Status Update

May 8, 2020

Slides

Welcome to ExxonMobil's shareholder webcast. This webcast is being recorded. Your host today will be Mr. Stephen Littleton, Vice President, Investor Relations and Secretary and Ms. Ingo Van Kopendal, Compensation, Benefits and Policies Manager. The format of today's call will include prepared remarks from Mr. Littleton and Ms. Van Kopendal, followed by a question and answer session. At this time, I will turn the webcast over to Mr. Wilson. Please go ahead, sir. Good morning, everyone, and welcome to today's shareholder webcast. This is our 8th year of hosting the webcast, and we welcome the opportunity to engage with you again to share our perspectives on the items proposed in our proxy statement and to gain your input on perspectives of our company. This webcast is an important part of our broader shareholder outreach, which occurs throughout the year. But first, let me take a moment to express our sincere appreciation for the effort of first responders, medical professionals and essential service workers around the world who are helping to manage the effects of the pandemic. Our thoughts are with all of those personally affected by COVID-nineteen. From all of us at XM Mobile, we are proud to assist where we can and we are committed to providing the energy that is essential for economic recovery worldwide. Over the next hour, we will cover 2 main topics. First, Inge Bankofenor, Manager Compensation Benefit Plans and Policies, will cover key highlights of ExxonMobil's executive compensation program. 2nd, I will review the 6 shareholder proposals for both in our proxy statement. We know you might be engaging with numerous companies during this time of the year, so we thank you for taking the time to join us this morning. We'll leave time today at the end of our prepared remarks for questions. Please feel free to submit your questions on the content of this presentation in the online portal at any time during this session. Please note the cautionary statement on this slide, Compensation related footnote and definitions are included at the end of this presentation. We strongly believe ongoing engagement with our shareholders is vitally important and keeping shareholders informed on relevant business matters is a priority for us. We also benefit greatly from engagement as it provides the Board and management with your important perspectives. These perspectives inform the Board and factor into Board oversight of the company. For example, this year in response to shareholder input, the Board made 2 significant governance changes for ExxonMobil. First, the Board significantly broadened the oversight authorities of the Independent Lead Director, resulting in enhanced oversight of company management. 2nd, the Board adopted an additional new right for shareholders to call a special meeting upon agreement of the holders of 15% or more of outstanding shares with no need for a court petition. Both are great examples of responsive changes by our Board We'll discuss both in greater detail in a few minutes. The company connects with shareholders through a variety of Our engagement efforts on environmental Our engagement efforts on environmental, social and governance issues have more than doubled over the last few years. The Board also has established procedures for shareholders to communicate with individual directors, including the Lead Director, Board Committee members or the non employee directors of the group. We included information about the process you can use to communicate with the directors on Page 19 of our proxy statement. We welcome and value your input. It is taken seriously by the company and the Board and has led to responsive changes by our Board to shape the future of ExxonMobil. I will now turn it over to Ingo, who will review our executive compensation program. Thank you, Stephen, and thank you to everyone on the call today for your interest. I appreciate that our time today is limited, so I will focus the discussion on a brief overview of our compensation program, more specifically, the key design features of our performance share and bonus program, the process used by the compensation committee to determine CEO pay in 2019 and the considerations that drove the outcome of that process for the most recent cycle. I will also make reference to additional information that can be found in the compensation discussion and analysis in our 2020 proxy statement, which begins on page 31. As I do this, I would like to underscore 3 key messages, each of which we will review in greater detail on subsequent slides. 1st, our compensation program is aligned with our business model and long term shareholder returns. This is most evident in our performance share program, which represents the majority of our executives' overall pay and is characterized by uniquely long restriction periods. 2nd, both our performance share and bonus programs deliver executive pay that is highly performance based and tied to company performance. And 3rd, in delivering market competitive pay, the compensation committee considers company and individual performance, experience and the results of annual benchmarking. The compensation committee continuously evaluates the effectiveness and competitiveness of the executive compensation program and continues to support the overall design of the compensation program for its alignment with ExxonMobil's business model and the returns of our shareholders over the long term. Our strong governance practices further strengthen the design of the program and discourage executives from taking inappropriate risk. More details on our governance practices can be found on Pages 4647 of our proxy statement. While the design of our compensation program has not changed, we have enhanced our disclosure to respond to the valuable insights gained from ongoing engagements with shareholders and proxy advisors. Most notably, we consolidated the former executive compensation overview brochure and the CD and A into one document, which allows for a more holistic view of the program and connects design intent, key program features and 2019 results. We further clarified the process for determining compensation to include all pay components and clearly articulate performance dimensions for each pay component. And we provided additional specificity on how our compensation committees use company and individual performance and experience. To the first point, alignment with our business model and the experience of our long term shareholders. Our business is a depletion business and involves continual and large investments over long periods of time that require our executives to maintain a long term view when making business decisions. This long term view also underpins our philosophy on teled development, intended to enable broad development and a deep understanding of the business across the business cycle. The performance share program makes up over 70% of CEO direct compensation and is marked by uniquely long restriction periods that place a significant portion of executive pay at risk well into retirement and through the commodity price cycle. This feature enables long term decision making and aligns the experience of our executives with that of our long term shareholders. The blue chart at the bottom of this slide illustrates how ExxonMobil's performance share program with its long restriction periods is a better fit for our business model than a shorter term program design. While every project net cash flow curve transitions from investment to profitability at a different point in time, in general, this inflection point materializes over a longer period of time. For example, take 2 of our primary upstream projects, Papua New Guinea and Guyana. While initial investments started in 2,004 and 2,009 respectively, both projects did not start up production until 10 years later. The longer bar at the top of the chart represents ExxonMobil's performance share program, where the extended By design, ExxonMobil's program does not allow for all shares to vest before the impact of key decisions becomes known. It also holds executives accountable for project success many years after making initial project investment decisions. An alternate formula based program would require a shorter time horizon to set meaningful credible targets. In our view, such a program would encourage short term thinking not aligned with the long investment lead times and capital intense nature of the business. A share denominated approach coupled with long restriction periods defines the risk reward profile of our performance share program. Therefore, the compensation committee does not adjust share grants to offset changes in share price. As a result, executives see a one for one change in compensation through share price aligned with the experience of our long term shareholders. Uniquely long restriction periods result in a need to apply performance metrics in grants versus in Zest. Key factors used in determining performance share award levels include both forward looking and backward looking measures. Forward looking measures include demonstrated leadership and accomplishments in progressing the company's strategic goals and objectives, set to generate sustainable growth and shareholder value over the long term. Backward looking measures include the company's performance against industry peers based on pre established financial and operating metrics over the investment lead times of the business. We will discuss this in more detail on subsequent slides. Performance share awards vest 50% in 5 years from grant date and 50% in 10 years or retirement, whichever is later. These long restriction periods effectively result in large levels of stock ownership. To put this in perspective, CEO stock ownership is 38x base salary, far exceeding standard ownership guidelines of typically 6x base salary. Restricted shares also remain at risk of forfeiture while invested. In summary, the performance share program with its uniquely long restriction periods enables an environment where executives are incentivized to take a long term view in decision making, aligned with the nature of our business and the experience of our long term shareholders. The annual bonus program ties executive compensation to annual company earnings performance and encourages strong earnings performance in the near and midterm while maintaining risk of forfeiture. The size of the annual bonus pool itself is determined by a formula that has been applied consistently for each of the last 18 years, including years in which earnings declined like this past year. Individual bonus awards are determined by the formula shown on this slide, change in pay grade and individual performance and are delivered using 2 distinct vehicles. Half of the annual bonus is delivered in cash in the Europe brand. The other half of the bonus, the earnings bonus units is delayed and does not vest until cumulative earnings per share reach a specified level, currently $6.50 per share. The EPS threshold is set to pay out within a 3 year time horizon. By design, and as shown on the chart, the annual bonus award to our CEO tracks to the changes in annual earnings performance, demonstrating the strong linkage of this portion of CEO pay to company performance. During engagements with shareholders, we received feedback to provide additional clarity on the process and considerations used by the compensation committee to determine CEO pay. This visual is intended to address this feedback. In determining CEO pay, the compensation committee considers progress towards the company's strategic objectives, company performance relative to industry peers over the investment lead times of the business, individual performance and the results of annual benchmarking taking into account experience in the position. Specific to the performance share awards, the compensation committee places emphasis on the company's progress towards strategic objectives where it noted significant accomplishments in 2019. The pre established financial and operating metrics remain the same as in 2018 and include safety and operational integrity, return on average capital employed, cash flow from operations and asset sales and total shareholder return, each assessed over the investment lead times of the business. Over the period 2010 to 2019, the company has demonstrated continued industry leadership in Safety and Operations Integrity, ROCE, and cash flow from operations and asset sales and continued to lag in TSR. While performance metrics are not assigned a specific weight, highest priority is given to progress our strategic objectives, safety and operations integrity and ROCE. Additional details can be found on Pages 4041 of our proxy statement. Specific to the annual bonus awards, we have already discussed the strong connection between company earnings performance and the bonus program. In 2019, the bonus program decreased as a result of lower earnings. Finally, as to base salary, performance dimensions include individual performance, demonstrated leadership and experience in position. More details on how the compensation committee considers company and individual performance and experience in its pay deliberations can be found on Page 39 of our proxy statement. A final input to the compensation committee is the outcome of annual compensation benchmarking to assess market competitiveness. For ExxonMobil, evaluating level of compensation is most relevant against other U. S. Companies that generally have large scale and complexity, capital intensity, international operations and proven sustainability over time. A list of these companies can be found on Slide 23 in the frequently used terms. In summary, this overview reflects the compensation committee's decision to deliver market competitive pay that is highly performance based and tied to company performance. Let me now turn to 2019 CEO compensation. As mentioned before, 2019 CEO pay decisions reflect strong leadership in progressing the company's strategic objectives and continued industry leadership in 3 of 4 financial and operating metrics. This is balanced against lagging TSR performance and takes into account annual benchmarking given experience and position. Total reported pay for 2019 was $23,500,000 up from $18,800,000 in 2018. This includes a change in pension value of $7,100,000 a component of reported pay that is highly volatile year over year. To that point, close to half of the change in pension value is due to changes in interest rates. For that reason, the compensation committee also reviews total direct compensation, which excludes the volatility that results from changes in pension value and all other compensation. Total direct compensation for 2019 was $16,100,000 versus $15,500,000 in 2018. As represented by the dark blue shaded bar on the reported pay chart, over 70% of total direct compensation is in the form of performance shares with long restriction periods. Looking at the chart on the right, total realized pay for 2019 was $5,500,000 and includes salary, cash bonus and vesting of previously granted incentive awards. Looking at pay for any particular year in isolation is not the most complete way to assess compensation. For this reason, and as we have done in the past, we also disclosed CEO realized and unrealized pay over a 10 year period and continue to receive positive feedback from shareholders on the additional perspective it provides. This slide shows how pay for the CEO position over the most recent 10 year period compares with the companies in our compensation benchmark group. For ExxonMobil, CEO pay is at the 26th percentile of compensation benchmark companies and ranks 10 out of 13 companies. This 10 year combined realized and unrealized pay chart illustrates not only the rank position and percentile, but also the magnitude of ExxonMobil CEO pay compared to CEO pay at our compensation benchmark companies. New this year, we are also disclosing realized pay over the same 10 year time horizon. CEO 10 year realized pay is at the 9th percentile and ranks 12 of 13. This chart on the right underscores the design intent of the performance share program with its long term vesting. We believe that this in-depth analysis provides a more balanced and accurate perspective on how ExxonMobil CEO compensation compares to that of our compensation benchmark companies. To recap the key messages I covered at the beginning, our compensation program design is fully aligned with our business model and the returns of our long term shareholders. Executive pay is highly performance based and tied to company performance. And 3, in delivering market competitive pay, the committee considers company and individual performance, experience and the results of annual benchmarking. We truly value the opportunity to dialogue with our shareholders to discuss our compensation program throughout the year. These engagements provide us valuable insights that are taken into consideration as the compensation committee evaluates our compensation program design and disclosures each year. And I hope we have been able to demonstrate this during this webcast. In closing, I would like to ask you, on behalf of your Board of Directors, we recognize your vote is important and we encourage you to carefully consider the information provided today as well as the compensation discussion and analysis in our proxy statement and vote for item 3 advisory vote to approve executive compensation. With that, Stephen, I would like to turn it back to you. Thank you, Inge. We appreciate the opportunity to engage with you, our shareholders. During 2019, we are pleased to have more than 80 engagements on environmental, social and governance issues either in person or by teleconference and including members from all levels of our company. We reached shareholders owning more than 1,400,000,000 shares or approximately 34% of our total shares outstanding. Each year, the corporation receives a number of suggestions from shareholders, some of which are in the form of proposals to be presented at the annual meeting. We seek a dialogue with the proponents and often we are able to reach agreement to withdraw the proposal from the proxy. For the remainder of the proposals, we generally agree on the objectives, but differ on the approach. We are firmly committed to maintaining constructive dialogue with our shareholders, including shareholder proponents throughout the year to better understand positions and work towards mutually beneficial solutions. A moment ago, I mentioned that often ExxonMobil and its shareholders are able to agree on objectives, but occasionally cannot align on the approach to reach those objectives. The shareholder proposal covered on the next several slides are good examples of this. The Board recommends that you vote against these shareholder proposals. 1st, regarding the independent Chairman proposal, we agree with the importance of a strong and independent Board dedicated to representing the interests of shareholders and providing oversight of company management, including CEO. However, we do not agree that a combined Chair and CEO position enters this objective. This year, responding to valuable input from you, our shareholders, the Board significantly broadens the authorities of our Independent Lead Director to enhance the robust oversight of company management. Our new Lead Director, Kenneth Fraser, holds all the same authority of our prior Presiding Director by calling, chairing and setting the agenda for executive sessions of the independent directors, chairing Board meetings in the absence of the Chairman, reviewing and approving the schedule and agenda for all Board meetings in consultation with the Chairman and engaging with shareholders. But our Lead Director has also now empowered additional oversight authorities including leading the annual performance evaluation of the Board, serving as the Chair of the Board Affairs Committee, providing comments and suggestions to the Board on the Board Committee structure, operations and appointment and importantly, working with the Compensation Committee, overseeing annual evaluation of the CEO, communicating resulting feedback to the CEO and a review of CEO succession plans. We encourage you to see the full list of the enhanced authorities of our Lead Director on Page 9 of the proxy statement. This responsiveness by our Board to shareholder input evidences the robust oversight and independence of our non employee directors. With the strong oversight of our Lead Director and full Board and their responsiveness to shareholder input, this proposal is not necessary. Next, we have a proposal regarding special shareholder meetings. For many years now, under existing New Jersey law, ExxonMobil shareholders have had the right to call a special meeting with the agreement of shareholders of 10% or more of outstanding shares upon a finding of good cause in court. In response to shareholder input, here our Board adopted an additional right for shareholders, the right to call a special meeting by shareholders holding 15% or more of outstanding shares with no need for a court petition. This means that your shareholders may now exercise the right to call a special meeting in either of 2 ways with agreement of holders of 15% or more outstanding shares without the need to go to court or with agreement of holders of 10% or more of outstanding shares upon finding in court of good cause. To be clear, there is no need for a court petition to call a special meeting when shareholders holding 15% of outstanding shares agreed to call the meeting. Our 15% threshold is lower than the special meeting threshold that is common among S and P 500 which is 25%. That's among the Board in response to shareholder input, enhance shareholders' meaningful and accessible rights to call a special shareholder meeting this year by adding the ability to call such a meeting without the need for a court petition. As a result of this responsiveness and the elimination of the need to go to court to call a special meeting, this proposal is not necessary. Next is a proposal that asks for a report on the cost and benefits of ExxonMobil's voluntary environment related activities. This resolution proposes that ExxonMobil should spend less on reducing emissions from its business and developing new technologies to address climate related risks. Let me repeat myself. The proposal wants us to spend less on addressing climate related risks. We agree that transparency and accurate disclosures are a benefit for our shareholders to appropriately assess potential risk and benefit of investment. However, the proposal claims that because ExxonMobil's products result in a very small percentage of global man made greenhouse gas emission, Exxon is doing and spending too much to address the risk of climate change. We disagree. We believe that efforts to mitigate greenhouse gas emissions can have a long term benefit. Over the last decade, ExxonMobil has invested $10,000,000,000 in lower emissions energy solutions. All ExxonMobil's opportunities, including those undertaken to address the risk of climate change, are rigorously evaluated to support the objective of generating long term value for our shareholders. Many of ExxonMobil's investments to mitigate environmental impact also improve business performance. A good example is that safe, reliable and responsible operations including steps to reduce emissions are correlated with strong financial and operating performance. Another example is that investments in cogeneration allow ExxonMobil to increase energy efficiency and reduce emissions while reducing the need to import power for our facilities. ExxonMobil's activities and contributions to address the risk of climate change are already disclosed in the Energy and Carbon Summary, Outlook for Energy and the Sustainability Report. In light of the detailed and transparent disclosure already provided by the company, this proposal is unnecessary. Next is a proposal requesting a report on the risk associated with our petrochemical facilities. ExxonMobil has extensive experience designing, constructing and operating facilities around the world using a rigorous and comprehensive scientific assessment process and the highest quality data for measurements and advanced computer modeling. Importantly, we work closely with governments and regulatory agencies for permitting and other requirements to ensure appropriate operating procedures and response measures are in place to minimize potential impacts. This collaborative approach enables us to gain a holistic view of issues that may affect a specific project and implement measures to eliminate, avoid or remedy potential concerns. ExxonMobil's participation in Gulf Coast Growth Ventures, the world scale ethane steamcracker and derivative unit in San Patricio County, Texas is an excellent example of the company's risk management processes in practice. ExxonMobil, through the joint venture, worked with government regulators and local communities to address 4 key priorities raised by local residents: health and safety, education and workforce development, quality of life and environmental stewardship. This process included approximately 150 meetings with local residents and others to understand perspectives and to work working closely with the Texas Commissioner of Environmental Quality to modify facility design and mitigate regulator and community concerns. Once facilities are in operation, we maintain disaster preparedness and business continuity plans. Detailed, well practiced and frequently updated emergency response plans tailored specifically to each facility help prepare for unplanned events, including extreme weather. A great example of this is the fact that after Hurricane Harvey in 2017, our Beaumont refinery was only shut down for approximately 2 weeks despite record rainfall totals. We also monitor and manage ongoing integrity through periodic checks on key aspects of facility structures, including adopting learning from recent extreme weather events as part of our ongoing engineering evaluation. Information about ExxonMobil's guidelines, measures and practices to assess and mitigate risk factors can be found on ExxonMobil's Energy and Carbon Summary. This proposal is not needed. We turn now to a proposal asking for a report on our political contributions. Before I get into the specifics of this proposal, I want to highlight that in response to shareholder feedback, we have further enhanced details around our rigorous oversight process governing public position and lobbying on our website. This relates to both this proposal on political contributions, but also on the next proposal on lobbying expenditures. At ExxonMobil, our political contributions are subject to a strict internal review process that requires approval by the Chairman according to the company's political activities guidelines, which are available on our website. As part of our process, political contributions of the corporation as well as the contributions of the political action committees established by the corporation are reviewed each year with the Board. These procedures are routinely verified during internal audits of the company's political activities. With respect to contributions to 3rd party organizations, we contribute to more than 100 U. S.-based non profit organizations that in many cases help provide informed policy decisions. This data is disclosed in ExxonMobil's report on worldwide contributions and community investment in the public policy section. You can review this report on our website. In addition, we believe the current legal disclosure requirements for political contributions are adequate and equitable as they require the same level of disclosure from all participants in the political process. Because of the detailed public disclosure already provided by the company, this proposal is not necessary. The final shareholder proposal requests a report on lobbying. We agree with appropriate transparency, accountability and disclosure of lobbying policy, activities and expenditures and fully comply with both the spirit and the letter of all federal and state laws on lobbying. In addition, and as I mentioned earlier, enhancements were made in our proxy and on our website better detailing the process for Board oversight of the company's lobbying and political activities. Each year, the company's political contributions and lobbying expenditures are presented to the full Board along with the Board's public issues and contributions committee, which is comprised entirely of independent outside directors. In addition, reviews of the company's key issues are conducted by the management committee several times a year as part of a regular oversight process. Positions on key issues in grassroots lobbying communications are publicly available on ExxonMobil's corporate website and the company's advocacy portal, the exchange.com. ExxonMobil's public filings include expenses associated with the cost of deploying federal lobbying as well as those portions of the payments to trade associations, coalitions and think tanks that are spent on federal lobbying. All reports are accessible to the general public. With our detailed disclosure available online, this proposal is unnecessary. Again, we recognize your vote is important. We want you to carefully consider this information provided in more detail in our proxy statement. Before we conclude, I want to make sure you're aware that our 2020 Annual Meeting of Shareholders scheduled for Wednesday, May 27 beginning at 9:30 am Central Time will now be conducted exclusively as a virtual only meeting. This decision forgo our regular physical meeting was made in light of coronavirus pandemic to facilitate the safeguarding of the health and welfare of our shareholders, employees and other meeting participants in the local community. Please refer to the Investor Relations section of our website for information about participating in ExxonMobil's virtual annual meeting. This concludes our presentation. We appreciate all of you who have joined us today to review these important topics. Your input and your approach is important to us and we look forward to continuing our shareholder engagement throughout the year. Now, Inkin and I are happy to take a few questions. We are ready for your questions at this time. Let me remind you that questions can only be submitted via the webcast. At this time, I will turn the Q and A over to Mr. Littleton. Please go ahead, sir. Well, thank you. We'll take a quick look and see if we have any questions. So far, it appears that we have no questions. What I would while we wait and see if anyone wants to issue a question, I would like to share some of the questions that I've been addressing over the past 2 weeks with regards to the proxy and one in particular that's been very common is around engagement. There's been a view that HEXO has not been engaging with the respect to shareholders. And I'd like to kind of help provide some clarity to that. If you look over the past couple of years, our engagement levels have really ramped up over the past couple of years, with regards to not only engagement with our Chairman, but also including engagements with many of our independent directors. If I look at just 2020, year 2020, we have planned for about 7 engagements, which we'll have multiple directors participating in them. So far, we've completed about 5 of those. On a percentage basis, that covers about 31% of the outstanding shares held by institutional shareholders. And I give you a perspective, when we compare that to the engagement levels we had in 2019, that already surpasses the amount of engagement or the percentages that we covered last year. Engagement is something very important to us and that one that we take very seriously. In fact, I'd like to say one of the engagements we had, I mean, and I can share some of the various institutions that we visited with over the past couple of years, whether it be Vanguard, State Street, BlackRock. And actually in 2019, we also had an engagement with Climate 100 plus and we had a series of very many people there, represented over 125,000,000 shares. It was a good dialogue. We had 2 independent directors participating in that meeting. And we had it was represented by several individuals, whether it was Church of England, New York State Common Retirement Fund and more of course were participating. So I want to rest assure that engagement is very important to ExxonMobil. We want to hear and talk to and engage with our shareholders. We value your opinions. We want to have an open and candid dialogue, not only with myself, but also the Chairman and our Independent Directors. So if you do have concerns that you want to address, please feel free to contact me, and we'll take it under advisement accordingly. Let me check and see if we have any additional questions. It appears we have no questions. So with that, we would like to say thank you for participating for those who dialed in. Also want to wish everyone to be safe in light of the pandemic that we're dealing with and hope everyone has a wonderful weekend. Thank you. This concludes our webcast. Thank you for your participation.