Featured: Rex Tillerson, CEO, ExxonMobil
Originally published: April 13, 2012
With gasoline prices hitting highs not seen in years, more than half of Americans with cars now say they're cutting back somewhere else to fill 'er up, according to a new Harris Poll. It's worse for low-income families; about two-thirds of households with annual income below $35,000 say fuel costs are forcing them to make sacrifices.
Americans will spend $456 billion on gasoline this year, $28 billion more than last year, predicts Mark Zandi, the chief economist at Moody's Analytics, assuming an average price of $3.75 per gallon for 2012.
Want to know where some of that extra $28 billion is going? You can probably figure it out: into the pockets of CEOs at big energy companies.
On April 12, we learned that ExxonMobil ( XOM ) CEO Rex Tillerson got a 20% pay hike last year to $34.9 million, three times the average for CEOs at Standard & Poor's 500 Index ( $INX ) companies.
Tillerson got $2.4 million in salary, a $4.4 million bonus, stock awards worth $17.9 million and $9.75 million more in pension funding. Along with all this loot, he got $197,323 worth of free rides on the corporate jet for personal travel.
That travel allowance alone would cover the extra gas bill of 715 U.S. households this year, assuming they use 1,200 gallons of gasoline, the AAA estimate, and a 23-cent-per-gallon increase this year, on average, compared with last year.
For making so much more money from fuel while higher prices are inflicting pain on the rest of us, I'm making Tillerson my "One Percenter of the Week" this week.
Exxon defends pay package
ExxonMobil responds that Tillerson's pay should be a lot higher than the average for CEOs, in part because ExxonMobil is so big. With a market cap of about $394 billion, ExxonMobil is the second-largest company in the S&P 500, behind only Apple ( AAPL ), with a market cap of about $569 billion, according to Standard & Poor's. ExxonMobil has operations in 120 countries, and it is the world's largest refiner.
Morningstar analyst Allen Good said that Tillerson's pay is "reasonable" considering the size of the company, as well as the energy giant's performance. ExxonMobil sets itself apart as a superior operator, he says. "It consistently delivers higher returns on capital relative to peers." Tillerson began his career at the company as a production engineer in 1975, working his way up to CEO in 2006.
ExxonMobil also says it takes care to set up solid links between CEO pay and the interests of long-term shareholders, because it can take so many years for the results of exploration and production investment decisions to play out.
More than half of Tillerson's annual pay is in restricted stock. Half of those shares remain unvested for five years. The other half remain unvested for 10 years after the grant date, or retirement, whichever is later. In other words, unlike at many companies, there's no accelerated vesting of restricted stock at retirement. Exxon execs are stuck with the consequences of their decisions in retirement.
The upshot is that the value of a big portion of Tillerson's 2011 reported compensation won't be known for years, and it will be realized over many years. Still, it was all granted in one year, and more will be granted next year. So it makes sense to tally it all as 2011 pay.
Cashing in on the surge?
Now, let's be honest. Tillerson should make a lot of money; Exxon is huge and very profitable, and he may be making great decisions. But profits at Exxon and other oil companies will also likely jump with this surge in oil prices -- because of market conditions, not executive decisions.
If nothing else, and given that 37% of Americans blame oil companies for higher prices at the pump, according to Harris, it's hard to watch executives cash in on the surge. "Many Americans are making real cuts in their budget to accommodate for the increase in the gas they need to get to work, school and run essential errands," says Sarah Simmons, a senior research executive at Harris Interactive.
So seeing a big oil executive get a 20% pay hike is about as much fun as sand in the gas tank.
