The Humbling of Exxon....

[woodgeek]

I have talked about the Exxon-Mobil corporation here in the Green Room for many years. I have a couple (distant) friends that have worked there in the past, and currently.

XOM's weird/secretive mgmt style (which includes doing global warming science in the 80s/90s, and then burying it), running AGW mis-information campaigns in the 2000s, Rex Tillerson's claims during the Obama administration, as renewable energy and EVs were getting rolled out, that oil demand would never peak, by asserting TINA: There Is NO Alternative. And their funny accounting model, where they assume a super long productive life for each of their oil projects (like 30-50 years vs their competitors, that use something like 15-20 years) and a correspondingly small depreciation rate. Their getting busted by the SEC multiple times FOR that accounting model. And their lawsuits with the NY and other states' AGs over hiding AGW info, and their shareholder revolt/annual vote to analyze business risks related to the carbon bubble (which third party analysts show XOM is MORE at risk than the other majors). And their glossy 'World Energy' booklet projections, that I read as a nerdy teen, and which show demand for their product growing forever into the future, despite other analysts showing that it is total BS. And their ownership of a raft of senators who passed legislation they basically wrote and harassed anyone that crossed the company with congressional subpoenas and leaking/doxxing them!

Those were the days.

And those oil guys had a rather bad 2019. And are having a much worse 2020. Businessweek article:

Exxon’s Humbling Fall From Oil Juggernaut to Mediocre Company

The industrial giant missed the shale boom, overspent on projects, and saw its debt rise to $50 billion as its stock plummeted.

www.bloomberg.com

Lots of good stuff in there. Like their soaring debt, much of which is to cover their dividend payments to shareholders (which they will not ever decrease, part of a strategy to make it appealing to retail investors). And them getting busted for NOT having their CEO participate in earnings conference calls, like every other corporation. Prima-donnas. And them getting into fracking LATE, when all the big money to be made was pre-2016. And them going big into tar sands, which the biggest money pit in the business.

Overall, the article makes them look like just any other clueless incumbent company being disrupted by a changing marketplace and more nimble competitors. If one that used to have the title of largest (by market cap) and most profitable private company in the US. Just a little more than a decade ago.

Most interesting fact: Exxon is currently worth less than Home Depot, and has half the annual revenue.

 

[peakbagger]

Standard corporations have no soul unless they are one of the new public benefit corporations. They are effectively an immortal legal sociopath. The founders of the company may initially have had a soul and ethics but ultimately the goal of the corporation is to make more profits for shareholders. If a corporate board or elected officer attempts to act like the company has a soul or promote ethical behavior at the cost of long term profits they are not doing their duty and the shareholders can and do replace them. Some corporations may decide that public image of ethics and soul will increase profits in the long run and will hire other corporations to promote their image. Philanthropy and charity may be means of improving public image but unless it improves the potential for future profits the corporate officers can be called to task for not maximizing profits by the shareholders and replaced. Since the corporation is a legal sociopath it tends to attract sociopaths to lead them. Unlike an individual, a corporation can not be jailed and any punishment to it ultimately is transferred to its shareholders. Government is supposed to pass laws to impose ethical behavior on corporations. as the corporations are unable to have ethical behavior on their own. At some point corporations realized that they can grow larger than governments and that in order to maximize profits its easier to just influence governments to minimize lawsthat will affect them. Corporations are in it for the long term while the elected officials that control governments have to be short term focused to stay in power.

Sure Exxon Mobil has been impacted by current external events out of their control and past bad decisions of their management but in theory the corporation will just keep going. We can vilify the corporation and decide not to invest in it but it does care. it will either keep growing or some other entity will will strip its bones when its gone. In Exxon Mobil's case, the likelyhood is the ultimate winner of the battle is the kleptocracy of Putin or the the Saudi Arabian ruling family. In either case they will act to maximize profits on energy at the cost of the rest of the world.

I own stocks indirectly through various mutual index funds, they in turn are managed for long term growth so I can retire. If I want to I can buy "ethical funds" and reduce my long term potential rate of return and lower my lifestyle in the future. It may make me feel good but the profitable corporations who do not meet the standards of ethical funds will attract other buyers. That is the economic system I grew up in and have the expectation I will live out my life in it. Sure I can attempt to move elsewhere and adopt a different model of government that purports to make things fairer but they are ultimately run by individuals with self interests. The only other control I have is at the ballot box and I am the minority as I elect to vote while many others do not and complain about it afterwards.

 

[woodgeek]

I agree with your take completely. We get what we ask for. For-profit corporations should not be deciding ethics or public policy, they are not designed to do that.

I also agree that the existing system is broken. But this is a policy/governance failure. We DO expect our government to act in our collective best interest, and part of that is regulating the corporations. And what we have instead is many in govt becoming their shills, and letting them write the regulations, and completely abdicating the enforcement of regulations and laws that we do have.

So, I am not bothered by XOM's extraction of oil, making of money and profit. In my case, XOM's R&D lab (at the scale of Bell Labs) in the 70s and 80s created my scientific discipline and trained many of my older colleagues.

But I am bothered by their use of misinformation methods, phony science think tanks, buying airtime and journalism access to promote untruths which are injurious to the world, while bumping their bottom line a little bit. And buying and selling US senators as a tool to stifle their competition and critics in very harsh ways. I guess there ought to be a law against doing that.....

 

[kennyp2339]

For myself, just one guy with only a few investments in the market, burns wood to save money from buying oil, owns a diesel truck, pre-virus rational thinking - big oil cant stop them, the world needs them to survive our way of life, climate change is happening, but it might just be a earth cycle thing. Last 7 weeks during the virus - wow look at those stars, the sky is so vibrant, the air seems much cleaner and clearer, even during the day things seem much more crisp, and that's only after 7 weeks of down turn. Hopefully the good that comes out of the pandemic is cleaner air, I'm now looking into sustainable green energies and starting to form a more positive opinion on the messages of what activists have been saying about fossil fuels and clean air. Older wood stoves that belch smoke - I'm not so worried, the oil fired burners for peaker power plants, or coal fired burners for power plants - I want them gone and replaced with something better, like nuclear for the flat baseline energy needs and solar, wind, renewable for peakers.