Center Stage for Exxon's CEO

Shareholders drilled Rex Tillerson with tough questions as he hosted his first annual
meeting as ExxonMobil's chief
The setting was the elegant Morton H. Meyerson Symphony Center in Dallas, built by I. M. Pei,
and the occasion was the first annual meeting for ExxonMobil (XON ) shareholders since Rex
Tillerson took over as chairman and chief executive in January.

But the new CEO didn't get much of a honeymoon. Sara Witman, of the socially active Northstar
Asset Management, lambasted the company for its "deplorable" sponsorship of the Masters Golf
Tournament at the all-male Augusta National Golf Club and offered up a proposition for Tillerson.
"I'd be happy to discuss this further with you on the golf course," said Witman, an avid golfer who
pointedly suggested that they would have to play at a venue where women were allowed. Not
missing a beat, Tillerson responded: "Me, too."

Hosting his first annual meeting as chief executive at Exxon, Tillerson regularly won points and
laughs for his sense of humor during the three-hour session. He faced tough questions and a
dozen shareholder proposals, covering everything from environmental responsibility to excessive
executive pay. There was a public outcry after Tillerson's predecessor, Lee Raymond, left the
company with a compensation package worth about $400 million. Nevertheless, all the
shareholder proposals, including those on restricting executive pay, were defeated.

KINDER, GENTLER STYLE. Tillerson's good-mannered and statesmanlike style signaled an end to
an era. Raymond, Tillerson's mentor, was alternately abrupt, caustic, or confrontational. While
covering much the same ground as the 2005 meeting, Raymond's last, this year's gathering was
relatively peaceful.

While he exuded a kinder, gentler style, Tillerson didn't expose any substantive differences
between his philosophy and that of his predecessor. The Texan made it clear that as boss of the
free world's biggest energy company he will dance with who brung him. That means that under
Tillerson, ExxonMobil will continue to pursue only the most lucrative long-term investments and
will not chase after hot deals or new exploration projects just because oil and gas prices are sky-
high. It also means ExxonMobil will probably continue to spend much on more rewarding
shareholders with dividends and share buybacks than it does on exploration and other business
investments. In 2005 the company spent $18 billion on such capital expenditures while it spent
$23 billion paying dividends and repurchasing shares.

When activist shareholders advocated a much larger commitment to alternative and renewable
energy projects, Tillerson merely reiterated that those opportunities are small relative to
petroleum. He cited the company's projection that demand for oil and gas will grow by 50% in the
next 25 years, as economies and populations expand. "We're not going to invest in lower-return
projects, we're not going to buy expensive volumes, and we will not jeopardize our ability to
provide consistent performance to our shareholders," Tillerson said.

ASIA BOOM. That disciplined approach has led ExxonMobil to return an average 21% on capital
employed over the past five years and 31% last year, well above its rivals. With an inventory of
100 promising future projects that could yield 26 billion barrels of oil-equivalent reserves on top of
the 73 billion barrels that ExxonMobil already has on its books, Tillerson expects to maintain a
leading position. In the next several years, Tillerson is counting on new production from offshore
West Africa and Russia, gas projects in Qatar, and expanded chemicals capacity in the booming
Asia market to help propel growth.

It isn't that the company doesn't like investing in future technologies. Tillerson pointed out that
ExxonMobil is spending about $700 million annually on research. The company has landed more
than 2,500 patents in the past five years, equal to its three largest competitors combined, he said.
Much of research and development is directed to increasing efficiency in production and
downstream operations such as refining and chemicals.

But he pointed out that much of it also is directed to what he called "breakthrough" technologies
such as hydrogen that could lead to new products down the road. Still, don't expect any sudden
changes for ExxonMobil in the next decade. Tillerson will stick closely to the tried and proven
playbook of his predecessors -- and why not? Despite the vocal activists who showed up at his
first annual meeting, Tillerson has millions of shareholders who are undoubtedly happy that their
returns continue to soar.