Rockefeller Rebellion Turns Up Heat on Exxon

COMMENT: Long set of articles, but fascinating if you're inclined to be fascinated by this stuff. Change comes about in many different ways, but the forces that create the conditions for change usually have to come from all directions. ExxonMobil - that's gonna be one hard nut to crack.

Rockefeller Rebellion Turns Up Heat on Exxon

By LESLIE EATON and RUSSELL GOLD
Wall Street Journal
May 24, 2008

Two decades ago, Neva Goodwin Rockefeller grew so tired of all the baggage that came with her fabled family name that she changed it and became plain Neva Goodwin.

But now, Ms. Goodwin, 63 years old, is embracing the powerful Rockefeller name as she publicly challenges the management of Exxon Mobil Corp., successor to the oil company founded by her great-grandfather, John D. Rockefeller. As Neva Rockefeller Goodwin, she has marshaled four generations of Rockefellers to join her in a campaign to force major changes at one of the most profitable companies in the world. The battle will come to a head at Exxon's annual meeting Wednesday in Dallas.

See a family tree of the Rockefellers.
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Some members of the family joined the fight out of a passionate belief in the threat of global warming; others were concerned that Exxon is overlooking business opportunities or risks. Many seem offended that the company appears impervious to the wishes of its shareholders, including those named Rockefeller.

And they have struggled -- not always successfully -- with the feeling that engaging in a public brawl with Exxon was simply not the done thing. After all, David Rockefeller, 92, the former chairman of Chase Manhattan Bank, had taught them that investor activism was "mostly carried out by nuts," says his daughter, Ms. Goodwin, a Cambridge, Mass., economist.

Fifteen family members, mostly cousins from Ms. Goodwin's fourth generation, have stepped forward to co-sponsor four shareholder resolutions urging change at Exxon. While three address concerns about global warming and renewable energy, the Rockefellers have rallied most enthusiastically around a fourth proposal to name an independent chairman, a plan they say is supported by 73 direct descendents of John D.

Focus on Oil

Exxon roundly rejects the need both for an independent chairman and for investing more in alternative energy. Chairman and Chief Executive Rex Tillerson says his job is to protect shareholders' investments by helping the company's thousands of engineers and scientists focus on its core business: oil and natural gas. The company says oil and gas will continue to provide the bulk of energy needs and they are working to provide that needed energy.

"We are a petroleum and petrochemical company," he said in an interview. "In fact, we think we're the best one in the world and our performance would tend to support that."

The odds are long that the family will get its way. As stockholders with only a tiny holding relative to Exxon's 5.3 billion voting shares, the Rockefellers' main clout comes from wielding their name to gain attention and woo other shareholders. The fact that Exxon just finished the most profitable year in American corporate history doesn't help their cause. Last year, Exxon posted a profit of $40.61 billion. The company's shares have more than doubled in the past four years.

Big Push

In the run-up to Wednesday's shareholder meeting, normally limelight-loathing Rockefellers have pulled out the stops to push their proposals -- including holding a press conference at a Manhattan hotel and endorsing a campaign slogan: "Exxon for Owners."

Peter M. O'Neill, 45, the son of one of Ms. Goodwin's cousins, is doing something that is usually anathema in the family: acting as a spokesman and giving interviews to the press.

It's an unprecedented effort by the politically diverse clan, says family historian Peter J. Johnson, who has worked for the Rockefellers for 32 years. "To actually get consensus in the family is rare," he says.

Exxon executives at first belittled the Rockfellers' potential influence by pointing out to reporters that the family members sponsoring the proposals own only .006% of the company's shares.

Family members say they own much more, but won't say how much. They say most of the family investments sit in a thicket of trusts set up starting in 1934 and mostly managed by a unit of J.P. Morgan Chase. Some say they don't even tell other family members how much they own.

On May 12, Exxon sent a letter to shareholders urging them to reject the proposal for an independent chairman, arguing "no one governance model fits all companies."

The Rockefellers are mounting the most serious shareholder revolt against Exxon in recent memory. But they're going up against a company with unrivaled success at finding, extracting and refining fossil fuels. Exxon has managed to make billions of dollars a year whether oil prices were high or low under men who spent their whole careers tending its fields and refineries. That strong culture strikes some outsiders, including the Rockefellers, as insular.

The Rockefellers' ties to Exxon go back to the 1870s, when John Davison Rockefeller Sr. began to put together the cartel that became Standard Oil. Trustbusters later split it into 34 companies, including what became Chevron Corp. and ConocoPhillips. Two of the largest, Exxon and Mobil, merged in 1999.

A century ago, Mr. Rockefeller was reviled as a rapacious plutocrat. Eventually he and his son, John Junior, developed a reputation for philanthropy on a grand scale. The family was responsible for, among many other things, restoring Colonial Williamsburg and creating Grand Teton National Park.

John D.'s five Rockefeller grandsons were towering figures of the mid-20th Century. Most famous was Nelson, four-term governor of New York and later vice president under Gerald R. Ford. The only survivor of that group is Neva's father, David, who issued a statement offering his support to the family's campaign.

Younger members of the now 232-person clan have generally avoided the spotlight. They live all over the world, but gather twice a year, often at Kykuit, the Rockefeller estate in Pocantico Hills, up the Hudson River from New York City.

To some Rockefeller watchers, the newfound activism appears to be another outbreak of the unease about their oil-based fortune that periodically grips family members. Those who came of age in the 1960s and 1970s were particularly ambivalent, says Peter Collier, a California writer who has chronicled the Rockefeller, Roosevelt and Ford families.

"For them, Exxon is not only an environmental malefactor, it's also original sin," he said in an interview. By challenging Exxon, "They are trying to remove the stain of oil from the family name."

That's a little melodramatic for many of the Rockefellers, including Ms. Goodwin, who in the 1970s was a friend and colleague of the unconventional inventor and professional visionary Buckminster Fuller. She lives with her historian husband in a baby-blue clapboard house, where a collection of Far Side cartoons sits on a bookshelf near volumes of Charles Darwin's correspondence. A Prius is parked in the garage.

"I don't feel responsible for everything my family has ever done," she says. "Selectively, I look at the really fine things the family has done and am extremely proud."

As co-director of the Global Development and Environment Institute at Tufts University, Ms. Goodwin's interest in corporate power was mostly academic. But a couple of years ago at Tufts, she met Sister Patricia A. Daly, a shareholder activist, and decided to co-sponsor her resolution, at Exxon's 2003 annual meeting, asking the company to study the impact of climate change.

Looking for Support

Ms. Goodwin then turned to her two-dozen Rockefeller first cousins for support. Five signed an email that read, in part, "Most members of our family will own shares of Exxon for far longer than the present management will be in place, and therefore we have an important interest in and responsibility toward the long-term viability of the company."

The resolution failed, but it ignited interest among the family, which formed a committee to study the issue. Some on the committee were ardent environmentalists; others had a pragmatic business outlook.

Among the latter was Mr. O'Neill, a former social worker who once ran a mental health clinic in Harlem and now sits on the boards of several private companies and philanthropies. A man who speaks carefully and uses "dialogue" as a verb, he says he worries that Exxon isn't positioning itself for a sea change in the energy markets.

"I care about the bottom line," he says, noting that for him, as for most in the family, Exxon is the largest single investment.

Talk with Executives

Twice in 2004, in response to requests by the Rockefellers to meet with Exxon about their concerns, the company sent investor-relations executives to talk to the family in their art-filled offices on the 56th floor of 30 Rockefeller Center. The family wanted to discuss Exxon's assumptions about the future of energy, particularly the company's assertion that alternative fuels will make few inroads into the dominance of oil and gas, Ms. Goodwin says. The Rockefellers were concerned Exxon would be vulnerable if energy markets changed more -- or more quickly -- than the company anticipated.

Exxon managers brought basic presentations to the meetings that the company gives to most shareholders, according to family members, and didn't specifically address their worries.

Exxon didn't respond to requests for information about what happened at those meetings.

The next year, the family held a private conference to educate itself, inviting scientists, engineers, industry executives and activist investors. "This is an advantage to being a Rockefeller," Ms. Goodwin says. "If you want to have a discussion about the future of energy, people are willing to come to it."

Family interest in Exxon was snowballing when Mr. Tillerson took over as chief executive in January 2006, succeeding Lee R. Raymond. But the Rockefellers made little headway with Mr. Tillerson, either.

Congratulatory Letter

Forty-three family members signed a congratulatory letter asking to meet him and the board. Instead, Mr. Raymond and Mr. Tillerson invited only Ms. Goodwin's father, David, to a Manhattan lunch. Although Ms. Goodwin eventually got an invitation, she says she didn't hear "anything they haven't said other times to many people."

Attempts to meet directly with other members of the board were rebuffed, Ms. Goodwin and Mr. O'Neill say. An Exxon spokesman says the requests were handled in the same manner used for all shareholders. Last fall, Exxon arranged for some activist shareholders to meet executives and researchers investigating alternative energy. Mr. O'Neill says he came away still concerned about the company's long-term strategies.

Mr. Tillerson says Exxon monitors potential new fuels, but won't invest in them simply because it's the politically correct thing to do. He says he refuses to support a policy of "casting a lot of corn out on the ground and hoping some of it takes root."

By spring of last year, the family's frustration with Exxon had reached full boil. At their June gathering, in a Tudor-style building on the Kykuit estate known as the Playhouse and hung with portraits of their ancestors, they decided to take action.

One way was to put their ideas to a shareholder vote by co-sponsoring so-called proxy resolutions at Exxon's annual shareholder meeting. The resolutions are nonbinding, although companies seldom ignore those that attract a majority.

Ms. Goodwin filed her own proxy resolution, calling on Exxon to study the effects of global warming on poor communities, and several of her cousins rallied round as co-sponsors. Other cousins and their children opted to support two other environmental resolutions, one on reducing greenhouse gases and the other on investing in alternative energy.

Mr. O'Neill chose to co-sponsor the independent chairman resolution, which had been introduced for several years by Robert A. G. Monks, a longtime activist on corporate governance. They were joined by another Rockefeller, John de Cuevas, a writer and environmentalist whose grandmother was John D. Rockefeller Sr.'s eldest child.

Heavy Support

The chairman proposal has drawn the support of more than 93% of John D. Rockefeller Jr.'s 78 direct adult descendents, the family says. (Senator Jay Rockefeller of West Virginia has his holdings in a blind trust, and said in a statement that though supportive, he isn't directly involved).

Mr. Monks, who had gradually been building support for his proposal to 40% of the vote last year, believes an independent chairman can help ensure an independent board, and an independent board is key to a company's evaluation of its strengths and weaknesses. As he wrote in a letter to shareholders, "such inner-reflection is difficult when the board is lead by a CEO who has spent most of his adult life at the company, as has the entire executive management team." For Mr. Monks, the Rockefeller support was an unexpected boon that moved the debate outside his world of corporate-governance geeks. "God bless them," he says of the Rockefellers. "They hate the idea of publicity. But they are willing to do it because they think something is wrong at Exxon."

Reticent to Speak Out

Most Rockefellers have been reticent to speak publicly about the effort. One family member who did agree to talk was Michael S. Rockefeller, a grandson of Nelson, who runs an Internet advertising agency called Active Media. The family realized it would take heat for its position, he says, and it has: He says some critics have described the family as "rich, spoiled little kids."

But one criticism, he says, "makes us just boil": The argument that John D. himself would never have agreed to a separate chairman-president arrangement.

According to Mr. Johnson, the family historian, that is exactly what happened in 1896, when the patriarch gave up operating control of Standard Oil while serving in the top board position until 1911.

Mr. O'Neill says he had to do a lot of soul searching before agreeing to go public with their fight. Rockefeller family members sit on a lot of corporate boards, he says, "and we're not known for being meddlers."

Write to Leslie Eaton at leslie.eaton@wsj.com2 and Russell Gold at russell.gold@wsj.com3

URL for this article: http://online.wsj.com/article/SB121157457128518175.html

STANDARD OIL'S FAMILY TREE

When the Supreme Court ordered the breakup of Standard Oil Trust in 1911, 34 companies came out of the split. Many of those companies have since recombined to become some of today's largest oil companies.

• Standard Oil of Indiana is spun out of Standard Oil (1911); becomes Amoco in 1954. Acquired by BP (1998).

• Atlantic Petroleum Storage Company is acquired by Standard Oil (1874); becomes independent again with breakup of Standard Oil (1911); partners with Richfield Oil Corp. & forms Arco (1966), is acquired by BP (2000).

• Standard Oil of California is spun out of Standard Oil (1911); Socal buys Gulf, rebrands as Chevron (1984).

• Continental Oil is reincorporated after breakup of Standard Oil (1911); Conoco, as it is later called, becomes part of Du Pont (1981), later is spun out as a separate company; merges with Phillips Petroleum to become ConocoPhillips.

• Standard Oil of New Jersey becomes independent with dissolution of Standard Oil Trust (1911); changes name to Exxon (1972); merges with Mobil (1999) -- itself is a descendant of Standard Oil known as Standard Oil Co. of New York (Socony).

• Standard Oil Company of Ohio is created by breakup of Standard Oil (1911); BP acquires 25% stake in Sohio (1970) after discovery of oil in Prudhoe Bay; BP acquires rest of Sohio, creating BP America (1989).

• The Ohio Oil Co. becomes independent after breakup of Standard Oil (1911). Changes name to Marathon Oil Co. (1962); becomes a subsidiary of United States Steel Corp. (1982); splits into independent company known as Marathon Oil Co. (2001)An independent chairman, they argue, could chart a strategy for Exxon's future, one that many of them hope would include more focus on renewable energy. They also believe an independent chairman -- to whom the CEO would be accountable -- might be more responsive to shareholder concerns.

Energy For Exxon Holders, Profit Is Not Enough

Hundreds of Exxon Mobil Corp. investors will gather Wednesday at the Morton H. Meyerson Symphony Center in Dallas. Attendees of the annual shareholders meeting should expect Exxon's own Bengal Traders brand coffee, visual displays that tout the company's latest technological breakthroughs -- and a clash between activists and management over the future of the company.

In some ways, it is an odd time for discontent among the Exxon faithful. With crude-oil prices at record levels, Exxon's stock hit a record high this week. Dividends are up. Profits are unprecedented.

By these financial measures, Rex Tillerson, the chairman and chief executive, should expect to hear a chorus of hosannas from some investors for his recital of the past year's accomplishments. But the activists are focused on the future. They worry Mr. Tillerson isn't preparing enough for what many expect to be a turbulent time in the energy markets.

The debate on the future of energy isn't academic. Exxon believes that in 2030, just as today, about 60% of the world's energy demand will be met with oil and natural gas. (The rest is largely coal, nuclear and hydropower.) Therefore, the company directs the vast majority of its capital budget to finding, extracting and selling oil and gas.

Most activists believe governments will soon mandate carbon-emissions constraints in order to curb global warming. This will lead to the swift rise of nonfossil fuels such as wind, solar, nuclear and biomass.

Exxon faces a raft of shareholder resolutions aimed at both steering the company toward a greener future and forcing change at the top by appointing an independent chairman.

These votes have been gathering momentum. In 2003, a proxy resolution to split the chairman and chief executives roles received 22% of the vote. Last year, it got 40%. Another proposal, to require Exxon to set specific goals limiting greenhouse-gas emissions, was favored by 31% of shareholders last year. Both are back on Wednesday's ballot. A new proposal would require Exxon to take a hard look at sustainable-energy technologies.

Offering vocal support to all three measures are descendants of John D. Rockefeller, the founder of Exxon-forerunner Standard Oil. Not only are they using their name to draw attention to the resolutions, the family and its retinue have been on the road in recent weeks urging institutional investors to cast their shares in favor of change. Exxon management opposes these resolutions, arguing that its record speaks to its ability to adroitly handle complex energy markets.

These resolutions are non-binding. If one attracts a majority of votes, Exxon could simply ignore it. But precedence and good corporate governance suggest otherwise. Two years ago, a shareholder resolution calling for the resignation of any Exxon director who doesn't get a majority of votes passed and was subsequently adopted by the board.

Exxon management might take solace in another shareholder resolution offered this year. The item proposes eliminating nonbinding resolutions altogether because they're "a primary tool of 'activist' or 'nuisance' shareholders." Exxon advises a vote against this measure, stating that suggested change is "the best way to carry out reform of the shareholder proposal process at this time."

Write to Russell Gold at russell.gold@wsj.com