EXXONMOBIL RECENTLY ANNOUNCED 2015 earnings of $16.2 billion, just half of 2014’s level. That news sent me scurrying around the Internet in search of a decade-old article I vaguely recalled.
At year-end 2005, Lee R. Raymond retired as ExxonMobil’s chairman and chief executive after 13 years at the helm. The following April, The New York Times reported that Raymond earned $686 million during that stretch, equal to $144,573 a day. The article noted that, during his tenure, ExxonMobil’s net income had soared from $4.8 billion in 1992 to $36.1 billion in 2005. But it also noted that “some corporate governance experts argue that much of Mr. Raymond’s pay came from easy profits generated by skyrocketing oil prices,” which roughly tripled during that 13-year stretch.
Unfair criticism? Consider what’s happened since. After Raymond’s retirement, ExxonMobil’s net income continued to climb, hitting a peak of $45.2 billion in 2008. Earnings have been choppy since, falling to $19.3 billion in 2009 and recovering to $44.9 billion in 2012, just below 2008’s lofty level. It’s been downhill ever since, as evidenced by 2015’s grim results.
Here’s a not-so-surprising insight: The trajectory of ExxonMobil’s net income pretty closely mirrors the trajectory of oil prices. Oil peaked in mid-2008, nosedived from there through early 2009, recovered in the years that followed and then collapsed again beginning mid-2014.
On Wall Street, investors are told, “don’t confuse brains with a bull market.” Maybe compensation committees at natural resources companies need a similar mantra: “Don’t confuse CEO brilliance with booming commodity prices.”