Exxon Mobil Corporation · NYSE:XOM
Exxon Mobil — Shareholder Meeting (May 2013)
50 slides from Exxon Mobil's shareholder meeting presentation, May 10, 2013
Slide 1: Schedule 14A Proxy Statement cover
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant x Filed by a Party other than the Registrant ¨ Check the appropriate box: ¨ Preliminary Proxy
Slide 2: Executive Compensation Overview
Executive Compensation Overview Audio Webcast May 10, 2013 1:00 p.m. CT
Slide 3: Cautionary Statement
Cautionary Statement Forward-looking Statements. Information concerning future events or conditions in this presentation or subsequent Q&A period are forward-looking statements. Actual future results, including capital expenditures; business and project plans, timing, costs, and capacities; and fina
Slide 4: Please bear our Cautionary Statement in mind
• As shown on slide 2, please bear our Cautionary Statement in mind during today’s discussion. 2
Slide 5: Agenda
Agenda • Key Elements of ExxonMobil’s Business Strategy • Shareholder Engagement • Long-Term Business Performance and Basis for Compensation Decisions – Financial and Operating Performance – Strategic Business Results • Annual Bonus Program • Restricted Stock Program • Scale and Scope of ExxonMobil
Slide 6: Turning to the agenda
• Turning to the agenda on slide 3, we will begin our review with a quick recap of ExxonMobil’s key business strategies and discuss our shareholder engagement in 2012. • The balance of the review will focus on how the compensation program is carefully designed to address the unique characteristicsof
Slide 7: Key Elements of ExxonMobil's Business Strategy
Key Elements of ExxonMobil’s Business Strategy Best-in-class Upstream, Downstream, and Chemical businesses • Effective risk management, safety, and operational excellence • Integrated business model • Disciplined processes • World-class assets across all business lines • Focus on profitability and r
Slide 8: ExxonMobil's mission and key strategy aspects
• ExxonMobil’s mission is to be the premier petroleum and petrochemical company in the world. To deliver on that mission requires eachof our three businesslines, Upstream,Downstream,andChemical,to be premier amongtheir peers. Some of the key aspects of our strategy to achieve this mission are shown
Slide 9: Shareholder Engagement
Shareholder Engagement • In 2012, more than 77 percent of votes cast were in favor of the say-on-pay resolution. • Wide-ranging dialogue between management and numerous shareholders, including the Company’s largest shareholders. • Positive shareholder feedback was received on the following: – More t
Slide 10: Compensation Committee and shareholder engagement
• The Compensation Committee of the Board believes that our compensation program should not be designed in isolation. This also means the Committee is committed to engagement between shareholders and the Company to fully understand diverse viewpoints on the topic of executive compensation. • The Com
Slide 11: Shareholder Engagement, cont'd
Shareholder Engagement, cont’d • The Compensation Committee carefully considered shareholder feedback on executive compensation and identified two opportunities to enhance disclosure: – More detailed explanation of the performance basis for determining the annual bonus program. • In response, this y
Slide 12: Enhanced disclosure in response to shareholder feedback
Last year, we also received several questions related to the formula basis for our short-term incentive program. We have enhanced our disclosure in response to shareholder feedback, which includes more detailed explanation of the steps to arrive at the annual bonus program. This dialogue with shareh
Slide 13: Financial and Operating Performance
Financial and Operating Performance • Financial and operating results outlined below provide additional perspective on Company performance: – Earnings of $45 billion in 2012, increased by 9 percent versus 2011. Five-year annual average of $36 billion in earnings. – Distributed more than $30 billion
Slide 14: Financial and operating results perspective
• In addition to linking long-term incentive compensation to the long-term performance of the business, the Compensation Committee also links the short-term incentive compensation to the short-term financial and operating performance. • The financial and operating results outlined on slide 7 provide
Slide 15: Strategic Business Results
Strategic Business Results • Advanced a Strategic Cooperation Agreement with Rosneft to jointly participate in exploration and development activities in Russia, the U.S., and Canada. • Expansion of opportunities in Romania, Tanzania, Nigeria, Australia, and Papua New Guinea added to the resource bas
Slide 16: Strategic priorities progress
• Another key performance criterion underlying the compensation decisions made by the Compensation Committee in 2012 was the progress achieved on several strategic priorities. • The accomplishments outlined on slide 8 are expected to have a positive impact on Company performance for decades, potenti
Slide 17: Long-Term Business Performance and Basis for Compensation Decisions
Long-Term Business Performance and Basis for Compensation Decisions (1) Employee and contractor safety data from participating American Petroleum Institute companies (2012 industry data not available at time of publication). (2) XTO Energy Inc. data included beginning in 2011. (3) Royal Dutch Shell,
Slide 18: Scorecard of safety and profitability performance
• Given our objective of industry-leading performance in risk management and return on invested capital, this slide provides a scorecard of our performance the overlast several years. • The results shown here helped form the basis for compensation decisions by the Compensation Committee. • Chart 1:
Slide 19: Long-Term Business Performance, cont'd
Long-Term Business Performance and Basis for Compensation Decisions, cont’d An analysis of historical TSR shows that one- and three-year TSR bears little correlation to prospective long-term TSR performance. (4) TSR represents annualized returns assuming dividends are reinvested when paid. (5) Royal
Slide 20: Long-term shareholder returns versus peers
• We know from the previous slide that we have consistently generated industry-leading financial and operating performance, but the question is “How have our shareholders fared over the long term?” • We typically compare our performance, including shareholder returns, to companies with similar size
Slide 21: Distribution yield versus industry
Long-Term Business Performance and Basis for Compensation Decisions, cont’d • Over the most recent five-year period, ExxonMobil average annual combined dividend and share repurchase distribution yield was 7.2 percent, more than 50 percent higher than the industry group average of 4.7 percent. (1) Di
Slide 22: Annual Distribution Yield
• Chart 5:Annual Distribution Yield – Compares ExxonMobil to the industry group on the basis of combined dividend and share repurchase distribution yield. • Over the most recent five-year period, ExxonMobil had an average yield of 7.2 percent, more than 50 percent higher than the industry group aver
Slide 23: CEO Reported Pay vs. Realized Pay
CEO Compensation 6 CEO Reported Pay vs. Realized Pay Realized Pay as Year of Realized Pay vs. a Percentage of Compensation Reported Pay(3) Realized Pay(4) Reported Pay Reported Pay 2012 $ 40,266,501 $ 15,561,163 -$ 24,705,338 39% 2011 $ 34,920,506 $ 24,637,196 -$ 10,283,310 71% 2010 $ 28,952,558 $ 1
Slide 24: CEO reported pay versus realized pay
• A substantial portion of the CEO’s compensation granted by the Compensation Committee and reported in the CD&A represents an incentive for future performance, not current cash compensation. • This long-term incentive pay will not actually be received by the CEO for many years in the future, and th
Slide 25: CEO Realized Pay vs. Reported Pay: Benchmark Companies
CEO Compensation, cont’d CEO Realized Pay vs. Reported Pay – (1) ExxonMobil vs. Compensation Benchmark Companies Realized Pay as (2) a Percentage of (3) ($ in thousands) Realized Pay Reported Pay Reported Pay Highest $ 68,443 $ 20,956 327% Middle $ 20,455 $ 25,806 79% Lowest $ 1,994 $ 15,362 13% Exx
Slide 26: 2012 CEO realized pay versus benchmark companies
• We recently completed an analysis of 2012 CEO “realizedversus pay” “reported pay”for our compensation benchmark companies. • The “realized pay”column illustrates that ExxonMobil’s CEO was at the 33rd percentile (rank 9 of 13) compared to the 12 compensation benchmark companies in 2012, with the mi
Slide 27: CEO Pay Alignment
CEO Compensation, cont’d CEO Pay Alignment • The following chart illustrates how the percent change in “Reported Pay” has tracked ExxonMobil’s TSR during the current CEO’s tenure. (3) Reported Pay is Total Compensation based on the current reporting rules for the Summary Compensation Table. Reported
Slide 28: CEO Reported Pay vs. TSR
• Chart 6: CEO Reported Pay vs. TSR – This chart illustrates how the percent change in “reported pay” has tracked ExxonMobil’s total shareholder returns (TSR) during the current CEO’s tenure. – There is a strong correlation between CEO pay and ExxonMobil stock performance. – In 2012, the lag effect
Slide 29: Annual Bonus Program
Annual Bonus Program • Annual bonus for CEO increased 5 percent in 2012 compared to a 9-percent increase in corporate earnings. • Annual bonus program based on the annual percentage change in projected net income according to a formula. • Bonus formula has been consistently applied in each of the la
Slide 30: Bonus formula and earnings change
• Since 2002, the annual bonus program for more than 1,600 executives worldwide, including the CEO, has been based on the annual percentage change in projected net income of the Corporation according to the formula shown on this slide. The net income (earnings) performance is tempered (2/3 x earning
Slide 31: Annual Bonus Program, cont'd
Annual Bonus Program, cont’d • Delayed Bonus Feature: _ 50 percent of annual bonus is delayed until ExxonMobil’s cumulative EPS reach a specified level ($6.25). _ EPS threshold has been raised steadily over the years (e.g., $3.00 in 2001). _ This delayed bonus feature further aligns the interests of
Slide 32: Annual bonus components and delayed feature
• The annual bonus award is split into two components; a cash award which pays out immediately and a delayed award that pays out when ExxonMobil’s cumulative earnings per share reach a specified level. • Delayed Bonus Feature: ForCEO,the 2012bonuswas$4.6million, half of which was paid at grantdatean
Slide 33: Three Performance Factors that Determine Annual Bonus
Annual Bonus Program, cont’d Summary of Three Performance Factors that Determine Annual Bonus 1. Award program varies based on annual earnings, as previously described. 2. Award program differentiates bonus based on individual performance assessment . 3. Fifty percent of bonus is delayed until cumul
Slide 34: Summary of bonus program determination
• In summary, the bonus program is determined annually as follows: – Annual change in bonus program determined by earnings performance, and tempered (2/3 x earnings) to account for commodity prices. – Specific individual award amounts are then determined by comprehensive individual performance asses
Slide 35: Restricted Stock Program: Risk Management and Investments
Restricted Stock Program Risk Management and Investments • Business model is characterized by significant capital intensity, operational risk, and long investment lead times that can span multiple decades. • ExxonMobil expects to invest $190 billion over the next five years. 18
Slide 36: Large capital investments and project cash flow
• Due to the nature of our industry and size of ExxonMobil, our senior executives are responsible for making very large capital investmentsthat generateattractive returns on capital employedfor many yearsinto the future. • These capital investments, including more than $39 billion in 2012, can take
Slide 37: ExxonMobil Restricted Stock Program
Restricted Stock Program ExxonMobil Restricted Program • ExxonMobil’s stock program is unique in how it effectively links executive pay to our business model and the interests of long-term shareholders. • This linkage is achieved by granting more than half of annual compensationin the form of restri
Slide 38: Long-term program design and vesting periods
• ExxonMobil’s Long-Term Program Design: – ExxonMobil’s stock program aligns with long investment lead times by granting restricted stock with long vesting periods. – Half of the CEO’s reported compensation is in restricted stock (or 72 percent when the pension accrual is excluded) with vesting peri
Slide 39: ExxonMobil Program vs. Alternate Formula-Based Program
Restricted Stock Program ExxonMobil Program vs. Alternate Formula-Based Program, cont’d • A key observation is the potential for the alternate formula-based program with a short-term focus to result in unintended consequences: – Rewarding short-term performance that bears little correlation to long-
Slide 40: Shares Vested by Year
• Chart 10: Shares Vested by Year – This chart helps illustrate the share payout profile of the three-year formula method versus our current approach. – In this example, the red shading indicates the ExxonMobil case of an annual grant of restricted stock per the normal vesting schedule of 50 percent
Slide 41: ExxonMobil Program vs. Alternate Program, cont'd
Restricted Stock Program ExxonMobil Program vs. Alternate Formula-Based Program, cont’d • ExxonMobil design better aligns with the lead times and risks of our business. • Alternate design introduces high degree of variability and earlier payout: – Misaligned with ExxonMobil investment profile. – Cou
Slide 42: Integration of Project Net Cash Flow and Compensation Design
• Chart11: Integrationof ProjectNet CashFlowandCompensation ProgramDesign – This chart combines the prior two charts showing project net cash flow and vested shares to illustrate the relationship between the investment profile of a typical ExxonMobil project and the vesting profiles of the ExxonMobi
Slide 43: ExxonMobil Restricted Program
Restricted Stock Program ExxonMobil Restricted Program • Alignment with Long-Term Shareholders – Executive’s compensation is at risk in a way that is similar to the risk assumed by long-term shareholders. – Our compensation program is intended to drive business decisions by executives that are consi
Slide 44: Alignment with Long-Term Shareholders
• Alignment with Long-Term Shareholders: – The underlyingpremiseof this designfeature is to encouragea “mindset” amongsenior executives that aligns with the interests of long-term shareholders. – This compensation strategy puts the value of an executive’s compensation at risk in a way that is simila
Slide 45: Scale and Scope of ExxonMobil
Scale and Scope of ExxonMobil 12 Scale of ExxonMobil vs. Compensation Benchmark Companies (1) (2) (3) (4) ($ billions) Revenue Market Capitalization Assets Net Income Comparator Companies Median ($) 110 185 140 10.7 75th Percentile ($) 129 198 208 13.9 90th Percentile ($) 144 216 233 16.4 ExxonMobil
Slide 46: Scale, scope and complexity versus comparators
• The Compensation Committee believes that performance should be the primary basis on which compensation decisions are made, particularly annual changes in compensation. • At the same time, the Committee believes that the compensation program should recognize that our senior executives are responsib
Slide 47: Vote 'FOR' Item 3: Advisory Vote to Approve Executive Compensation
Vote ‘FOR’ Item 3: Advisory Vote to Approve Executive Compensation • ExxonMobil’s compensation program supports a business model that has weathered volatile commodity prices and industry business cycles for many years. • Our compensation program has contributed to a culture of performance, integrity
Slide 48: Conclusion: vote FOR the advisory vote
• In conclusion, ExxonMobil’s compensation program supports a business model that has weathered volatile commodityprices and industry businesscyclesfor many yearsand consistently generatedindustry-leading financial and operatingperformanceand shareholderreturns over a very long time. • The compensat
Slide 49: Questions and Answers
Questions and Answers -ExonMobil 25
Slide 50: Prepared remarks concluded
• That concludes our prepared remarks. We would now be happy to take your questions. 25