Wednesday , March 14, 2018 - 11:20 AM
(c) 2018, The Washington Post.
In the span of only a week, two of the most senior former business executives who have served in Trump’s orbit are gone, presumably free to return to corporate America and collect lucrative board seats or offer consulting services on the ways of Trumpworld. But while there appears to be little reason former Goldman Sachs president and top economic adviser Gary Cohn couldn’t return to work on Wall Street, former ExxonMobil CEO Rex Tillerson -- who was unceremoniously ousted as Secretary of State Tuesday -- has more than a few that may keep him from going back to work for Big Oil.
That’s because if he were to leave government service and go to work for an oil or gas business, according to the terms of a trust set up for Tillerson when he left Exxon, he could give up deferred compensation that was valued at some $180 million a little over a year ago.
The independent trust specifically says he may not be employed or provide services in the oil or gas industry “whether as an employee, contractor, consultant, director or in any other similar capacity;” if he does, the forfeited funds will be paid to a charity the trustee chooses that is “dedicated to the alleviation of disease and poverty in the developing world.”
While the existence of some kind of noncompete provision after an executive retires is not unusual -- and Tillerson would have been subject to similar competitive restrictions had he simply retired from the oil giant -- Exxon’s approach to keeping shares at risk well past retirement is atypical, executive compensation experts said.
“It’s not the usual sunset cruise,” said Brian Foley, an independent executive compensation consultant based in White Plains, New York. Whereas most companies vest equity awards over a three- to five-year period, Exxon’s timeline is 10 years and does not not accelerate vesting for any reason short of death. “No one’s going to have to take up a collection for him. But you’re going to be hard pressed to find another example that stretches out that far.”
A spokesman for Exxon Mobil declined to comment. Reginald Brown, a lawyer for Mr. Tillerson, also declined to comment.
The restrictions, which were reported by Bloomberg on Tuesday, arose as part of the company’s efforts to set up a trust that mirrored the terms of Tillerson’s compensation program at Exxon.
When Tillerson’s name first began circulating as a potential Secretary of State in Trump’s Cabinet, executive compensation experts noted a quirk in his pay package: He had more than 2 million shares of Exxon stock at risk, worth more than $180 million at the time, because they were not yet vested, meaning they had been granted but he did not have outright access to them yet.
The company has an unusually long vesting schedule that keeps shares at risk for 10 years, even after retirement, designed in part to keep executives from from being able to take advantage of cyclical swings in commodity prices that can affect the company’s share price, according to a company filing.
Goldman Sachs, where Cohn had worked before joining the administration, is also known for having compensation plans that require executives to hold onto rewards for longer periods than most, a practice governance experts call shareholder-friendly. But the firm, which has been nicknamed “Government Sachs” and has a history of executives who have gone to work for the government, also has a provision that allows awards to be delivered or have the restrictions lifted if the executive becomes employed by the U.S. government. Cohn’s payout of unlocked cash and stock awards was valued early last year at $123 million.
Exxon ultimately asked Tillerson to surrender the unvested shares, but made a cash payment nearly equal to their value to an irrevocable trust, which would distribute payments to him over time, on a timeline that corresponds to the original 10-year vesting schedule. The cash payment was discounted by about $3 million to comply with federal ethics guidelines, the company said at the time; Tillerson also gave up about $4 million in unpaid deferred cash bonuses and said he would sell the more than 600,000 shares in the company he owned outright.
Converting the shares to a cash payment both removed the risk of continuing to hold Exxon stock and lowered a potential upside if the stock goes up over the original timeline. Since the trust was announced, Exxon’s shares have fallen roughly 15 percent.
Of course, after a tumultuous year of globetrotting as Trump’s Secretary of State, Tillerson may very well have little desire to go back to work anywhere. In an interview that was widely shared a year ago, the former CEO told the Independent Journal Review that “I didn’t want this job. I didn’t seek this job,” and that when Trump asked him to be Secretary of State, he had expected to retire.
“I was going to go to the ranch to be with my grandkids.” Indeed, Exxon has a mandatory retirement age of 65, the age Tillerson turned in March 2017.
The president, at least, has said that whatever he does next will be an improvement on his time at the State Department. “I think Rex will be happier now,” Trump said Tuesday in remarks to reporters.
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