By Bradley Olson and Lynn Cook
President-elect Donald Trump's selection of Rex Tillerson as his
secretary of state complicates the challenges facing Exxon Mobil
Corp., which now must speed a transition to a new leader while
managing the intense scrutiny Mr. Tillerson's new public role could
bring to the oil and gas giant.
While the U.S. hasn't seen a chief executive as powerful as Mr.
Tillerson go straight from the boardroom to a presidential cabinet
in decades, the election in 2000 of former Vice President Dick
Cheney, a former Halliburton Co. chief executive, provides a recent
parallel.
Halliburton became a political lightning rod after the U.S.-led
invasion of Iraq in 2003, when the company won billions in
contracts to work Iraq oil fields and support the U.S. military. A
Halliburton spokeswoman declined to comment Tuesday.
Exxon could face similar tests as Mr. Tillerson leads a Trump
diplomatic team that will make decisions on such foreign policy
issues as sanctions on Russia, human-rights abuses in resource-rich
countries and climate change, experts said.
Although Exxon hasn't formally announced a successor to Mr.
Tillerson, Darren Woods, 51 years old, emerged as Mr. Tillerson's
heir apparent last December when he was appointed president of the
company and took a seat on the board.
Succession planning is serious business at Exxon, and Mr.
Tillerson, chairman and chief executive since 2006, is supposed to
retire in March when he turns 65, according to company rules.
"The board of directors of Exxon Mobil Corporation congratulates
Rex W. Tillerson, chairman and chief executive officer, on his
nomination for the position of U.S. secretary of state," Suzanne
McCarron, Exxon's vice president of public and government affairs,
said Tuesday. "The board will be meeting shortly regarding
transition."
Exxon declined further comment.
Far from worried, investors have reacted with glee to news of
Mr. Tillerson's secretary of state candidacy. Exxon shares rose 2%
to $92.80 Tuesday as the president-elect officially announced Mr.
Tillerson as his choice.
"This won't faze the company in the least as their succession
planning is among the most rigorous in the industry," said Les
Csorba, an executive recruiter at Heidrick & Struggles
International Inc. in Houston who also helped manage national
security appointments in the administration of President George
H.W. Bush.
The appointment of a major American chief executive to a cabinet
post isn't without precedent, according to historians, who point to
former Secretary of Defense Robert McNamara, a former president of
Ford Motor Co., and former Secretary of Defense Charles Wilson, a
former chief executive of General Motors Co.
Mr. Wilson's stock holdings in GM became a point of conflict
during confirmation hearings in 1953, during which he famously told
members of Congress he hadn't seen any conflict because he thought
that "what was good for our country was good for General Motors,
and vice versa."
The business background of those appointees was less
controversial because American corporations occupied a different
place in American society at that time.
"McNamara himself, as the principal architect of an unsuccessful
Vietnam War strategy, may have elevated public and political
skepticism about CEOs in Cabinet positions," said Donald Hafner, a
professor of history at Boston College.
Exxon, by contrast, now confronts some of the biggest political
and business obstacles it has faced since its origins as part of
the 1911 breakup of John D. Rockefeller's Standard Oil Co.
Exxon has struggled to find enough new oil and gas after three
big bets made by Mr. Tillerson have failed thus far to deliver on
their promise. It suffered a serious setback when the U.S. and its
allies imposed economic sanctions on Russia in 2014, after Mr.
Tillerson brokered a major Arctic drilling deal with the country in
2011.
The company also poured billions into Canada's oil sands over
the last decade but in October told investors it recognized as many
as 4.6 billion barrels of future reserves, primarily in Canada, may
no longer be profitable to produce at today's prices.
And it got into the shale drilling boom late with a purchase of
XTO Energy Inc. valued at $31 billion when it was announced in
2009.
Earlier this year, Exxon lost the sterling triple-A credit
rating from Standard & Poor's it had held since before the
Great Depression. Last year, it failed to replace all of the oil
and gas reserves that it produced for the first time in more than
two decades.
If the Trump administration lifts sanctions on Russia and Exxon
reboots its energy partnership with Rosneft, the company stands to
reap billions in profits.
Back in the U.S., however, Exxon is embroiled in several
disputes, including an investigation opened earlier this year by
the U.S. Securities and Exchange Commission over how Exxon accounts
for its oil and gas reserves and communicates with investors about
climate change.
Exxon is also in a protracted legal battle with state attorneys
general in New York, Massachusetts and elsewhere over
investigations that Democratic officials have started into Exxon's
history of climate research and how it discloses information about
the business risk of climate change in its reports to shareholders
and regulators.
While Mr. Woods's expected ascension to the chief executive role
isn't yet official, and still must be approved by the company's
board, Exxon has consistently promoted from within its ranks,
elevating future leaders to the role of president before they take
over.
Mr. Woods is a 24-year Exxon employee with an engineering degree
from Texas A&M University. He rose up the ranks in the oil
giant's vast refining and chemical business. Mr. Tillerson had
moved up through the company's exploration and oil-pumping
side.
While executives at the company's headquarters in Irving, Texas
take pride in taking a long view of their businesses, Mr.
Tillerson's successor will have to steer Exxon through short-term
headwinds as fierce as any since the Exxon Valdez oil spill in
Alaska in 1989.
Mr. Woods couldn't be reached for comment Tuesday.
--Christopher M. Matthews contributed to this article.
Corrections & Amplifications: Rex Tillerson is the CEO of
Exxon Mobil. A caption in an earlier version of this article
incorrectly spelled the company name as Exxon Mobile. (Dec. 13)
Write to Bradley Olson at Bradley.Olson@wsj.com and Lynn Cook at
lynn.cook@wsj.com
(END) Dow Jones Newswires
December 14, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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