Tillerson, ExxonMobil cut deal to sever financial ties

ExxonMobil Corp. and Rex W. Tillerson, its former chief executive officer and US President-elect Donald J. Trump’s current nominee for secretary of state, have reached an agreement to shed financial ties and remove possible conflicts of interest should he be confirmed for the government post. The result is a severance package currently valued at about $180 million.

The deal entails that the value of more than 2 million deferred ExxonMobil shares he was slated to receive over the next 10 years be transferred to an independently managed trust and the ExxonMobil share awards would be cancelled.

The trust would be prohibited from investing in ExxonMobil and the trustee would manage the assets consistent with government ethics rules. Payments to Tillerson from the trust would be subject to the same 10-year schedule that the cancelled awards would have had if he had remained chief executive officer.

Tillerson would also surrender entitlement to more than $4.1 million in cash bonuses, scheduled to pay out over the next 3 years, and other benefits such as retiree medical and dental benefits, and administrative, financial, and tax support.

The one-time payment to the trust would be equal to the value of Tillerson’s cancelled shares based on a volume-weighted average price per share. Consistent with guidance from federal ethics regulators, the value would be reduced by about $3 million.

The trust would include forfeiture rules that would prohibit Tillerson from working in the oil and gas industry during the 10-year payout period.

The trust rules dictate that in the event of forfeiture, the money would be distributed to one or more charities involved in fighting poverty or disease in the developing world. Neither Tillerson nor ExxonMobil would have any control over the selection of the charities.

The net effect of the deal is a reduction of $7 million in compensation owed to Tillerson.

Separate to the agreement with ExxonMobil, Tillerson has also committed to the State Department that, if confirmed, he would sell the more than 600,000 shares in ExxonMobil he currently owns. Those shares are currently valued at about $54 million.

Tillerson retired from ExxonMobil on Dec. 31 following his nomination by Trump earlier in the month (OGJ Online, Dec. 14, 2016). He had spent more than 40 years with the firm. Former ExxonMobil President Darren W. Woods is Tillerson’s successor as chief executive officer (OGJ Online, Dec. 15, 2016).