Exxon Mobil Corporation (XOM) CEO Darren Woods Hosts 2020 Annual Meeting of Shareholders (Transcript)

Exxon Mobil Corporation (NYSE:XOM) 2020 Annual Meeting of Shareholders May 27, 2020 10:30 AM ET

Company Participants

Stephen Littleton - Vice President of Investor Relations and Corporate Secretary

Darren Woods - Chairman, President and Chief Executive Officer

Liz Gordon - New York State Common Retirement Fund

John Chevedden - Shareholder

Steve Milloy - Shareholder

Lila Holzman - Shareholder

Tim Brennan - Shareholder

Ricky Brooks - Shareholder

Operator

Good morning, and welcome to Exxon Mobil's 2020 Annual Meeting of Shareholders. Please note that this broadcast will be recorded and will consist of copyrighted material. You may not record or rebroadcast these materials without Exxon Mobil's consent.

At this time, I will turn the call over to Stephen Littleton, Exxon Mobil’s Vice President of Investor Relations and Corporate Secretary. Please go ahead.

Stephen Littleton

Thank you, and good morning, everyone. Welcome to our 2020 annual shareholders meeting. In a few moments, I will turn the meeting over to Darren Woods, Exxon Mobil's Chairman, President and Chief Executive Officer for the business overview and some comments about how we are managing the current market environment while positioning the company for long-term success.

First, I would like to address some of the logistical and procedural aspects of today's meeting. In light of public health concerns regarding the coronavirus outbreak and public health authority recommendations, we are holding our meetings solely by remote communications in a virtual format. If we encounter any technical difficulties and are unable to proceed with the meeting, please be advised that the notice of the annual meeting has been properly served. A quorum is present. All proposals will be deemed to be properly presented before the meeting, appointed proxies as cast all votes have set forth on the individual proxy cards. Polls will be closed at 10:30 am Central Time and then meeting will be adjourned. Final votes will be posted on the Exxon Mobil Web site and reported on Form 8-K.

I would now like to call to your attention our cautionary statements, which contains important information and disclosures regarding forward-looking statements made during today's presentation and discussion. Next, I'd like to provide an outline of today's proceedings. We'll begin by summarizing rules for the meeting, including how proponents of shareholder proposals or their duly authorized representatives will be recognized and the items of business to be covered. We will then give an update on Exxon Mobil's plans to grow shareholder value. Next, the nine items of business will be presented, including three board proposals, the election of directors, ratification of independent auditors and advisory vote to approve executive compensation in six shareholder proposals.

If you wish to vote or change your previous vote, please follow the voting instructions displayed on your screen. Polls will then be closed and I will provide the preliminary voting results from the inspector of elections. That will conclude the formal business of the meeting. We will then have a question-and-answer period as time permits, for questions received prior to or during this meeting. Following that discussion, Darren will provide some final remarks. To ensure the meeting is conducted in a orderly and productive manner, the Chairman of the Board has established rules governing this event.

The rules of conduct are posted on our Web site and are also available within the meeting materials on the virtual meeting Web site. Only shareholders as of the record date April 2nd or their properly appointed proxies will be entitled to participate during the meeting. Given the virtual nature of the meeting, we want to make sure we have adequate time to hear the proposal, as well as shareholder questions. As such, we've asked the proposal presenters to respect the three minute time allocations. To facilitate this, there will be two audible notifications to remind the presenters they are nearing the end of their allotted time. The first time will be heard when 30 seconds remain and a second and final notification when 10 seconds remain. At the end of the three minutes, the operator will intervene.

I would now like to pause for a moment to demonstrate the audible notifications. Abiding by this time allocation, we will ensure everyone is given equal time. For those of you who have registered as an identified shareholder and want to submit a question, you may do so within the, “ask a question” box in the lower left of your screen. Questions of general interest relating to Exxon Mobil business will be considered during the question-and-answer period. In light of the number of business items on this year's agenda and the need to conclude the meeting within a reasonable period of time, we will do our best to respond to as many questions as we can, but as always we cannot ensure that every question will be addressed.

A list the shareholders entitled to vote is available for your inspection. Further instructions are included in the meeting materials on the virtual meeting Web site. Shirley Nessralla and Paula Buckley of Computershare Trust have been appointed to Inspector of Election for this meeting and are participating remotely. They have taken an oath of office that has been delivered to the secretary for filing with the minutes. Notice of this meeting has been properly given. The Inspector of Election has determined that a quorum is present.

Now, it is my pleasure to turn the call over to Exxon Mobil’s Chairman, President and Chief Executive Officer, Darren Woods.

Darren Woods

Thank you, Stephen. Good morning everyone. I'd like to bring our meeting to order. The polls are now open. I declare a quorum present and the meeting ready for business. Thank you for joining us today. With the challenging circumstances of the COVID-19 pandemic, we have moved to a virtual format to protect the health and safety of our shareholders and everyone involved in our annual meeting.

We will conduct a formal business of the meeting in a few moments. But first, I'd like to share my thoughts about our company, starting with how we're managing the unprecedented market conditions caused by the coronavirus, while continuing to preserve long-term shareholder value. Over the years, we've had to respond to natural disasters, the international crises and market disruptions. As a capital intensive commodity business, we've successfully weathered the ups and downs of price cycles and often emerged stronger than before.

However, we've never experienced anything like what the world is now seeing, a global threat to public health and a significant global economic downturn, resulting in a commodity price collapse. In responding to these challenges, we have focused on three areas; protecting the health and safety of our employees and communities, keeping our operations running to provide the critical energy and products that support modern life and the COVID response efforts and aggressively reducing spend while preserving value. Throughout the crisis, we have to manage the impact on our business, while supporting our people, healthcare workers, first responders and many others who have worked tirelessly in support of their communities.

Early into the pandemic, we activated our emergency response teams and implemented business continuity plans, people who could began working from home, enhanced cleaning and distancing protocols were put in place at our offices and facilities and employees were provided additional personal protective equipment. To-date we've been largely successful in eliminating exposure to infections at our sites. To support society's broader response, we increased production of isopropyl alcohol, a key ingredient in sanitizer, especially polypropylene, used in medical mask and hospital gowns. On top of that, our people in Baton Rouge reconfigured operations to produce, blend, package and distribute medical grade hand sanitizer, which we donated to the healthcare providers and first responders across the United States.

We also support efforts to redesign and accelerate production of reusable face mask and shields to help alleviate shortages. Around the world through our philanthropic giving, we're supporting those directly affected by the pandemic. We're also helping our communities with donations to schools, support for food banks and fuel, meals and masks for healthcare workers and first responders. I'm extremely proud of our employees. They're taking care of themselves and their families, stepping up to support response efforts around the world and effectively running our business, which I'd like to turn to now.

Before discussing the pandemic’s impact on our business and our ongoing response, I’d like to provide some context with an overview of our work in 2019 to reshape our businesses and improve their earnings capacity. We made significant progress last year, growing upstream liquid volumes by 5%, while also growing future opportunities with major deep water discoveries. We achieved the first oil offshore Guyana ahead of schedule and below budget, and grew the resource potential. We increased Permian volumes by nearly 80%, again, executing our multi-year exploration program Offshore Brazil and continued work on L&G developments in Mozambique and Papua New Guinea.

Our downstream and chemical operations saw significant progress as well. In the downstream we delivered projects to upgrade our product yields and lower our costs. We've recently brought three major refined projects online Antwerp, Rotterdam and Beaumont, all performing at or better than the design basis and generating positive earnings in a challenged market environment. We also made progress on critical investments in Singapore and Beaumont. both leverage integration and technology, maximizing the value of molecules across the value chain.

In our chemical business, we continue to grow performance products that play an essential role in modern life. We successfully started up our polyethylene expansion in Beaumont and advanced projects in Baytown, Corpus Christi and Baton Rouge. Despite challenging market conditions, we delivered earnings of more than $14 billion. And through our quarterly dividends, Exxon Mobil share our success [technical difficulty] as we've done for more than 100 years. As we progressed through 2020, the challenging market conditions of 2019 has broadened and intensified for each of our businesses.

Starting in early March, the economies all around the world shutdown and are only now beginning to reopen. Demand for crude dropped by almost 30% in April. Demand for aviation fuel dropped by nearly 70% and gasoline demand was almost half. While we expect demand will fully recover at year-end, we project it will still be down compared to last year due to lost economic activity. On average, we estimate that global demand for oil in 2020 be down roughly 10% year on year. We expect demand for natural gas to be down less than 5% with demand for chemical products flat to 2019 levels.

To help mitigate the impact of a significant loss in demand in revenue. Last month, we announced a number of near-term actions to reduce spend. A 15% reduction in cash operating expenses and 30% reduction in capital expenditures. We initiated an effort in the fourth quarter of 2019 to drive expense efficiencies and lower costs, which served as the springboard to this broader and much deeper effort. Spending will be maintained on activities that are critical to the integrity of our operations, the safety of our people and the protection of the environment. We're focusing on capturing additional efficiencies and lower market prices, deferring less critical spends and prioritizing quick payout items.

Turning to capital. We took a similar approach. In the very early days of the pandemic, I discussed reductions in our capital spend based on market conditions at the time. Shortly thereafter, we intensified work with our venture partners, resource owners and contractors to optimize spend in light of the growing impacts of the pandemic. We set an aggressive objective, reduce spend without compromising the project advantages or returns. Any inefficiencies had to be offset with market savings or other efficiencies. Through extensive collaboration, we've identified opportunities to reduce our CapEx by $10 billion and more than offset deferral costs, preserving the returns and project advantages.

We’re reducing small capital projects at most of our sites, slowing the pace of some downstream and chemical projects and pushing out the development of Mozambique LNG. The largest share of the reduction will be in our unconventional business, specifically the Permian Basin, where the short cycle investments are more readily adjusted. We have the flexibility to reduce spend in the Permian, while maintaining scale, preserving capital efficiency and maximizing resource recovery through our acute development. Our investments in Guyana remain a key priority for the company. While we've attempted to maintain the pace of development, the ongoing election process and uncertainty around Guyana's next administration has slowed government approval and progress.

Finally, let me say a few words about our financial capacity, which has been built for times like this. Our strong balance sheet is a core competitive advantage and an integral part of our strategy, allowing us to maintain our capital allocation priorities across the life cycle. This approach has proven itself during these trying times, allowing us to selectively advanced critical investments to structurally improve our business despite very low demand and margins. As we address these short term challenges, we must also keep our eye on maximizing long-term value. Our strategy and business is based on long time horizons, which is why we always go back to the fundamentals. Despite the current volatility and near term uncertainty, the long-term fundamentals that drive our business remain strong and unchanged. Economies around the world will recover. Even with the current downturn, global energy needs are expected to increase about 20% over the next two decades with the majority of that growth in developing countries. Global populations will continue to grow to more than 9 billion by 2040. Billions will enter the middle class. People will continue to strive for better life and higher standards of living, and the world's economies will grow, driving the need for more energy. We've seen this in countries like China and India, and are seeing in other developing nations. This is a good thing. People are healthier, more educated and living longer. Their lives are better. This is why over the long-term, international energy agency estimates that up to $20 trillion of additional investment in oil and natural gas will be needed by 2040, to meet demand and to replace the decline in current production. Of course, the world's efforts to address the risk of climate change will impact the amount of oil and gas that will be needed. However, incredible scenarios that evaluate options to keep global temperature increases at or below two degree C. Oil and natural gas supply more than 40% of the world's energy needs in 2040. None of this keeps us from exploring for and investing in alternative solutions that reduce global greenhouse gas emissions, while reliably providing affordable energy.

In addition, we're focused on mitigating emissions from our own operations, providing products to help our customers reduce their emissions and engaging in climate related policy. Every year, we publish an energy and carbon summary, which provides a comprehensive discussion on our philosophy, strategies, work and governance to climate related risks. Our most important work in lowering emissions, while still providing affordable energy leverages our industry experience and R&D organization to develop technologies that close the gap in the current solution set. Existing technologies like wind and solar power, provide a range of benefits but they also have limitations in availability, reliability and storage. And while they have important roles to play, they alone can't meet society's need for less carbon intensive energy meaningful technology advances are needed. This is where Exxon Mobil can add unique value. With our research capabilities and commitment to innovation, we're investing in new technologies that provide affordable lower carbon energy.

We're focusing our efforts on the most important areas, commercial transportation, power generation and industrial processes. Together, these three sectors account for about 80% of global CO2 emissions. In the commercial transportation sector, our research has focused on advanced biofuels, algae and cellulosic biomass. For power generation and industrial processes, we’re working to reduce the cost of carbon capture and storage. We're also working on affordable technologies to directly capture CO2 from the air.

For energy-intensive industrial processes, we're looking at new materials and manufacturing processes that we do see use of energy and thus lower emissions. We have teams collaborating with leading universities, industry partners and government agencies around the world to advance technologies across each of these sectors. This is not a new approach for us. We have a long history of researching and developing new technologies that help meet the pressing needs of society. Of course, developments in technology also play a critical role in the long-term success of our ongoing business. In fact, it is one of our key competitive advantages.

A recent example is our proprietary full wave seismic inversion technology, which helps identify hydrocarbon reservoirs. Last year, this enabled us to have four of the top 10 exploration discoveries in the world and five out of the six largest oil discoveries. In offshore Guyana, this technology helped us achieve four giant discoveries in 2019, and increased our drilling success rate there to 89%, well above the industry average. The results speak for themselves. The estimated recoverable resource offshore Guyana has now increased to more than 8 billion barrels, about two and half times what we estimated just two years ago. Closer to home in the Permian basin where we built an industry leading position with 1.8 million largely contiguous acres, we see the benefit of coupling our technology advantage with scale, another key competitive advantage.

We're combining industry leading and reservoir modeling, advanced drilling techniques and large scale developments, to reduce costs and maximize resource recovery, giving us a significant industry advantage. As we adjust the pace of our Permian development in response to pandemic, we're ensuring that we don't compromise these advantages and that wee protect the future value, maximize recovery of the resource and drive the lowest cost operations. Our integrated value chains that in some markets link upstream production with co-located refineries and chemical plants provided another competitive advantage, extracting the maximum value from every molecule and significantly reducing operating costs.

We're fully leveraging this integrated capability in the Permian, beginning with the production of oil and gas in New Mexico and West Texas through our gathering systems, terminals and pipelines, all the way to our Gulf Coast refining and chemicals complexes, providing unconstrained market access to the upstream and advantage feed stocks for our manufacturing facilities. Over the past two years, this approach has generated $1 billion of incremental value. The collective experience of our global organization operating over decades has resulted in deep knowledge and critical disciplines and execution capabilities. We refer to this as functional excellence, which manifests itself in all of our work. A particular importance is how we develop and execute projects.

We leveraged our project management expertise in the Liza Phase 1 development Offshore Guyana, last year bringing production online under budget and ahead of schedule, less than five years from discovery, which is about twice as fast as the industry's average for a project of this scale, and we did this with leading safety and environmental performance. We enhanced our capabilities in this area when we formed our new global projects organization in April of last year, integrating decades of project management experience, deep technical knowledge and commercial capabilities from our upstream, refining and chemical businesses and the one global team, excluding projects across our entire corporation. This new organization is already delivering significant value, and is playing a critical role in managing our response to COVID-19.

All of our advantages and the synergies that exist among them have taken generations to establish and serve as the foundation for our strategies. Benefits though only realized with the commitment and hard work of our people. With more than 160 nationalities and an average career tenure of 30 years, our people are our most important competitive advantage. We have professionals from a wide range of disciplines, including behavioral sciences, mathematics, chemistry and biology, and more than 20,000 scientists and engineers, including 2,200 PhDs. Their development through a combination of challenging work assignments, training and on the job experiences ensures they realize their potential and fully contribute to our business. This is particularly important in managing the current uncertainties, and I have no doubt they're up to the challenge.

Let me conclude by saying that these are indeed unprecedented times. To support the pandemic response, we're working to keep our operations safe and increasing production of essential products needed by healthcare workers, first responders and the communities where we live and work. While doing this, we've adjusted our business plans and response to market conditions, and are working hard to ensure we maintain the value of our portfolio of industry leading opportunities. While these are uncertain times, some things remain unchanged, including the fundamentals that underpin our business, our-long term plan and our commitment to grow value for shareholders.

The global economy will rebound. Populations and energy demand will grow and so will the demand for our products. Our objective is to strengthen the structure and earnings power of our business through industry advantage projects. This provides a solid foundation for generating cash, reliably growing the dividend and maintaining a strong balance sheet. Our company is strong and every employees working hard to make it stronger. I want to thank you for your support and the continued trust and confidence you placed in our great company.

With that, let's turn to the business of the meeting. I'm now placing the nine items of formal business listed in the meeting notice, including the election of directors before the meeting for a vote. The first proposal is the election of 10 directors. Board nominates the 10 persons identified in the proxy statement. All 10 are highly qualified to serve on the board. All the nominees are currently serving as Exxon Mobil directors and are participating in this meeting by phone. They are, Susan Avery, Angela Braly, Ursula Burns, Kenneth Frazier, Joseph Hooley, Stephen Kandarian, Douglas Oberhelman, Samuel Palmisano, William Weldon.

I also want to take this opportunity to recognize one of our directors who is retiring and not standing for reelection, Steve Reinemund, with served on our board for 14 years. Steve, it's been a pleasure working with you over the years. We appreciate the leadership you've provided. And we're going to miss your wise counsel. Thank you for your years of service.

The next item on the agenda is the ratification of PricewaterhouseCoopers as the independent auditor. Board's audit committee has appointed PwC to audit Exxon Mobil's financial statements for 2020. PwC is represented today by Tom Smith, he's also participating remotely. The audit committee's reasons for recommending PwC appear in the proxy statement. The audit committee recommend vote for ratification of that appointment.

The next board proposal calls for a shareholder advisory vote to approve executive compensation. Board recommends a vote in favor of this proposal.

The next order of business is the consideration of shareholder proposals. For those following along, details can be found in the proxy statements posted within the meeting materials on your display.

I'll now turn it over to Stephen, who will introduce the presenters.

Stephen Littleton

Thank you, Darren. As I mentioned earlier, to ensure we have adequate time to hear the proposals, as well as shareholder questions, each presenter will have up to three minutes to present their proposal. The first shareholder proposal calls for an Independent Chairman. Liz Gordon will present a proposal with a recorded statement. Operators please play the recording.

Liz Gordon

Good morning. My name is Liz Gordon and I represent the New York State Common Retirement Fund, which is a co-sponsor along with the Olga Monks Pertzoff Trust 1945 of item for the independent chair proposal. This proposal urges the Board of Directors to require an independent chair of the Board for the next CEO transition. This is a fundamental principle of corporate governance, a Board led by its chair is responsible for protecting shareholders’ interests by providing oversight of management, and there an inherent conflict when a CEO is tasked with oversight of himself or herself. When the CEO and chair positions are combined, it results in excessive influence on the Board by the very management it is supposed to oversee.

In response to the strong vote on this resolution by shareholders at last year's Annual Meeting, the company has re-branded its presiding Director as a Lead Director, purportedly expanding the position’s responsibility, but this is nothing more than window dressing as the combined chair and CEO position retains full authority over the Board, while our company lagged behind its peers on financial performance, shareholder engagements and risk oversight, especially climate risks. In fact, Climate Action 100+ and international coalition of 450 investors with more than $40 trillion in assets has flagged this proposal on it's list of shareholder resolutions that are consistent with the objectives of the initiative, which include addressing climate risks by reducing greenhouse gas emissions, strengthening climate related financial disclosures and improving governance, which of course includes Board leadership by an independent chair to ensure robust climate risk oversight.

Exxon is a laggard in addressing climate risks. Our company has no enterprise-wide targets for greenhouse gas emissions reduction from its own operations, does not even disclose the greenhouse gas emissions associated with the use of its products, much less articulate any ambition to reduce those emissions and invest to grow its hydrocarbons production at a rate that is clearly inconsistent with the goals of the Paris Agreement. By contrast, peers such as BP & Shell has disclosed detailed plans for managing the low carbon transition that were developed in response to engagement with their investors.

These plans include setting greenhouse gas reduction targets for their products and committing to become net zero emissions businesses by 2050. Significantly, the boards of these companies have an independent chair. It is crystal clear to us that Exxon Mobil’s inadequate response to climate change constitutes a broad failure of corporate governance, and a specific failure of independent directors to oversee management. We have no doubt that an independent chair would mean an Exxon Mobil that is better equipped to address significant business risks, engage more effectively with its shareholders and post better financial performance. Thus, we urge our fellow Exxon shareholders to vote for item four on the proxy.

Darren Woods

Okay. Well, let me respond to the proposal. And before getting to that though, I'd like to make a few comments regarding our position on climate change and shareholder engagement. As I discussed in my opening remarks, we recognize the importance of addressing the risk of climate change, and are focusing our efforts on developing technologies that close the gaps in the existing solution set.

As the world's going to realize the ambitions of the Paris Agreement, new options are needed and the more organizations working on them the higher the chance for success. We're also committed to managing our operational emissions to produce some cleaner, more-advanced products and to engaging in climate policy discussions. With respect to shareholder engagement, over the last three years, we've been increasing our efforts in this area. For example, last year we had some 85 engagements, including more than two dozen substantive meetings with members of Climate Action 100, including participation by both subject matter experts and members of our board of directors.

As to the proposal itself, we agree with the importance of a strong and independent board. The strong board is dedicated to representing the interest of shareholders and providing oversight of company management, including the CEO. I can assure you that Exxon Mobil has a strong board. Our board is actively engaged on all substantive matters. Our meetings provide for in depth and candid discussions on issues of importance to shareholders.

With respect to the issue of a combined Chairman and CEO position, the board has carefully considered this matter and currently believes that having the roles combined results in significant benefits. Our governance is strengthened by the annual selection of a lead director who provides independent oversight and act as a liaison with the Chairman. Importantly, this person is selected by the independent directors.

On top of that this year, the board responded to input from shareholders and broadened the authorities of the lead director position. So in addition to previously held responsibilities, the lead director now leads the annual performance evaluation of the board, chairs the board affairs committee and works with the compensation committee to oversee the annual evaluation of the CEO, the communication and resulting feedback and the review of CEO succession plans. The board's decision to broaden this role, following shareholder engagement demonstrates the strong oversight and independence of our nine non-employee directors. In summary, the board believes our current structure provides the greatest benefits and importantly, preserves the board's flexibility to determine the appropriate leadership and oversight structure. Therefore, the board recommend shareholders vote against this proposal.

Stephen Littleton

The next holder proposal relates to special shareholder meetings. I understand that John Chevedden will present the proposal. Operator, please open the line. John, go ahead.

John Chevedden

Hello. This is John Chevedden. Can you hear me okay?

Darren Woods

Yes, we can, John.

John Chevedden

This is proposal five, it calls for an improvement in the right for shows that call a special shareholder meeting sponsored by Kenneth Steiner of Great Neck, New York. Shareholders ask the board to take the steps necessary to amend the bylaws and governing documents to give the owners of a total of 10% of the outstanding common stock, the power to call a special shareholder meeting without the current requirement that begins with a petition to a court of law.

This proposal has already been successful in leading Exxon management to reduce the stock ownership threshold to call a special meeting to 15% in March of 2020, a more accessible shareholder ability to call a special shareholder meeting would put shoulders in a better position to give continuing input on improving the makeup of our board of directors. Calling a special meeting is that means shareholders can use to raise important matters outside the normal annual meeting cycle like the election of a new director.

This proposal topic is more important since Exxon shareholders have no oversight of the CEO by an independent board chairman. The combined Chairman, CEO, Mr. Darren Woods, was rejected by the third highest number of Exxon shares in 2019. Ms. Ursula Burns, who chaired the Exxon audit committee, was rejected by 27% of shares in 2019 and Steven Randleman, who was not on the ballot this year, was rejected by 14% of shares. This proposal could be an incentive for directors who performed better after the price of our stock has fallen from $70 to $45 in one year. Plus the new lead director, Mr. Kenneth Frazier is also a Chairman and CEO, and one can expect the rules of professional courtesy to apply at the expense of effective oversight. There should be a rule against any Chairman and CEO having oversight of another Chairman and CEO. This is like placing a pilots union in charge of investing airliner crashes.

A more accessible shareholder ability to call a special meeting is more important, because the shareholder right to use shareholder proxy access maybe out of reach. And since it can only be used by less than 21 deep pocket shareholders who have owned a combined total of $5 billion of Exxon Mobil stock continuously for three years. If a group of less than 21 shareholders is $1 short of meeting the enormous $5 billion requirement, the group is 100% disqualified.

Please vote, yes for proposal five for an improvement in the right for shareholder to call a special meeting.

Darren Woods

Thank you, John. We agree that shareholders have a meaningful right to call a special meeting. We provide two pathways for that to occur. Our shareholders have one option for many years under New Jersey law where we are incorporated. Under that law, Exxon Mobil’s shareholders holding 10% of outstanding stock have the right to call a special meeting provided they have a court petition showing good cause.

Based on shareholder input, the board expanded that right. Now shareholders holdings 15% of outstanding shares can call a special meeting with no need for a court petition. I would also note that a 15% threshold is significantly lower than the average of S&P 500 companies, which is 25%. Therefore, the board recommend shareholders vote against this proposal.

Stephen Littleton

Thank you, Darren. The next shareholder proposal calls for a report on the cost and associated benefits of the company's environmental expenditures. I understand that Steve Milloy will present the proposal. Operator, please open his line. Steve, go ahead.

Steve Milloy

Good morning my fellow shareholders. My name is Steve Milloy. Our share price was rocked this year by oil production war and coronavirus lockdown. You may think these events were unforeseeable and management is simply doing the best it can, or you can realize Exxon Mobil operates in a dangerous and unpredictable world where management must be prepared for all sorts of catastrophic events. I filed my shareholder proposal because I take the latter view and management is letting us down.

Our world runs on fossil fuels. Nothing in our world happens without that, nothing. And now to recover from the coronavirus locked down, we will need cheap, reliable fossil fuels more than ever. But what is management doing? Management is helping radical left wing groups scare the public about fossil fuel emissions. Management is lobbying for CO2 tax so consumers can use less of the product Exxon sell. Management wants America to rejoin the Paris Climate Agreement, a hoax of a treaty that would limit fossil fuel use in the U.S., while allowing Communist China to do whatever it wants. Is management incompetent or just irresponsible? But one thing's for sure. When he talks about climate, it is spewing nonsense. You can read that in some of management's baloney in my shareholder proposal or in my op-ed in today's Wall Street Journal.

But here's the bottom line. Exxon Mobil could stop selling oil and gas today and forever and it would make no difference to weather or climate. In fact, the entire U.S. could stop emitting today and forever and it would make no difference to weather or climate. The math is simple. Management says it is simply preparing for the inevitable low carbon world. But remember, nothing in the real world happens or will happen anytime soon without oil and gas. Even left wing filmmaker Michael Moore was compelled to expose the fraud of renewable energy in the low carbon world in his documentary Planet Of The Humans, the reality of a low carbon world would be poor and dirtier and with a much lower standard of living, the deaths and depravation of a low carbon world would make the tragedy of COVID-19 look like a sneeze. Preparing to knuckle under it to a low carbon world is tantamount to getting used to the idea of a communist China dominated world.

Management should be fighting low carbon world, not facilitating this global suicide. Climate radicals want to go from the economic and societal devastation of the coronavirus lockdown straight into the economic and societal devastation of a climate lockdown. They say this all the time and they are serious. Many of you may be thinking, oh, that will never happen. But did you ever imagined the price of oil could go below zero as it did in April. We need management to dial into reality. Yes, there is a real climate risk out there, but it's got nothing to do with the weather.

Climate and the low carbon world are not about controlling the weather, they're about controlling us. Just ask Michael Moore, who had his film yanked down off YouTube, because it exposed the ugly truth about renewable energy and the green fraud behind it. The real threat we face is climate communism, a strong but realistic term. And management wants to surrender Exxon Mobil, our investments, our standard of living and our liberties to it. No, thank you. I'm not worried about the weather in the year 2050. I'm worried about the totalitarianism of the year 1984, and you should be too. Thank you.

Darren Woods

Well, thanks, Steve. Appreciate your comments. Let me start by saying, I understand some of the concerns that you've mentioned. I think they're misplaced though at Exxon Mobil. We certainly agree that transparency and accurate disclosures are important for our shareholders to appropriately assess the potential risks and benefits of investments and all the opportunities inclusive of those undertaken to address the risk of climate change are evaluated to support the objective of generating long-term shareholder value.

In fact, I think if you look at our plans going into the future, we intend to grow production of both oil and gas to meet the growing demands of society. We also believe though that our efforts to mitigate greenhouse gas emissions have a long-term substantive benefit to the corporation. In fact, we've seen over many years numerous examples of where our investments to mitigate environmental impact also improve the business performance.

There is undoubtedly a strong correlation between safe, reliable and responsible operations, including steps to reduce emissions and financial and operating performance. Some examples include co-generation where we generate both power and steam, saves emissions and energy at the same time, reducing flaring, reducing methane leaks, preserve products and reduces emissions at the same time.

As a company, we've been very clear. For society to me it's ambitions to significantly move to a less carbon intensive fuel new technologies are going to be needed. And earlier during my presentation, I outlined the various technologies we are researching that could help society transition to a lower carbon energy system consistent with the goals of the Paris Agreement.

I'll conclude by stressing that we're fully transparent and publicly disclose activities and expenditures associated with environmental protection, and in addressing the risk of climate change. Sources include the energy and carbon summary, outlook for energy and the sustainability report. Therefore, the Board recommends shareholders vote against this proposal.

Stephen Littleton

The next shareholder proposal will require a report on the public health risk of our petrochemical investments. I understand that Lila Holzman will present the proposal with a recorded statement. Operator, please play the recording.

Lila Holzman

Good morning Mr. Chairman, members of the board, fellow shareholders. My name is Lila Holzman, and I want to thank you for the opportunity to present proposal number seven, submitted by As You Sow. The proposal requests a report assessing the public health risks of expanding petrochemical operations in areas increasingly prone to climate change induced storms, flooding and sea level rise. Due to do the COVID-19 pandemic, the 2020 has seen unprecedented disruption. With lives at stake, government action has been insufficient to avert massive loss of life and economic devastation. The shocks demonstrate just how critical early action and planning is to mitigating known and likely global catastrophes even as the energy sector grapples with the impacts of COVID-19, it must not put aside preparation and action to send the risks of the climate crisis.

Petrochemical operations use hazardous chemicals that are dangerous when released to the environment. Already storms like hurricane Harvey has shown how vulnerable Exxon's plants are to extreme weather. During hurricane Harvey, flooding at Exxon facilities resulted in upsets and equipment malfunctions that led to alarming chemical leaks. Nearby community members reported health impacts, such as respiratory illness, nausea and headaches among others. Some health issues may be long-term and worse than captured by initial reports. We know that hurricanes like Harvey are becoming more frequent and severe as the impacts of the climate crisis worsen. And yet, Exxon has stated plans to significantly expand petrochemical investments in high risk regions like the Gulf Coast.

As investors, we seek disclosures with sufficient detail on how the company’s decision-making considers future severe and evolving climate risks, and how that impacts where and how to invest in the build out of sensitive infrastructure. Existing risk management systems are proving demonstrably inadequate to handle new climate threats, and the company has already faced the legal challenges on this issue. Since this proposal received a strong 25% vote after the first time it was presented last year, it appears Exxon has not changed its disclosures or related practices.

The requested proposal will help the company incorporate new insight to reduce risk of infrastructure damage, financial penalties, litigation, human health consequences and reputational damage. It will further provide more transparent analysis to shareholders who must assess the strength of management’s actions to mitigate risks from expanding petrochemical investments in areas increasingly prone to climate change induced storm, flooding and sea level rise. We look forward to working with a company to address this emerging issue. Thank you.

Darren Woods

Thank you, Lila. Let me be clear about our overall approach with regard to risk and operations. Exxon Mobil operates in geographically diverse locations around the world. And as a result, we have extensive experience operating facilities in a wide range of challenging physical environments. Every development we progress uses a rigorous assessment process. This includes advanced computer modeling, a process that considers the full range of potential environmental, socioeconomic and health risk. Understanding these risks enabled us to develop measures to avoid, mitigate or remedy them.

Our operations integrity management system is the backbone of this process, and has proven effective in ensuring readiness-for and resiliency-to extreme weather conditions. The work is done jointly with the communities where we seek to advance the project. We work collaboratively with a broad range of stakeholders, neighbors, local government, environmental organizations and regulatory officials. Finally, we only invest where potential risks can be managed to safe and acceptable levels. Therefore, this report is not needed and the board recommends voting against this proposal.

Stephen Littleton

Thank you, Darren. The next shareholder proposal calls for a report on the company's political contributions. I understand that Tim Brennan will present a proposal. Operator, please open his line. Tim, go ahead.

Tim Brennan

Mr. Chairman, members of the board and fellow shareholders, thank you for the opportunity to speak to you this morning. And thank you, Mr. Woods, for arranging for this virtual meeting to protect your health. I'm Tim Brennan, representing the lead filer, the Unitarian Universalist Association where I serve as special advisor on responsible investing. I hereby move our proposal, item number eight on your proxy card, which requests that the company report to shareholders on policies and procedures for making political contributions with corporate funds and on election related contributions and expenditures, including indirect funding of elections and trade associations.

One of the UUA's seven principles calls us to uphold the democratic process. We are deeply concerned that excessive spending and dark money in elections can corrupt democratic institutions and undermine public trust, especially if it comes without full transparency. Furthermore, we believe that transparency and accountability and corporate spending to influence elections are in the best interest of shareholders.

The Center for Political Accountability Zicklin Index, benchmarks the political disclosure and accountability policies and practices of leading U.S. public companies. With a middling score of 61 out of 100 in 2019, the Exxon's showed some improvement but still scores poorly on disclosure of election spending that goes beyond the minimum mandated bylaw. These payments are often referred to as dark money, because the connection between the donor that is the company and the candidates is hidden from public view.

The Zicklin Index report reveals that Exxon does not disclose entire categories of payments intended to influence elections, such as independent expenditures, indirect contributions through trade associations and payments to so called social welfare organizations. Such admissions can make it appear that the company has something to hide. In a statement of opposition included in your proxy statement, the Exxon board argues that meeting the minimum legal standard is sufficient. In doing so, the company is setting a very low bar for itself. Disclosing direct and indirect election related spending as this proposal request would bring our company in line with a growing number of leading companies, including peers ConocoPhillips, Able Energy and Apache Corporation.

If Exxon has nothing to hide, transparent disclosures should show that its election spending is being done in the company's and shareholders' best interest and is aligned with company values and public positions. This would protect its reputation and shareholder value. Therefore, we urge shareholders to vote for this proposal. Thank you.

Darren Woods

Thank you, Tim. The board agrees that transparency and accountability are important components of our company's political spending. In response to shareholder feedback, we've expanded the details of our oversight process, governing the development of public issue of positions, as well as lobbying activity on our Web site. Our site also discloses the company's political activity guidelines, as well as multi-year contributions to candidates and political organizations.

We fully comply with all disclosure requirements under Federal and state laws, which we believe are sufficient to ensure disclosures and transparency, and provide a consistent and equitable standard for all reporting entities. Finally, the company's political contributions are subject to strict internal review processes, including approval by the Chairman and an annual review by the Board. For these reasons, the Board recommends a vote against this proposal.

Stephen Littleton

The final shareholder proposal calls for a report on lobbying. I understand that Ricky Brooks will present the proposal. Operator, please open his line. Ricky, go ahead.

Ricky Brooks

Can you hear me?

Darren Woods

Yes, we can hear you.

Ricky Brooks

My name is Ricky Brooks. I work at Exxon Mobil's Baytown Texas refinery. I'm the President of USW 13-2001. On behalf of the USW, I hereby move item nine report on lobbying, a proposal filed by 12 co-sponsors. Exxon's current disclosure is [inadequate]. We need more transparency in state lobbying and involvement in trade association, as well as social welfare organizations that can engage in unlimited lobbying activities. When our company’s lobbying contradicts its public position, it's [problematically] creates reputation of risk.

For example, Exxon Mobil is assisting COVID-19 relief efforts but the Chamber of Commerce of which Exxon Mobil is an active and prominent member, is [lobbying] against using the Defense Production Act on medical manufacturing when essential workers like me and frontline workers face PPE shortages. Exxon discloses making a total of $390,000 in contributions to the Chamber's charitable group in 2018 but shareholders have no way of knowing the company's payments to the chamber itself.

Here's another example. I've seen firsthand how dangerous refineries and chemical plants can be. My union leads the National Old Boardman Program, which helps address safety issues in the industry, push for process safety management regulations in California that would make refineries and [surrounding] communities safer. But then the [Western States] Petroleum association lobbied heavily to roll back to safety reform. Exxon Mobil’s undisclosed trade association payments are part of an $8.8 million. This association has been in California in 2019 to directly lobby against regulations that protect workers like me and the community Exxon operates in.

Exxon Mobil supports the Paris Climate Agreement and yet it was named by Influence Map as one of the top-three global corporations lobbying against effective climate policy. Because of this misalignment last year, Exxon was at risk of being banned from lobbying in the European Union. This is -- there’s growing support for lobbying disclosure at Exxon and the church commissioners of England, the New York State Common Retirement Fund, and the [technical difficulty], have all publicly called on Exxon investors to support this proposal.

Coupled with all of this, Exxon Mobil claims it cannot afford to offer hourly [technical difficulty] refinery employees, pattern wages, yet it can spend all of this money and even seek increases to executives stay. And Exxon Mobil for two years was known natural labor relations [violations] to the law have kept the Clinton, New Jersey employers without a contract. It is time to make [technical difficulty] to do what's right for hard working men and women in Clinton, New Jersey and we urge you do so Mr. Chairman, and we urge all shareholders to support a vote for [technical difficulty].

Stephen Littleton

Thank you, Mr. Brooks. Unfortunately, you have exceeded the three minutes and we must move on. However, your complete shareholder proposal can be found in our proxy statement. I will now ask Darren to respond.

Darren Woods

Let me thank you Ricky. The board fully supports appropriate transparency, accountability and disclosure of lobbying policy activities and expenditures. Risk associated with lobbying and political engagements are addressed as part of the board's oversight of the company's enterprise risk framework, which includes potential reputational risk. We also follow a strict review and oversight process to ensure our public policy positions are aligned with lobbying activities. This process includes regular reviews of public issues of significance with the management committee and the board.

In addition, our positions on key issues and grassroots lobbying communications are publicly available on our Web site. Each year, the company’s political contributions and lobbying expenditures are presented to the board. We also issue public filings that include expenses associated with employee federal lobbying. This includes those portions of payments to trade associations, coalitions and think tanks that are spent as part of federal lobbying. In addition to these extensive disclosures, we've responded to shareholder input and made further enhancements to our Web site, and proxy provide even greater detail regarding the board's oversight process. To summarize, the board believes the company's detailed disclosures are appropriate and therefore recommends you vote against this proposal.

That concludes the presentation of the proposals. Please cast your votes if you've not already done so. I will pause for a brief moment before the polls are closed. The authorized proxies in attendance today have cast all votes in accordance with the instructions indicated on the individual proxy cards. I now declare the polls closed. We'll turn it over now to Stephen to report the preliminary results of the vote. Stephen.

Stephen Littleton

Thank you, Darren. According to the inspector of elections, there are 3.5 billion shares represented at this meeting. That equates to approximately 82.2% of outstanding shares at the time of the vote. Subject to final tabulation of votes, which should not materially change the results, on average 92.6% of the votes cast were voted to elect as directors for 10 nominees listed in the proxy statement. The resolution concerning the ratification of independent auditors passed approximately 96.8% of the shares voting thereon were voted for. The resolution concerning an advisory vote to approve executive compensation passed approximately 91.5% of the shares voting thereon were voted for.

The resolution concerning an independent chairman was not approved, approximately 32.7% we're voted for. The resolution concerning special shareholder meetings was not approved, approximately 26.8% were voted for. The resolution concerning a report on environmental expenditures was not approved, approximately 4.1% were voted for. The resolution concerning a report on risk of petrochemical investments was not approved, approximately 24.5% were voted for. The resolution concerning a report on political contributions was not approved, approximately 30.9% were voted for. The resolution concerning a report on lobbying was not approved, approximately 37.5% were voted for.

This concludes the voting report. The written report of the inspector of elections will be filed with the minutes of the meeting and the final votes on each of these matters will be available on the Exxon Mobil Web site and filed with the SEC.

Darren Woods

Thank you, Stephen. This concludes the formal business of today's meeting. We will now begin the question and answer period and Stephen will moderate.

Question-and-Answer Session

A - Stephen Littleton

Okay. We've received a number of questions on the proxy cards, and in advance of our Web site and submitted online during the meeting today. We will address these questions as time permits. In the interest of time, questions may be grouped by similar topic and summarized. We’ve received over 30 questions during the meeting.

Let me start with an area, which has one of the highest levels of interest, the dividend. Where we have received six questions. Exxon Mobil didn't increase their dividend this past April, like it used to do and other companies have cut their dividend. Darren, will you cut the dividend?

Darren Woods

Well, Stephen, I think that's a important question and particularly in today's environment, and understand the context of the question with the reporting and the press out there and other statements that companies are making.

Let me start by just talking about our capital allocation priorities. First and foremost, we want to invest in advantaged projects. That's a priority, because it maintains the foundation for a healthy and long-term business. We want to pay reliable and growing dividend, it’s our way of rewarding long-term shareholders and it shares our success over the years. And when you maintain a strong balance sheet to rise through the ups and downs of the market and commodity markets that we have historically seen and particularly relevant in today's environment. So those capital allocation priorities have been in place for many, many years. We continue to honor those priorities and actually balance across those. When the environment gets challenging, we adjust to make sure that we're optimizing across the whole and for the long term.

As you look at the short term environment, we have given a priority to the dividends and so have not reduced that. And instead move to cut our operating expenses and to reduce capital, while preserving the value of that capital over the long-term. And we'll continue to assess that as we move forward, balancing across those three priorities that we have. The board looks at that every quarter and assesses it, and continues to put a priority on those three priorities and in maintaining a dividend. So I think we'll have to see how the environment continues to grow but it's an important priority that the board wants to maintain.

Stephen Littleton

Thank you, Darren. Another popular thing from our shareholders is the potential for cost reductions to affect staffing. Are you planning to layoff employees as part of your cost cutting?

Darren Woods

Thanks Stephen. There's a lot of coverage in this in the press, obviously. And I think as you all know, we work pretty hard in managing the business to try to avoid these. So they're not required. The 15% reduction in expenses do not include any layoffs.

As we think about layoffs and what I've encouraged others to think about is they're really in two buckets. The first is a response to significant short term developments is what we're seeing today. We have unprecedented demand drop from the pandemic. Work has dried up. And you don't need the same number of people to manage the work. This is particularly relevant in service firms and contractors and that's where you see a lot of the announcements. We use these service firms and contractors to supplement our business and to manage the workload. As that workload comes off, our need for those reduces and therefore, we don't continue to use those service firms and contractors. And so, that's in the short-term how we're responding to this disruption that we're seeing due to the pandemic.

The second bucket to think is what I'll call the structural changes in business, and how the work gets done, that's more of a medium to long-term horizon as you think about business and how you optimize and that's an ongoing effort for Exxon Mobil. We continue to look at that and look for ways to become more efficient and to run our business more effectively. As you all know, we've talked about over the last couple of years. We have reorganized and put our businesses inline with the value chains that we manage. And there's work ongoing to continue to look to optimize those organizations and the work processes to underlying those, and that would lead to longer-term efficiencies if we find those as part of evaluating business processes under our new organizational structure. Today, we have no layoff plans.

Stephen Littleton

Okay. Thank you, Darren. Another topic that's pretty of high interest is climate change. We received a following question from a shareholder. Does the Board expect to achieve net zero emissions across both its operations and energy products and if so when?

Darren Woods

And this is an area where there's pretty broad industry discussion. Let me share how we think about that. First, I'd say with respect to net zero emissions to meet the ambitions of the Paris Agreement. That will require a substantive changes in government policy. It's going to require technology developments as I've discussed. And it will require adjustments in consumer preferences and demand. As individual company we can't drive that but we can certainly participate in it. I think it's always important to keep in mind the share or the position that we have in the market. Our share of oil is about 2% to 3% of the global market.

The second thing to think about in this space is the demand issue. This is not a supply issue. This is a demand issue. And the challenge with addressing the demand is the availability of substitutes that fulfill all of consumer's needs. If you think about oil and gas today, they're energy dense. So, they're easily transportable. They're widely available. They're affordable. And so, the challenge is how do you continue to meet those benefits while lowering emissions. And that challenge is one of the reasons why the progress and moving to a less carbon-intensive fuels has been slower than some want. And that's why too, we're working on portfolio technologies to try to address all of the consumer demands, both the benefits and lowering the cost.

We're working on carbon capture, biofuels, industrial processes. And advances in those technology are going to be key to determining the path and the pace at which society as a whole globally can reduce its emissions. And just to give you one example, we're working on a technology collaboration with others to lower the cost of capturing CO2 from air. If that technology was to have a breakthrough, it could change the course of emissions around the world. It could actually lead to negative emission sectors, and that would allow us to then start to set some targets. But longer-term targets and thinking about those longer term targets will be a function of government policies and those changes, consumer demand changes and then these technology breakthroughs.

And as those developments happen, we'll adjust our business in line with those changes. In the meantime, we're reducing our own emissions from our operations. We're developing products to help consumers reduce their emissions. And we're also engaging with policymakers around the world to help with policy decisions.

Stephen Littleton

Okay. Thank you. Darren. Also related to climate change and we've gotten several questions similar to this one. Are you planning to move into renewable energy?

Darren Woods

Let me build on that previous question with respect to renewables. If you look at solar and wind, as I said earlier, they're going to play an important role. However, in some geographies, they don't meet all of the society's needs. And so while they'll be important in and of themselves, they don't solve the climate challenge.

So put technology aside for the moment and look at renewable as a business, moving into that business for ExxonMobil would be a new business for us. It's moving down the value, the energy value chain. We're not in a power generation today. And so moving into renewables would be a new business. We've looked at this and the question we've asked like any other business that we would move into is do we bring a unique advantage that would allow us to successfully compete and justify to our shareholders that move, and generate above industry average returns. Today, we don't see that opportunity.

The value and the advantages that we would bring would be consistent with what others bring to that. Maybe one exception would be offshore wind, but that is something that continue to develop and continue to look at. Some have argued with us that an opportunity to invest in renewable would change our product portfolio and then would allow us to have a less carbon intensive product slate. Frankly, that doesn't change the equation for the globe. Therefore, we're not particularly interested in doing that for the accounting purposes.

So I'll come back to what we're focusing on is leveraging our unique capabilities. 135 years of experience in this industry, $1 billion a year and a research and development to look for solutions to help society address its needs, while having affordable and reliable energy with less emissions.

Stephen Littleton

Okay. Darren, it looks like we only have time for about one more question. And I’ll wrap it up with this one. Shareholders have seen big drop in their return on investment because of the low stock price. What is management and the board doing to turn that around?

Darren Woods

Well, I think you know as an organization, we're very focused on shareholder value and obviously, its stock price plays the key component of that. Let me focus on two aspects of what drives the stock price. One is the macro environment and then the other is the company performance. Let me start with the macro. If you look at the stock price, you can see that it correlates fairly closely with the movements in crude prices. So as crude price goes up, demand goes up, you see our stock price go up and vice versa when the crude price drops, so you see stock price drop and that’s, you can clearly see that in today’s environment with the significant loss in demand and the drop in crude prices.

And as a consequence, you've seen a significant drop in the share price. That is the nature of commodity businesses and that has historically been reflected in our stock and the movements in our stock, that's at a macro level and applies to everyone participating in the industry. From a company performance standpoint relative to competitors, it's largely shaped by the assets of our, asset portfolio. If you think about it, our business is capital intensive and the earnings power of our business is generated by the capital that we've invested in.

If you look across the portfolio today, our upstream has a heavier weighting, more heavier than peers and to lower margin resources, oil sands and U.S. dry gas. And the way we're looking to address that is by upgrading our asset portfolio through investments. You've heard me talk for quite some time now about the investments that we're making in the Permian in Guyana, the exploration acreage that we’ve picked up in Brazil and then longer term our development of LNG projects. All those investments are geared towards bringing higher margin resources into our portfolio and continuing to meet the growing demand of societies around the world.

So that's our strategy is to make investments to high grade and improve our asset portfolio. As we also discussed, have been discussing since last year, divestments to help upgrade the portfolio. Those all go hand in hand with the expectation that we will then improve earnings power and that in turn will help drive the stock price above and beyond what the commodity cycle is driving. And you've heard me talk about that pretty consistently and is what underpins the investment program, and the reason why we're on the higher side of the industry with respect to our investments.

Stephen Littleton

Okay, I think we're coming to close of time. So appreciate your questions. More importantly, I thank you for your investments in Exxon Mobil. In closing, I want to reemphasize that the long-term fundamentals that underpin our business remain strong. Given our confidence in the fundamentals, our capital allocation priorities remain unchanged, investing to create value, rewarding shareholders with a reliable growing dividend and maintaining a strong balance sheet.

While we work to conserve cash in the near term, we remain focused on enhancing long-term value, leveraging our competitive advantages and the optionality provided by deep portfolio of opportunities. We do all this while working to ensure the safety of our people and communities and actively supporting society's response to the pandemic. Our company remains strong. Our people have the skills, experience and fortitude to face the challenges ahead and find opportunity in them, emerging stronger than ever. We're grateful for your steadfast support. I wish all of you good health and stay safe. Thank you.