Exxon Board’s Turnover May Bring Fresh Views
Originally posted in The Wall Street Journal on June 6, 2008.
The old guard is starting to change at the oil and natural-gas behemoth Exxon Mobil Corp., as newcomers begin to succeed long-serving directors who have reached retirement age.
Though gradual — only two of 12 directors are new this year — the turnover may ultimately bring fresh viewpoints to a board that critics have contended is controlled by management at a company widely regarded as highly successful but extremely insular.
Corporate-governance activists and members of the Rockefeller family launched an unsuccessful proxy fight this year to try to get Exxon to create an independent chairman, contending that the company needed outside perspective on issues like the future of fossil fuels.
While those efforts failed, the company board is changing nevertheless, because a third of the board hit what is supposed to be a mandatory retirement age — 72 — in the past year.
Two of those directors departed, but the board asked two of the 72-year-olds to stay: Walter Shipley, the former chairman of Chase Manhattan Corp., and James R. Houghton, chairman emeritus of Corning Inc.
They were asked to remain “to help ensure an orderly transition and provide for additional continuity,” said board Chairman and Chief Executive Officer Rex Tillerson in a written response to questions.
An Exxon spokesman said he didn’t know when they would depart, and members of the board didn’t respond to requests for comment or referred questions to Exxon management.
Fully half of Exxon’s directors, including Mr. Tillerson, have been on the board for four years or less. The average tenure of the independent board members is seven years, the lowest level since before the merger of Exxon and Mobil Oil.
While it isn’t clear whether the newcomers will push for any substantial strategy changes, the sheer number of new members is likely to bring new perspectives.
“On a typical board, if you have a new member once in a blue moon, that member tends not to be able to move the board,” said Stephen Davis, a project director at the Yale University Millstein Center for Corporate Governance and Performance. “There is not enough clout to re-examine entrenched assumptions. But if you have a critical mass, all bets are off.”
Some of the relative newcomers are clearly already powerful. William George, a Harvard University professor who joined the board in 2005, recently became chair of the compensation committee. This makes him one of two board members who alternates as the presiding director (the other is Mr. Shipley).
Mr. George succeeds William R. Howell, the former chief executive of J.C. Penney Co., who turned 72 years old this year and retired from the board after 25 years.
Asked if he thought the new directors would take a fresh look at issues before the company, Mr. Tillerson replied, “Directors are called upon at all times to use their expertise and experience in all matters relating to Board affairs.”
One change being weighed by the board is how many employees should serve as directors. Traditionally, the Exxon board has had two employee directors, but the retirement of Senior Vice President J. Stephen Simon this year triggered his departure from the board, leaving only Mr. Tillerson, the CEO.
The board is currently discussing whether to stay with a single employee director, which would put Exxon in step with the majority of U.S. corporations.