Exxon Pays Tillerson Shares into Blind Trust

ExxonMobil’s board has reached an agreement with former chairman and CEO Rex Tillerson to sever all ties with the company to comply with conflict-of-interest requirements associated with his nomination as US secretary of state three weeks ago.

If Tillerson is confirmed as secretary of state, the value of more than 2 million deferred Exxon shares that he would have received over the next ten years will be transferred to an independently managed trust and the Exxon share awards would be cancelled.

Exxon shares are currently worth about $90.90 each, which means the 2mn holding is currently worth some $182mn.

The trust would be prohibited from investing in Exxon and the trustee would manage the assets consistent with government ethics rules. Payments to Tillerson from the trust would be subject to the same ten-year schedule that the cancelled awards would have had if they had continued in place.

Rex Tillerson was nominated US Secretary of State last month by President-elect Donald Trump (Photo credit: ExxonMobil)

Tillerson would also surrender entitlement to more than $4.1mn in cash bonuses, scheduled to pay out over the next three years, and other benefits such as retiree medical benefits.

The one-time payment to the trust would be equal to the value of Tillerson’s cancelled shares based on a volume-weighted average price per share. Consistent with guidance from federal ethics regulators, the value would be reduced by about $3mn.

The trust would include forfeiture rules that would prohibit Tillerson from working in the oil and/or gas industry during the ten-year payout period.

The trust rules dictate that in the event of forfeiture, the money would be distributed to one or more charities involved in fighting poverty or disease in the developing world that neither Tillerson nor Exxon could select.

Exxon said the net effect of the agreement is a reduction of some $7mn in compensation owed to Tillerson, who retired December 31 after more than 40 years of service with the company. His successor is Darren Woods who was already on the Exxon board.

Separate from the agreement with Exxon, Tillerson has also committed to the State Department that, if confirmed, he would sell the more than 600,000 Exxon shares he currently owns.

The Exxon statement did not detail Tillerson’s final year’s salary or his estimated final retirement package. However, the Wall Street Journal reported in April that his total remuneration for 2015 was $27.3mn, down 18% from the previous year. It peaked at $40.5mn in 2012. The oil price crashed in mid 2014.

Tillerson’s predecessor, Lee Raymond, left ExxonMobil in 2006 with a total retirement package worth some $400mn.

Mark Smedley