Private Empire: ExxonMobil and American Power (44 page)

After the 1999 merger, ExxonMobil had jockeyed with Microsoft and General Electric for the status of largest American company by total stock market value, but as Raymond retired, ExxonMobil moved into the top spot. Walmart earned more revenue in some years, but as a retailer, its profit margins were relatively thin. ExxonMobil generated more profit than any other company in the world. The corporation had 83,700 employees and 2.5 million individual shareholders.
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If that community of interest was defined as ExxonMobil’s “population,” it was about the same size as tiny, oil-rich Kuwait’s, yet the latter’s national income in 2005 was only about $100 billion, or less than a third of ExxonMobil’s revenue. ExxonMobil citizenship, then, particularly for senior managers and executives with lucrative restricted stock packages, had become highly rewarding, even if it involved constraints on personal freedom that a Kuwaiti subject might also recognize. Even the corporation’s lower-paid employees enjoyed wages, retirement security, and income growth unavailable to the vast majority of comparable American workers.

After he formally retired, as part of a $1 million per year transition consultancy, Raymond embarked with his wife, Charlene, on an ExxonMobil Challenger jet from Dallas Love Field to Paris. For almost a month, the Raymonds circled the world on a farewell tour, touching down in Norway, London, and Singapore before they cleared customs and reentered the United States in Hawaii. They stayed a few days on the Big Island. Raymond’s journey from Watertown, South Dakota, was over, and his family was now wealthy beyond imagination. Following formulas for executive retirements the corporation had previously established, and taking into account the compensation he had deferred over the course of his forty-year career, ExxonMobil’s board of directors awarded Lee Raymond pension benefits as a lump sum of $98 million, restricted shares worth $183 million, stock options with a potential value of $70 million, the $1 million consultancy, and reimbursement of his country club fees. Altogether, his retirement package was worth just under $400 million.
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PART TWO

THE RISK CYCLE

Fifteen

“On My Honor”

K
en Cohen’s public affairs team in Irving crafted a formal transition plan to shape outside perceptions of ExxonMobil’s change at the top. The essential message was continuity. “Clearly the financial model was working,” an executive involved said later. “You do not change a winning game.” The new Management Committee sought to reassure Wall Street that the corporation’s scale of profit making would continue, and that Rex Tillerson was not arriving with grand new ideas about how the business should be restructured. When he met analysts in March 2006 for the first time as chief executive, Tillerson recited the doctrine of 2030 and pledged that ExxonMobil’s strategy “remains unchanged.”

Tillerson sought nonetheless to reset the corporation’s communications with its opponents and the public. “It’s true that I wanted to change the tone of ExxonMobil and of our industry,” he said later. He felt the corporation was “misunderstood” and that he “owed it to the industry” to try to reduce some of the friction ExxonMobil generated. “The industry was so good to me, [but it] was given a bum rap,” and it was in his power to correct some of that image problem, he believed. “Let me assure you we never set out for the company to be public enemy number one,” he said. At issue was more than just feel-good public relations strategy. By choosing Tillerson over Ed Galante, the board and Lee Raymond had handed the corporation back to an upstream executive with a presumed gift for forging international partnerships with oil and gas owners from Moscow to Luanda, at a time when a question hanging over the company and the industry was its long-term ability to replace reserves. Raymond had demanded that the world deal with ExxonMobil on its own terms—and had often succeeded. But the unilateralism by which he steered his private empire mirrored an American hubristic age that was fading by 2006, and the oil and gas properties on which ExxonMobil profits mainly relied as Tillerson took charge had mostly been acquired during the 1990s or earlier. To win new oil and gas access in what the author Fareed Zakaria would soon call a “post-American world,” Tillerson might benefit from a collaborative touch. At the same time, Cohen’s department worked as much as possible to depersonalize the leadership transition. They certainly did not want to promote some sort of cult of corporate leadership centered on the new man in charge.
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It would not have been an easy cult to construct in any event. Tillerson had grown up mainly in small towns in Texas and Oklahoma, the son of a midlevel, modestly compensated professional organizer at the Boy Scouts of America. His mother was a devout but independent-minded Christian who volunteered as a social worker on ambulance runs.
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From these influences Tillerson grew up to identify himself as a lifelong Eagle Scout. He frequently cited the Scout Oath and Scout Law in corporate speeches. (The Oath: “On my honor I will do my best to do my duty to God and my country and to obey the Scout Law; to help other people at all times; to keep myself physically strong, mentally awake, and morally straight.” The Law: “A Scout is trustworthy, loyal, helpful, friendly, courteous, kind, obedient, cheerful, thrifty, brave, clean, and reverent.”) Boy Scout language soon found its way into ExxonMobil promotional materials, to describe the corporation’s values and ambitions.

Apart from a divorce and remarriage during his early career, there was little evidence of complexity in Tillerson’s life. He was fifty-three when he succeeded Raymond: Exxon was the only company for which he had worked after college. He did not possess the fierce intellectual independence (or the sometimes gratuitous meanness) of Lee Raymond. If Tillerson were to match Raymond’s financial achievements as ExxonMobil’s leader, however, he would have to learn to think for himself. If he were to successfully manage adversaries that ranged from environmentalist campaigners to sub-Saharan insurgents, he would also have to grapple with the world as it really was, not as the Boy Scouts wished it would become.

Tillerson’s parents both grew up in Wichita Falls (motto: “The City That Faith Built”), a North Texas plains town that continually reckoned with tornadoes and had a population of just more than one hundred thousand in 1952, when Rex was born. On the day of his birth, the
Wichita Daily Times
happened to publish its annual oil edition, which contained about two dozen stories with headlines such as “U.S. Oil Production Reaches New Record.” (A public service ad in the edition observed, “There Is No Security in Foreign Oil for the Defense of Our Own Borders.”) The city had been an oil boomtown in the 1920s and 1930s, after the discovery of the giant Electra oil field. By the fifties and sixties, its oil revenue was declining, and the town was struggling to diversify. The Tillersons lived in a modest one-story house in a working-class neighborhood called Faith Village that had been erected for returning veterans. When Rex was six, his father, Bobby Joe, who had been a bakery salesman, took a job that would change the family’s destiny: He became assistant district executive for the Boy Scouts of America’s Wichita Falls Council. The family moved several times during Rex’s childhood before Bobby Joe took a job in the Sam Houston Council, one of the country’s largest, and settled in Huntsville, Texas.
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The focus of Rex Tillerson’s young life was scouting, and he diligently pursued the public service and other tasks required to earn his Eagle Scout rank. In 1970, he left Huntsville to enroll at the University of Texas at Austin. He was by his own account a “slightly above average” civil engineering student. He evaded the city’s blossoming music counterculture and served instead as a bass drummer in the Longhorn marching band. He joined Kappa Kappa Psi, which was less a fraternity than a service organization within the university band. It nonetheless had an initiation ritual in which new recruits would be “taken on a ride.” The euphemism described a rule-constrained kidnapping regimen. During a prescribed window of time, fraternity pledges could be seized unexpectedly, often in the middle of the night, bundled into a car or truck, driven into the countryside, often stripped of all clothing, and abandoned. A mercy rule required the kidnappers to provide each victim with at least a dime to make a phone call. Another rule required that victims be kidnapped in pairs, so no one would be abandoned alone.

Faith in free enterprise also influenced Tillerson; he later listed his favorite book as
Atlas Shrugged,
Ayn Rand’s 1957 philosophical novel that became a touchstone for diverse conservatives, libertarians, and advocates for unfettered capitalism.
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Exxon recruited him when he was a senior at U.T. He had offers from two corporations and turned down a higher salary to work for the Standard Oil successor. His intuition that he would fit in proved correct. Tillerson worked initially in south Texas and passed successfully through the corporation’s vetting for potential managers and leaders; after that, he began the typical eighteen-month rotations and reassignments that Exxon employed to groom future executives.

About two years out of college, Tillerson married a Huntsville High band mate, Jamie Lee Henry; they soon had twin boys. As Tillerson’s career took off, however, his marriage fell apart. By 1983, Jamie Lee had returned to Huntsville with the twins, and Rex had married a divorced mother of one, Renda House. In 1988, Rex and Renda had their own child, another son. They shared a passion for horses and settled eventually in Argyle, Texas, away from the Dallas social scene and closer to Fort Worth.

Renda was an effusive cowgirl, a barrel racer at rodeos. She continued to race competitively well into middle age. The Tillersons became leaders and intimate members of the Texas barrel-racing community. They also became active in Fort Worth’s world of cutting horses and attended auctions to bid tens of thousands of dollars for seasoned competitors. They bought a ranch in Kamay, about a dozen miles south of Wichita Falls. They called it Bar RR Ranches (for Rex and Renda). As Tillerson rose into ExxonMobil’s Management Committee and enjoyed more and more of the wealth and privilege that came with success at the corporation, they also purchased a $2.5 million lake house in the Hill Country, outside of Austin. Texas was his world; nothing but the demands of business travel could persuade him to leave. Renda served on the board of the National Cowgirl Museum, and the couple gave generously to Republican office seekers in the state, often to middle-of-the-road conservatives such as Kay Bailey Hutchison, as well as to Rex’s alma mater in Austin.
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Increasingly, Tillerson gave over much of his extracurricular charity work to the Boy Scouts of America. He served on the boards of the Dallas chapter and the national organization. Tillerson had never lived outside the United States—even when working closely on the Russian operations, he had been based in Houston—and he had never served on the board of a global corporation besides ExxonMobil, as Raymond had done at J.P. Morgan. If his emphasis on scouting seemed parochial to some within ExxonMobil, Tillerson seemed to regard it as a constructive, universal moral and management system. Within ExxonMobil, he implemented a program of medals or coins for outstanding performance that employees understood to be modeled on the Boy Scouts’ merit badge program. Employees with exceptional ability or motivation could meet certain criteria and obtain a full collection of ExxonMobil medals, which were minted in the style of the coins handed out to troops by military commanders. There was a medal available for team leadership, another for teamwork, one for safety performance, and one for technical excellence, which was particularly difficult to obtain. Even managers who laughed and scoffed ironically at Tillerson’s merit badge–inspired regime competed to complete their collection, either because they were naturally competitive and couldn’t help themselves or because they thought it would enhance their career prospects.
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T
illerson asked Ken Cohen to remain in his role overseeing all public policy and outside communication strategies. The decision to keep Cohen in place spoke to the consensus at the top of the company that ExxonMobil had no profound public affairs crisis to solve, only a need to change the tone of its messaging. Tillerson did recognize that ExxonMobil had backed itself into a corner on the climate question and that the arrival of a new chief executive presented an opportunity to chart some sort of new direction—at a minimum in the way the corporation characterized climate change, and perhaps in its lobbying and advocacy positions as well. Yet he viscerally resisted concessions to the corporation’s campaigning opponents. The message he heard from environmentalists as he came to power at ExxonMobil was, he said, “Get in line. You’re outta line right now, get in line.”
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Instinctively, he refused. Privately, he ordered a review of the issues.

During 2006, he formed a small interdisciplinary group at headquarters, of which Ken Cohen was a member, to review ExxonMobil’s climate policy, think tank funding, and public affairs strategy. The group included economists, scientists, and corporate planners. They intensively analyzed alternatives to the climate policy positions ExxonMobil had articulated and supported under Lee Raymond. One manager who participated saw the exercise as an effort by Tillerson to carefully reset the corporation’s profile on climate positions so that it would be more sustainable and less exposed. The review, conducted in secret and rolled out only to selected executives upon completion, included a case-by-case evaluation of think tanks and advocacy organizations funded by ExxonMobil and active on climate issues. The committee’s work was deliberate; it would be late 2006 before it produced firm conclusions about how to gradually unveil a modified position on both the validity of climate science and the implications of that science for public policy. “We just looked at it,” said another participant. “We took each option and said, ‘Okay,’ and analyzed each one.” ExxonMobil was well known in the oil industry for passing on an oil field auction if the timeline did not align with its by-the-book evaluation process; the same was true for public policy questions.
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The Tillerson committee’s assignment was tricky because it involved legal risks. Greenpeace, the Union of Concerned Scientists, and other campaigners had accused ExxonMobil of replaying the science-manipulating techniques of tobacco companies. The comparison itself served as a warning: To achieve their goals, environmental groups might, as antitobacco activists had done, file class-action tort litigation, accusing ExxonMobil of fraudulent efforts to suppress greenhouse gas regulations. It was hard to imagine how ExxonMobil could ever be as badly affected by lawsuits over global warming as tobacco companies had been by suits over smoking’s dangers, but Cohen and other corporate lawyers could not afford to be complacent. (The tobacco companies had initially regarded their own class-action suits as an immaterial nuisance and had been proven wrong.) One of the challenges facing Tillerson’s interdisciplinary climate team, then, was to reposition ExxonMobil’s arguments about warming to more fully account for consensus scientific opinion, without admitting that any of the corporation’s previous positions had been mistaken, for that might open a door to lawsuits.

This was doubly difficult because climate scientists themselves issued stronger and stronger warnings after 2005—these included scientists funded by ExxonMobil. The scientists who refined and perfected the Global System Model at the Massachusetts Institute of Technology, for example, reported steadily more dire forecasts when compared with those Lee Raymond had earlier cited to support his arguments about such forecasting. In 2003, the Global System had issued a median prediction of a 2.4-degree-Centigrade rise in global temperatures by 2100; a few years later, that number had more than doubled.
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