Exxon Mobil's top executives are showing a failure of leadership by accepting perks such as financial-planning services and use of the corporate jet for personal trips, according to a 42-year veteran employee.
Bernie Pafford, who worked in chemical research for Exxon until his 2018 retirement, has written a proposal to end executive-only benefits at the company's annual meeting on May 25. Top managers should be subject to the same strict, global policies that prohibit rank-and-file employees from using company funds for personal benefit, he said in an interview.
"It's not about the money involved, it's about credibility," Pafford said. "Core principles and rules should be the same across the organization. I don't think we as shareholders should be paying to be a travel service for these guys who have earned $10-$20 million a year."
The proposal received backing from proxy giant Institutional Shareholder Services Inc., which said such fringe benefits "are not considered to be a best practice."
Pafford first submitted the proposition for the 2021 annual meeting but withdrew it after Exxon offered to engage with him on the issue. The company later ended the financial-planning benefit for new executives, while retaining it for already eligible managers. Dissatisfied, Pafford re-submitted the proposal for this year's gathering.
"If it's wrong, then it's wrong and should be eliminated for all," he said.
Exxon is urging shareholders to reject the proposal because its program is designed to be "market competitive for all employees," according to a proxy filing. The company "does not consider security costs to be personal benefits since these costs arise from the nature of the employee's occupation." Exxon said some executive benefits like financial planning are "generally due to legacy participation" in now terminated programs.
The executive perks, which are common across corporate America, cost the company about $250,000 a year, Pafford estimates based on Exxon's proxy filing. While that's a fraction of overall C-suite compensation, Pafford is more concerned about the message sent to Exxon's employees, who have endured a tough couple of years with the pandemic, mass layoffs, frozen salaries and temporary benefit reductions.
"Leadership is important to the rank and file," Pafford said. "Maybe we've lost that perception in upper management. To me, am I a leader if I take a blank check from the company each year? That's what we give because we pay for personal travel."
As oil prices rose, Exxon reinstated previously cut benefits and last month announced a one-off, 3% pay increase for U.S. workers to "maintain competitiveness." Company spokesman Casey Norton declined to comment beyond the proxy filing.
Like many S&P 500 corporations, Exxon requires CEO Darren Woods to use the corporate fleet for both business and personal travel for security reasons. However, companies such as Visa, Warner Bros., Discovery and FedEx require executives to reimburse the company if the aircraft is used more than a specified amount.
Proxy advisor ISS did not discuss Exxon's corporate-jet policy but singled out a $31,492 benefit covering Woods's car use as "relatively large" compared with other S&P 500 companies. Exxon declined to comment on the ISS report. The company's compensation benchmarking includes large U.S. industrial companies rather than the wider S&P 500, according to its proxy.
"Investors may also find that highly compensated executives should be responsible for the costs of their commuting, personal financial planning, and other similar tasks," ISS said. The use of perks "does not clearly provide a tangible benefit to investors, is not considered to be performance based, and provides certain benefits beyond what is offered under employee-wide plans."