The man who will lead Exxon Mobil: can one of America's most controversial CEOs be cloned? Some shareholders hope so; activists pray not - Succession - Lee Raymond - Interview

Chief Executive, The, Oct, 2002 by Scott S. Smith

It's been more than a year since the board of Exxon Mobil asked its chief executive, Lee Raymond, now 64, to extend his contract. Saying that executives in training were not yet ready, the 13-member board asked Raymond, among corporate America's longest-serving CEOs, to stay on past the company's mandatory retirement age of 65. Raymond, who has been part of the Exxon organization since 1963 and chairman since 1993, had planned to retire in 2003, but agreed to stay on until a replacement was ready. The company attributed the postponement to the megamerger of Exxon and Mobil in November 1999, saying the changes it brought delayed the development of potential successors.

Exxon Mobil, composed of the two biggest pieces of the Standard Oil empire that was broken up in 1911, is one of the world's largest companies. It has exploration activities in 48 countries and is the world's largest nongovernmental marketer of gas. However, it faces several uncertainties: doing business in the volatile Middle East, the possibility of government inquiries into its pricing policies in the United States retail market and reduced demand for jet fuel after September 11.

Now, at its headquarters in Irving, Tex., where the tough-talking Raymond engineered the merger and oversaw the integration of the freewheeling Mobil culture with Exxon's conservative ways, succession is the priority. Will there be a style change at the top? Will Exxon Mobil get a kinder, gentler CEO?

In the oil industry's notoriously close-to-the-vest, behind-the-closed-door style, Raymond is noted for speaking out strongly on controversial issues. On global warming, for example, he has taken the position that the potential for climate change caused by elevated levels of carbon dioxide in the atmosphere is a legitimate concern, but disagrees with projections of serious future effects. He also opposes the Kyoto agreement and any mandatory measures to restrict the use of fossil fuels. Arguing that Raymond has caused Exxon Mobil "reputational harm," particularly for his skeptical views about the science behind global warming, Robert Monks, a longtime corporate governance activist who runs Lens Investment Services, spearheaded a surprisingly popular shareholder resolution this year. It was aimed at reducing Raymond's duties as chairman and CEO, to mitigate what Monks saw as the damaging effects of Raymond's view that global warming was not a problem for the company. The resolution got 20 percent of the vote, which was considered unusually strong.

On succession at Exxon Mobil, analysts and corporate recruiters point to three contenders, all members with Raymond of the four-person management team: Harry Longwell, Edward Galante and Rex Tillerson. Each of them has been with the company since the early- to mid 1970s. Whoever is chosen to lead, analysts say, will need technical and financial savvy, and nerve. The refining industry is in a slump. The company's first-half net income is down 40 percent from its 2000 high, on a 14 percent drop in revenues. The next CEO will face complex geopolitics, the analysts point out, and ever more daunting technical questions and image problems.

In this day of the deglamorized chief executive, who would want the job? Well, probably pretty near anyone who fancies himself a top-dog CEO. After all, the "God pod," as Exxon's executive suite is known, conveys awesome power. The chief may not be a head of state, but he does have more power than many. And for years Exxon Mobil has been one of the most profitable companies in the world.

There is no doubt that those 2000 revenues were due to extraordinarily high oil prices, but prices change. This year's first half brought in a reasonably healthy $94 billion, with $4.7 billion in net income. In the U.S., Wal-Mart had more sales in its first half, at $114.7 billion, but its profits were $3.7 billion.

Raymond did not set out to be an oilman, but he has built a financial and technological powerhouse, and will be a tough act to follow. He is a native of Watertown, S.D., a town of 20,000 about halfway between Fargo and Sioux Falls. In school, he quickly established himself as a vigorous debater with an interest in science. That led him to pursue a bachelor's degree in chemical engineering from the University of Wisconsin in 1960 and a Ph.D. in chemical engineering from the University of Minnesota three years later. He planned a career in academia but he thought it would be good to get some real-world experience, so he joined the Tulsa, Okla., office of the Standard Oil Company of New Jersey (later renamed Exxon) as a production engineer.

The ambitious young executive crisscrossed the corporate and global landscape, moving from Tulsa to the Caribbean to Latin America to New York. His financial skills first became apparent when in two years he took a refinery in Aruba that was losing $10 million a month and turned it into a moneymaker. He successfully ran the company's international supply and transportation of oil products. In 1979, Raymond was appointed president of Exxon Nuclear Co.