sri-advisor.com
where checking accounts rebuild communities
Back to homepageInstitutional ReportsSRI Financial Professionals DirectoryToolsNewsSRI Performance and TrendsAbout Us   
News


June 25, 2012
Book Review: Private Empire: ExxonMobil and American Power, by Steve Coll
    by Robert Kropp

In a well-researched investigation into the inner workings of one of the world's largest and most powerful corporations, author Steve Coll details ExxonMobil's efforts to discredit climate science and extract resources in countries ruled by autocrats.


ExxonMobil has never been a favorite of most sustainable investors. The oil and gas industry is by its nature unsustainable, exploiting finite natural resources. And as author Steve Coll describes it in the prodigiously researched 600-plus pages of Private Empire: ExxonMobil and American Power, the corporate culture of the oil and gas giant, especially under former CEO Lee Raymond, has been notable for its regimented secrecy.

Private Empire begins and ends with disasters. In 1989, the Exxon Valdez ran aground in Alaska's Prince William Sound, spilling up to 750,000 barrels of oil into a formerly pristine natural landscape. The spill remained the largest environmental disaster in American history until 2010, when a blowout at a BP-owned deepwater well killed 11 workers and spilled more than four million barrels of oil into the Gulf of Mexico.

During the years between those events, we see the world's most profitable corporation funding research in efforts to discredit scientific findings on climate change, and spending more on political expenditures and lobbying than any organization with the notable exception of the US Chamber of Commerce. We see it keeping the US government at arm's length while it cozies up to dictators in a single-minded effort to book enough oil and gas reserves every year to keep the investment community satisfied. And we see its take-no-prisoners approach at work in US courts as it uses its massive financial resources to fight a number of lawsuits.

"With its ideological allies," Coll wrote, "ExxonMobil funded the promotion of public confusion about climate science by means that future employees and executives of the corporation are likely to look back on with regret."

A defining moment in Coll's narrative occurred in 1998, when Exxon and Mobil merged in an $81 billion deal. As a result of the merger, ExxonMobil became "the world's largest nongovernmental producer of oil and gas," Coll wrote, and soon became the largest corporation headquartered in the US. A consequence of the merger was extensive holdings in countries that the company labeled as transitional; that is, often autocratic nation-states with weak infrastructure and poor human rights records.

In Indonesia, security guards hired by ExxonMobil were implicated in human rights abuses including torture and murder. In Equatorial Guinea, the company lobbied to keep the US government out of security measures for its offshore installations, while simultaneously supporting full recognition by the US of the regime of Teodoro Obiang. Transparency International continues to rank Equatorial Guinea as having one of the most corrupt regimes in the world.

And in Venezuela, ExxonMobil worked out a bond repurchase agreement with the government of Hugo Chavez, by which it received $242 million; but at the same time, the corporation secretly obtained a court order preventing Venezuela from accessing the $300 million due to it in the agreement.

ExxonMobil had an opportunity to update its corporate culture in 2005, when Raymond retired. A close friend of Dick Cheney's, Raymond had overseen the move of the company's headquarters from New York City to Texas; in the aftermath of Exxon Valdez, he instilled a by-the-book culture noteworthy for its conservatism and, in the view of many, arrogance.

But Rex Tillerson, Raymond's successor, has been handicapped by a number of factors. His predecessor's campaign to discredit climate science forced him to proceed somewhat timidly in modernizing the company's position even as scientific consensus coalesced around the issue. An oil-friendly Administration was replaced by Barack Obama, who had campaigned on the necessity of addressing climate change. And ExxonMobil's profits suffered at least a temporary decline as the industry was increasingly forced to pursue more expensive unconventional methods of extracting oil and gas from the earth.

Arriving late in the game to natural gas, ExxonMobil sought to buy its way in with the $41 billion acquisition of XTO Energy. However, "It looked to analysts and investors that Tillerson had overpaid for Simpson's company and that ExxonMobil had made risky assumptions about future natural gas prices," Coll wrote. "Investors hammered ExxonMobil's share price, relative to its peer group, in a way the corporation had not experienced for many years."

Earlier this month, ExxonMobil published its 2011 Corporate Citizenship Report. In it, the corporation states, "We have ceased funding groups we believe were addressing the public policy discussion by questioning the science of climate change as opposed to exploring solutions to this complicated challenge."

Sustainable investors and other shareowner activists have won considerable support with resolutions addressing corporate governance and environmental issues at ExxonMobil. At this year's annual general meeting, 35% of shareowners supported the separation of the positions of CEO and Chairman, both of which are currently held by Tillerson. Twenty-four percent asked for a report on political contributions, 27% supported goals for greenhouse gas (GHG) emissions reductions, and 30% requested that the company report on the impacts of hydraulic fracturing.

But, as Coll implies, corporations like ExxonMobil continue to reap disproportionate profits while society is left with the costs of environmental degradation. Until those externalities are priced—an action, however necessary, that US lawmakers seem unlikely to address anytime soon—ExxonMobil and its industry peers will continue to benefit even as the mounting impacts of climate change threaten the planet.

 

 
Home
| Reports | SRI Financial Professionals Directory | Tools | News | SRI Performance and Trends | About Us | Contact
© SRI World Group, Inc. - All rights reserved
Terms of use - Privacy Policy - OneReportTM Network