Well, the reviews are in:

"Lavish"
– The Independent.

"Shameful 
 – Sen. Byron Dorgon (D-ND).

"Obscene"
– Congressman Rick Renzi (R-AZ).

Even DaimlerChrysler – the company that brings us the Dodge Ram (14 mpg city/18 highway) and Jeep Liberty (17/23) – got into the act. Jason Vines, the automaker’s vice president of communications, reportedly railed against Big Oil "greed" in a blog entry posted April 10.

What’s got hackles up from Houston to Halifax is, of course, the news that Lee Raymond, outgoing CEO of ExxonMobil Corporation, exited with a retirement package valued at some $400 million. This at a time when ExxonMobil posted America’s largest-ever yearly profit: $36 billion. And at a time when American drivers are sucking it up (literally) with pump prices topping $3 and even $4 by the end of April.

In this kind of environment, can anyone in the energy industry doubt that Raymond’s Lotto-like personal windfall would spark public resentment? And can any doubt that politicians are quick to jump on the news for some fingerwagging?

The bigger question, however, is this: Should we be criticizing the package or congratulating the board for rewarding someone truly deserving in the face of such assured criticism?

The much-reported pension figure is a combination of salary, bonuses and stock options, "some of which are not vested for 10 years," according to the Financial Post. Raymond, the article adds, took his pension as a lump sum of nearly $100 million.

So even if ExxonMobil’s former CEO will not literally see $400 million, he has become a figurehead representing all that average Americans dislike and distrust about large corporations.

As the pundits check in with their outrage, it may be a prudent time to examine why ExxonMobil’s board of directors stitched this most golden of parachutes:

He did the job. Lee Raymond’s tenure at Exxon began in 1963 as a production research engineer. Over the decades he grew with the company, heading up operations in Venezuela and Aruba before becoming president of Exxon Nuclear Company in 1979. Raymond’s executive career track led him to be named president of Exxon in 1987.

From the beginning of his tenure as CEO, Raymond steered the company through rough times – the Exxon Valdez oil spill was still hot news – and fluctuating energy market. Raymond is best known for cost cutting, but he also strategically led the company with moves into Asia (Qatar, Singapore, Southeast Asia and consolidation in Japan), and eliminating unsuccessful Exxon businesses including coal and marine business units. When oil sold for about $10 per barrel, Raymond managed to configure the largest merger in the oil and gas business and built the juggernaut called ExxonMobil. When it became fashionable to downplay our reliance on hydrocarbons, Raymond called the Kyoto Protocol a bad idea. He successfully steered ExxonMobil forward with a consistent hand while others reveled in the boom-and-bust cycles of the industry. He never apologized for representing an oil and gas company.

In this sense, Raymond follows in the well-compensated footsteps of other American executives. According to figures supplied by executive-compensation expert Graef Crystal, big-time retirement payouts are the norm beyond the oil industry:

• Citigroup CEO Sandy Weill: about $1 billion in stock options

• Disney's ex-honcho Michael Eisner: shown the door with $1 billion in stock options

Public relations also enters into the picture. Bill Gates, who runs the monopolistic Microsoft and has a net worth of $50 billion, is hailed as an all-American success story, yet has the cost of his Windows software declined over the past decade? In Gates’ defense, of course, is his long record of charitable efforts. Should Raymond be obligated to match that kind of philanthropy? And if he does, must he rely on the PR machine to grant him good-guy status?

He did it legally. In a post-Enron world, having to point out that someone made a fortune by not breaking the law and not fleecing investors has, regrettably, become a required disclosure. In a country where jailbird Martha Stewart can return to society to a $900,000 annual salary and little more consequence than some late-night comedy potshots, should Raymond be so widely vilified?

He did it well. That’s not something all of Raymond’s fellow chief executives can claim. In an April 26 MSN posting, financial writer Michael Brush named the five "lousy CEOs who get fabulous pay." That group includes Henry McKinnell of Pfizer. McKinnell pocketed $78 million over five years while Pfizer shares plunged 35 percent. Merck’s Raymond Gilmartin steered his company to a 41 percent loss and took home $54 million for his troubles. AT&T’s Edward Whitacre "earned" $85 million while delivering a 40 percent loss to shareholders over five years. The severance of HP’s ousted Carly Fiorina totaled $42.5 million.

When he assumed a leadership role in 1987 ExxonMobil stock was worth about $10.80 with a split ratio of 8:1. Today the shares trade for $63.00. In the face of his own backlash, the former CEO continued to pull no punches. Here’s what Raymond said at an April 19 address at Columbia University: "Back in 1998, when prices went down to $10, I don’t recall anybody in Washington calling me up and saying, ‘What can we do to help?’ But I didn’t want them to be calling up. …It’s our job to manage the risk. I am not interested in hearing from them when prices are at $10, and I am not interested in hearing from [politicians] when prices are $40 or $50."

While this does nothing to endear Raymond to those who criticize his compensation, nor does it help the energy industry’s odds of avoiding the penalties of increased taxation, he makes a good point. He carried the mantel during some very tough times.

Obviously, a company has every right to compensate its executives in any way it deems appropriate. In ExxonMobil’s case, the $400 million set by the board of directors was, in the company’s view, "appropriately positioned relative to CEOs of U.S.-based integrated oil companies and other major U.S.-based corporations, particularly in view of the long-term performance of the company and the substantial experience and expertise that Mr. Raymond has brought to the job."

Arthur Levitt, former chairman of the Securities and Exchange Commission, noted in a Bloomberg News release that ExxonMobil was taking a chance with such a pricey package. "This is bound to inflame investor passion," said Levitt. "Evidently, Raymond did a first-rate job. Why do they want to hurt his legacy and his image by creating a compensation package that is so skewed and so unnecessary?"

On the other hand, Pearl Meyer, senior managing partner at Steven Hall & Partners, which advises corporate boards on executive compensation, told the New York Times that Raymond’s pension was fair. He is "reaping the results of a 43-year career during which he led the organization through difficult times as well as some good years."

In a time when other executives receive huge sums of money with no regard to performance, Lee Raymond is another example of how the energy industry cannot get a break. The shareholders of ExxonMobil should be pleased that he was put at the lead of the company, as the benefit to them is obvious. If anyone can find fault with Raymond, it is that he did not pander to public opinion or put his personal image or that of the industry above his main priority: steering ExxonMobil and making sure the company could maintain itself over time.

The market capitalization of ExxonMobil is now $375 billion, and Raymond’s $400 million pension represents a small fraction of the value the CEO brought to the table under his watch. Further, by reducing his pension to the lump sum of $100 million, he saved his shareholders $300 million of this investment – indicating that once again, Raymond was looking out for shareholders’ interests.

However, in the delivery even this positive motive is seen as selfish. From the investor’s perspective, one assumes that paying for performance instead of failure is a refreshing change. From the media perspective, this gives us a lot to talk about. From the consumer’s perspective, ExxonMobil is a healthy company that competes in the global arena and might even help to keep prices down. This is a win-win situation.

© 2006 Richard R. Loomis and Susan Salter
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