s kept Exxon at the top in performance despite volatile swings in energy prices. He’s even nudged Exxon forward on climate change.
“He has an understated toughness and a real understanding of how the world works,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University. “He could be a transformational pick for secretary of state.”
Daniel Yergin, an energy historian, praised Tillerson, too: “He’s a man with a tremendous capacity to absorb information and make decisions,” Yergin told The New York Times. “He’s very measured and disciplined and takes a long view.”
Tillerson joined Exxon in 1975 after graduating from the University of Texas at Austin, so he doesn’t have experience in government. That’s rare for this Cabinet post. But rising to the top of Exxon, and remaining there for a decade, is a major personal achievement.
Exxon is famous for its methodical, demanding approach to business and management. Every year, executives are evaluated in seven key areas, including safety, strategic results and total shareholder return. Outstanding performance in one area will not cancel out a poor showing elsewhere, according to the proxy statement.
“All 21 executive officers are expected to perform at the highest level or they are replaced,” the proxy said.
If another exec can make a stronger contribution, a succession plan is implemented and the incumbent is reassigned or pushed out, according to the filing.
Tillerson’s pay is benchmarked against executives at AT&T, Boeing, General Electric and other industrial giants. During his tenure, his “realized” pay ranked 10th among 13 companies. Include the value of unvested stock and delayed bonuses, and his pay ranked eighth, the proxy said.
Tillerson became CEO in 2006, and in the next 10 years, Exxon outperformed its peers in the major metrics tracked by the board, the proxy shows. Exxon also has started 22 major projects since then and plans to bring on 10 more in 2017.
Exxon’s market value today is $27 billion higher than when Tillerson became CEO, even though the price of crude oil is $10 lower.
Steve Coll, who wrote the 2012 book “Private Empire: Exxon Mobil and American Power,” has reservations about Tillerson. They start with whether he can put national interests ahead of private ones.
Exxon executives have disdain for the state department, in part because Exxon’s foreign policy sometimes had more impact on countries, Coll wrote in The New Yorker. He questioned whether Tillerson can “suddenly develop respect and affection for the American diplomatic service.”
But Coll also acknowledged the CEO’s personal integrity, as well as other skills. Tillerson can absorb complex political analysis, evaluate foreign leaders and negotiate with friends and adversaries. In addition, Coll noted Exxon’s strong safety record and the fact that it avoided problems with prosecutions while operating in countries rife with corruption.
Exxon goes to some lengths to promote strong ethics. It has “clawback” provisions to recoup executive pay in the event of a financial restatement. It has no employment contracts or severance agreements, so execs who fall short don’t get a safety net. Exxon also has delayed bonuses and unvested stock awards that can be forfeited if an executive does something detrimental, even after retiring.
In the 1990s, according to oilman Ray Hunt, Tillerson and Hunt refused to pay small bribes to expedite a deal in Yemen, even though the practice was not uncommon at the time.
“He has the courage of his convictions,” Hunt said in a 2014 story, “and he will never do anything that creates a short-term gain at the price of a long-term loss.”
Many lawmakers, including some Republicans, have concerns about Tillerson’s close ties with Russia and Vladimir Putin. That will be a major topic during Tillerson’s Senate confirmation hearings next month.
When Tillerson spoke to students at Southern Methodist University, he downplayed the importance of befriending the Russians.
“He said it was a matter of understanding their history and culture,” SMU’s Bullock recalled. “He said they were once an empire — and are still a very proud country with very proud leaders.”
That kind of insight will have a place in Trump’s Washington.