Exxon Mobil Corporation
| Patrick T. Mulva
Vice President, Investor Relations
June 12, 2003
Securities and Exchange Commission
E-mail address: email@example.com
Attention: Jonathan G. Katz, Secretary
RE: April 14, 2003 Request for Comments
Ladies and Gentlemen:
As Vice President - Investor Relations and Secretary of Exxon Mobil Corporation, I am writing to comment on recent proposals to change the proxy rules regarding the election of directors. Specifically, I wish to address the proposals under which shareholders owning a certain minimum percentage of a company's stock would be permitted to include their own competing director nominees in the company's proxy material. We believe this change is unnecessary and would be detrimental to good corporate governance.
A well-established procedure already exists under the proxy rules whereby any person who wishes to solicit votes for competing director candidates may do so using their own proxy card and soliciting material. This avoids the confusion for shareholders that would result from combining one or more dissident slates within the same set of soliciting material, and clearly allocates legal responsibility for the material to the soliciting party. We see no reason to change the existing structure, which presents shareholders with clear and understandable choices in the case of election contests.
The only substantive argument advanced by proponents of the "open ballot" is one of cost, i.e. that the company should be required to bear the cost of dissident shareholder campaigns. We believe this would be unfair to other shareholders, and we do not believe that cost is in fact an impediment to election contests.
Most advocates of the "open ballot" recognize that the process must be limited to shareholders holding a significant position -- anywhere from 1% to 5% or more of the company's outstanding shares.1 However, a shareholder or group owning such a significant stake can easily afford the cost of a proxy solicitation. By way of example, a 1% interest in ExxonMobil would represent almost 6.7 million shares with a market value at current prices of approximately $2.5 billion. The cash dividends alone on a 1% interest in ExxonMobil would be over $1.5 million per quarter at current rates.
We also believe the so-called "open ballot" procedure would detract from good corporate governance. The premise of recent reforms, such as SEC rules under Sarbanes-Oxley and pending NYSE corporate governance changes, is that shareholders are best served by a strong, independent board and board committees. In particular, pending NYSE rules will require listed companies to have an entirely independent nominating and corporate governance committee.
The open ballot process is contrary to the premise of these other reforms, which have not yet been given a chance to work. Under the open ballot, it would not be possible to ensure that the elected members of the board meet the required standards for independence and financial literacy, or to ensure compliance with other requirements such as the antitrust laws. The election contest resulting from open ballots could also, we believe, lead to the election of "special interest" directors who seek to represent particular constituencies, rather than all shareholders, and deprive the board of vital experience through excessive board turnover.
For all the above reasons, we oppose the "open ballot" and urge the SEC to stay on course with the significant corporate governance reforms already enacted.
cc: Chairman William H. Donaldson