Engine No. 1 Activist Presentation Deck
Disconnect results in part from compensation plans
that can reward volumes over sustainable value
ā
Limited disclosure regarding project returns and lack of cost & balance sheet
focused metrics limit accountability for cost overruns or overly optimistic price
projections on projects described as "advantaged" even as overall returns decline
Peers have more objective disclosures that are reported annually, such as
Shell's "Project delivery on schedule/ budget," Total's "Pre-dividend organic
cash breakeven & Gearing Ratio," and BP's "Production costs per barrel,
Refining availability, and Cash Cost Reduction"
ExxonMobil's compensation plan can also reward industry "outperformance"
even if the entire industry destroys value, which can encourage capex spending
even where shareholders would be better served by increased returns of capital
or investments to strengthen the business. ROCE and TSR are compared to
industry averages without reference to the overall market or cost of capital
BP uses absolute ROACE and Total uses absolute ROE as targets,
and Chevron and ConocoPhillips include S&P500 Total Return Index
as a peer for TSR
Source: Company proxy statements. ExxonMobil's performance metrics are Safety and Operation Integrity, ROCE,
Cash Flow from Operations & Asset Sales, and TSR.
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