Company Name:
ExxonMobil
Public Availability Date: January 3, 2008
Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 7, 2007
VIA Network Courier
U. S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
RE: Securities Exchange Act of 1934Section 14(a); Rule 14a-8 Omission of
Shareholder Proposal Regarding Bonus Recoupment
Gentlemen and Ladies:
Enclosed as Exhibit 1 are copies of correspoudence between Chris Rossi and Exxon
Mobil Corporation regarding a shareholder proposal for ExxonMobil's 2008 annual
meeting. We intend to omit the proposal from our proxy material for the meeting
for the reasons explained below. To the extent this letter raises legal issues,
it is my opinion as counsel for ExxonMobil.
Proposal has been substantially implemented.
The proposal requests adoption of a bylaw to enable the company to recoup
incentive bonuses or other incentive payments to senior executives to the extent
the corresponding performance targets were later reasonably determined not to
have been achieved or to have resulted from errors. The proposal is a repeat
submission from the 2007 annual meeting.
In our request for no-action relief last year, ExxonMobil argued that the
"pay-at-risk" structure of the company's executive compensation program,
including strict provisions for forfeiture and clawback of awards in case an
executive engages in detrimental activity or is subject to an unapproved early
termination, substantially implemented the proposal. The staff did not concur.
See Exxon Mobil Corporation (available March 7, 2007).
Based on that letter as well as the staff's stated rationale in similar
precedents, the key difference between ExxonMobil's compensation programs as in
effect last year and the proposal is the fact that the proposal would apply
regardless of any fault on the part of the executive. See Bristol-Myers Squibb
Company (available March 17, 2006, reconsideration denied) in which the staff
explained:
"Among the differences between the proposal and Bristol-Myers' Recoupment
Policy, we particularly note the followingwhile the proposal requests that,
under circumstances specified in the proposal, Bristol-Myers recoup all bonuses
and any other awards made to senior executive officers in the event of a
restatement of financial results or significant extraordinary write-off,
Bristol-Myers' Recoupment Policy would result in recoupment only from those
officers who, in the Board's view, engaged in misconduct that caused or
partially caused the need for the restatement." [emphasis added]
The ExxonMobil proposal did not receive a majority vote at the 2007 meeting.
However, as we indicated in last year's no-action request and in the proxy
statement for the 2007 meeting, the proposal is consistent with the philosophy
that underlies ExxonMobil's executive compensation program. Accordingly, taking
into account the developments of last season and the company's own position on
this issue on October 31, 2007 (prior to receipt of the proposal), ExxonMobil's
Board of Directors adopted a "Board Statement on Incentive Compensation in Case
of Restatement" (attached as Exhibit 2). The Statement, which is available on
ExxonMobil's website, makes clear the Board's commitment to ensuring that senior
executives do not profit on the basis of overstated results.
In order to implement the Statement, the Board has also amended the
corporation's Short Term Incentive Program to include a new Section XII (full
text of plan, as amended, attached as Exhibit 3). This is the program under
which incentive bonuses and other payments whose amount is based on specific
financial or operating results are currently granted and paid to our executives.
The new Section provides that, in case of a material negative restatement of any
financial or operating results of the Corporation, executive officers may be
required to repay an amount corresponding to each award or portion of an award
that the Compensation Committee determines would not have been granted or paid
if the Corporation's results as originally published had been equal to the
Corporation's results as subsequently restated.
To make it perfectly clear that the new repayment provision applies without
regard to misconduer on the part of the executive officer, paragraph (b) of
Section XII specifically states that "[t]he obligations of reporting persons to
make payments under this Section XII are independent of any involvement by those
reporting persons in events that led to the restatement." 1 Section XII, like
other terms and conditions of the plan, is incorporated into each award granted
under the plan.
With the addition of the new Board Statement and incentive plan amendment
described above, we believe we have removed any doubt that the proposal has been
substantially implemented and may be excluded from the proxy material for the
2008 annual meeting under Rule 14a-8(i)(10).
Formalistic differences between the proposal and the Board's actions, such as
the fact that the proposal seeks to implement a recoupment policy through the
by-laws, should not alter the above conclusion. Rule 14a-8(i)(10) does not
require that a company's actions be identical in every respect to the wording of
a shareholder proposal. Rather, the purpose of the rule is "to avoid the
possibility of shareholders having to consider matters which have already been
favorably acted upon by management." See Release No. 34-12, 598 (July 7, 1976).
That is the case with this proposal. See generally Pfizer Inc. (available March
8, 2006, reconsideration granted) (rejecting "formalistic" approach to analysis
of substantial implementation). In fact, ExxonMobil's actions go beyond what the
proposal requests, because a recoupment provision in the company bylaws would be
more difficult to enforce against an individual executive than a recoupment
provision incorporated directly into the express terms of that executive's
compensation arrangement.
If you have any questions or require additional information, please contact me
directly at 972-444-1478. In my absence, please contact Lisa K. Bork at
972-444-1473.
Please file-stamp the enclosed copy of this letter and return it to me in the
enclosed selfaddressed postage-paid envelope. In accordance with SEC rules, I
also enclose five additional copies of this letter and the enclosures. A copy of
this letter and the enclosures is being sent to Mr. Rossi and to John Chevedden.
Sincerely,
/s/
James Earl Parsons
JEP/jep
Enclosures
cc - w/enc:
Mr. Chris Rossi
P.O. Box 249
Boonville, CA 95415-0249
Mr. John Chevedden
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
-----FOOTNOTES-----
1 Plan provisions regarding cancellation or clawback of awards in case of
detrimental activity or termination of employment, as described in last year's
letter, continue to apply.
[APPENDIX 1]
EXHIBIT I
Chris Rossi
P.O Box 249
Boonville, CA 95415-0249
Mr. Rex W. Tillerson
Chairman
Exxon Mobil Corporation (XOM)
5959 Las Colinas Blvd.
Irving TX 75039
Rule: 14a-8 Proposal
Dear Mr. Tillerson,
This Rule 14a-8 proposal is respectfully submitted in support of the long-term
performance of our company. This proposal is submitted for the next annual
shareholder meeting. Rule 14a-8 requirements are intended to be met including
the continuous ownership of the required stock value until after the date of the
respective shareholder meeting and the presentation of this proposal at the
annual meeting. This submitted format, with the shareholder-supplied emphasis,
is intended to be used for definitive proxy publication. This is the proxy for
John Chevedden and/or his designee to act on my behalf regarding this Rule 14a-8
proposal for the forthcoming shareholder meeting before, during and after the
forthcoming shareholder meeting. Please direct all future communication to John
Chevedden at:
olmsted7p (at) earthlink.net
(In the Interest of company cost savings and improving the efficiency of the
rule 14a-8 process please communicate via email.)
PH: 310-371-7872
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
Your consideration and the consideration of the Board of Directors is
appreciated in support of the long-term performance of our company. Please
acknowledge receipt of this proposal by email.
Sincerely,
/s/
Chris Rossi
10/22/07
Date
cc: Henry Hubble
Corporate Secretary
PH: 972-444-1157
PH: 972 444-1000
FX: 972-444-1505*
FX: 972 444-1350
[APPENDIX 2]
[XOM: Rule 14a-8 Proposal, November 23, 2007]
3Recoup Unearned Management Bonuses
RESOLVED: Shareholders request our board to adopt a bylaw to enable our company
to recoup all unearned incentive bonuses or other incentive payments to all
senior executives to the extent that their corresponding performance targets
were later reasonably determined to have not been achieved or resulted from
error(s). This is to be adopted as a bylaw unless such a bylaw format is
absolutely impossible. If such a bylaw were absolutely impossible, then adoption
would be as a policy. The Securities and Exchange Commission said there is a
substantive distinction between a bylaw and a policy. Restatements are one means
to determine such unearned bonuses.
This proposal applies to all such senior executives who received unearned
bonuses, not merely the executives who cooked the books. This would include that
all applicable employment agreements and incentive plans adopt enabling or
consistent text as soon as feasibly possible.
This proposal is not intended to unnecessarily limit our Board's judgment in
crafting the requested change in accordance with applicable laws and existing
contracts and pay plans. Our Compensation Committee is urgedfor the good of our
companyto promptly negotinte revised contracts that are consistent with this
proposal even if this means that our executives be asked to voluntarily give up
certain rights under their current contracts.
This proposal topic won 62%-support at the Motorola 2007 annual meeting. This
proposal is also similar to the proposal voted at the Computer Associates (CA)
August 2004 annual meeting. In October 2003 Computer Associates announced that
it had inflated income in the fiscal year ending March 31, 2000 by reporting
income from contracts before they were signed.
Bonuses for senior executives in that year were based on income exceeding goals.
Sanjay Kumar, then CEO, thus received a $3 million bonus based on Computer
Associates' supposedly superior performance. Subsequently Mr. Kumar did not
offer to return his bonus based on discredited earnings. Mr. Kumar was later
sentenced to 12-years in jail in regard to his employment at Computer
Associates.
There is no excuse for over-compensation based on discredited earnings at any
company. It is particularly important to support this proposal because of our
history of outrageous CEO pay. For instance our ex-CEO Mr. Raymond was entitled
to $350 million.
The scandal over backdated stock options is yet one more reminder that the
executive class of many corporations seek over-compensation based on undeserved
earnings.
Recoup Unearned Management Bonuses Yes on 3
Notes:
Chris Rossi, P.O. Box 249, Boonville, Calif. 95415 sponsored this proposal.
The above format is requested for publication without re-editing, re-formatting
or elimination of text, including beginning and concluding text, unless prior
agreement is reached. It is respectfully requested that this proposal be
proofread before it is published in the definitive proxy to ensure that the
integrity of the submitted format is replicated in the proxy materials. Please
advise if there is any typographical question.
Please note that the title of the proposal is part of the argument in favor of
the proposal. In the interest of clarity and to avoid confusion the title of
this and each other ballot item is requested to be consistent throughout all the
proxy materials.
The company is requested to assign a proposal number (represented by "3" above)
based on the chronological order in which proposals are submitted. The requested
designation of "3" or higher number allows for ratification of auditors to be
item 2.
This proposal is believed to conform with Staff Legal Bulletin No. 14B (CF),
September 15, 2004 including:
Accordingly, going forward, we believe that it would not be appropriate for
companies to exclude supporting statement language and/or an entire proposal in
reliance on rule 14a-8(i)(3) in the following circumstances:
the company objects to factual assertions because they are not supported;
the company objects to factual assertions that, while not materially false or
misleading, may be disputed or countered;
the company objects to factual assertions because those assertions may be
interpreted by shareholders in a manner that is unfavorable to the company, its
directors, or its officers; and/or
the company objects to statements because they represent the opinion of the
shareholder proponent or a referenced source, but the statements are not
identified specifically as such.
See also: Sun Microsystems, Inc. (July 21, 2005).
Stock will be held until after the annual meeting and the proposal will be
presented at the annual meeting.
Please acknowledge this proposal promptly by email and advise the most
convenient fax number and email address to forward a broker letter, if needed,
to the Corporate Secretary's office.
[INQUIRY LETTER]
December 26, 2007
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
# 1 Exxon Mobil Corporation (XOM) Shareholder Position on Company No-Action
Request Rule 14a-8 Proposal: Recoup Unearned Management Bonuses Chris Rossi
Ladies and Gentlemen:
The company December 7, 2007 no action request fails to address the Staff
precedent in Bristol-Myers Squibb Co. (March 9, 2006) which states: "We note
that there is a substantive distinction between a proposal that seeks a policy
and a proposal that seeks a bylaw or charter amendment."
The Bristol-Myers Squibb Co. precedent is also highlighted in the December 14,
2007 rebuttal of the Exxon Mobil no action request regarding the Rule 14a-8
Proposal: Special Shareholder Meetings by Kenneth Steiner.
Clearly the company has not adopted a bylaw that addresses the text of this 2008
rule 14a-8 proposal which states (bold added):
RESOLVED: Shareholders request our board to adopt a bylaw to enable our company
to recoup all uneamed incentive bonuses or other incentive payments to all
senior executives to the extent that their corresponding performance targets
were later reasonably determined to have not been achieved or resulted from
error(s). This is to be adopted as a bylaw unless such a bylaw format is
absolutely impossible. If such a bylaw were absolutely impossible, then adoption
would be as a policy. The Securities and Exchange Commission said there is a
substantive distinction between a bylaw and a policy. Restatements are one means
to determine such unearned bonuses.
This proposal applies to all such senior executives who received unearned
bonuses, not merely the executives who cooked the books. This would include that
all applicable employment agreements and incentive plans adopt enabling or
consistent text as soon as feasibly possible.
This proposal is not intended to unnecessarily limit our Board's judgment in
crafting the requested change in accordance with applicable laws and existing
contracts and pay plans. Our Compensation Committee is urgedfor the good of our
companyto promptly negotiate revised contracts that are consistent with this
proposal even if this means that our executives be asked to voluntarily give up
certain rights under their current contracts.
The above text was submitted following the 47% support from the yes and no votes
at the 2007 at Exxon Mobil annual meeting for this proposal calling for a bylaw
on this same topic:
"RESOLVED: Shareholders request our board to adopt a bylaw to enable our company
to recoup all unearned incentive bonuses or other incentive payments to senior
executives to the extent that their corresponding performance targets were later
reasonably determined to have not been achieved. This is to be adopted as a
bylaw unless such a bylaw format is absolutely impossible. If such a bylaw were
absolutely impossible, then adoption would be as a policy. The Securities and
Exchange Commission said there is a substantive distinction between a bylaw and
a policy. Restatements are one means to determine such unearned bonuses.
This would include that all applicable employment agreements and incentive plans
adopt enabling or consistent text as soon as feasibly possible. This proposal is
not intended to unnecessarily limit our Board's judgment in crafting the
requested change in accordance with applicable laws and existing contracts and
pay plans. Our Compensation Committee is urgedfor the good of our companyto
promptly negotiate revised contracts that are consistent with this proposal even
if this means that our executives be asked to voluntarily give up certain rights
under their current contracts.
For these reasons it is respectfully requested that concurrence not be granted
to the company. It is also respectfully requested that the shareholder have the
last opportunity to submit material in support of including this proposalsince
the company had the first opportunity.
Sincerely;
John Chevedden
cc: Chris Rossi
James Parsons<james.e.parsons@exxonmobil.com>
[INQUIRY LETTER]
January 2, 2008
VIA UPS Next Day
U. S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, NE
Washington, D.C. 20549
RE: Securities Exchange Act of 1934Section 14(a); Rule 14a-8 Omission of
Shareholder Proposal Regarding Bonus Recoupment
Gentlemen and Ladies:
We are writing to correct the mistaken characterization of a recent staff
precedent in the letter dated December 26, 2007, from John Chevedden to the
staff. Mr. Chevedden's letter responds to our original no-action request dated
December 7, 2007. To the extent this letter raises legal issues, it is my
opinion as counsel for ExxonMobil.
Mr. Chevedden cites Bristol-Myers Squibb Company (available March 9, 2006) to
support the proposition that framing a proposal as a request for a by-law
defeats any argument that the proposal has been substantially implemented
without a by-law. In fact, Bristol-Myers refutes that proposition. Although, as
Mr. Chevedden quotes, the staff noted in that letter the existence of "a
substantive distinction between a proposal that seeks a policy and a proposal
that seeks a bylaw and charter amendment," the staff nevertheless found that the
company's policy regarding poison pills substantially implemented the proposal
and that the proposal could therefore be omitted under Rule 14a-8(i)(10).
Although the current proposal relates to executive compensationa matter that,
as we discuss below, is less effectively addressed through a by-law than the
proposal at issue in Bristol-Myersthe same conclusion should be drawn.
The proposal at issue requests adoption of a by-law to enable the company to
recoup unearned incentive compensation. In New Jersey, where ExxonMobil is
incorporated, by-law provisions that purport to address employment-related
issues may be trumped by an employment contract. See Dennis v. Thermoid Co., 25
A2d 886 (1942) (by-law provision for removal of officers which conflicts with
contract provision for yearly employment cannot prevail) and Magnus v. Magnus
Organ Corp., 177 A2d 582 (Super Ct. 1962) (corporation is bound by arbitration
clause in president's employment contract, despite by-law for removal at will).
Accordingly, the most certain approach through which to create a right of
recoupment enforceable against an individual executive is to make recoupment an
express term of the relevant compensation plan.1 This is precisely what
ExxonMobil has done as described in our original letter. In addition, we have
published a Board statement on incentive pay recoupment on our website for the
benefit of investors and other interested parties.
ExxonMobil has therefore taken the necessary action to enable the company to
recoup compensation from senior executives as contemplated by the proposal. In
fact, the company's action is more effective for this purpose than a by-law
action would be, and therefore substantially implements the proposal.
A more relevant precedent from last proxy season is Bristol-Myers Squibb Company
(available March 17, 2006), dealing with substantial implementation of an
incentive pay recoupment proposal. The key issue cited by the staff in that
letter was the fact that the company's recoupment policy only applied to
officers who had engaged in misconduct. As we explain in more detail in our
original request, ExxonMobil has expressly addressed that issue by providing
that the company's right of recoupment will apply without regard to fault.
If you have any questions or require additional information, please contact me
directly at 972-444-1478. In my absence, please contact Lisa K. Bork at
972-444-1473.
Please file-stamp the enclosed copy of this letter and return it to me in the
enclosed self-addressed postage-paid envelope. In accordance with SEC rules, I
also enclose five additional copies of this letter. A copy of this letter is
being sent to the nominal proponent Mr. Rossi and to John Chevedden.
Sincerely,
/s/
James Earl Parsons
JEP/jep
Enclosures
cc: Mr. Chris Rossi
P.O. Box 249
Boonville, CA 95415-0249
Mr. John Chevedden
2215 Nelson Ave., No. 205
Redondo Beach, CA 90278
-----FOOTNOTES-----
1 ExxonMobil executives do not have employment contracts.
[STAFF REPLY LETTER]
January 3, 2008
Response of the Office of Chief Counsel Division of Corporation Finance
Re: Exxon Mobil Corporation Incoming letter dated December 7, 2007
The proposal requests that the board adopt a bylaw to recoup all unearned
incentive bonuses or other incentive payments to senior executives to the extent
that their corresponding performance targets were later reasonably determined
not to have been achieved or to have resulted from error.
We are unable to concur in your view that ExxonMobil may exclude the proposal
under rule 14a-8(i)(10). Accordingly, we do not believe that ExxonMobil may omit
the proposal from its proxy materials in reliance on rule 14a-8(i)(10).
Sincerely,
/s/
Craig Slivka
Attorney-Adviser |
