Exxon Mobil Corporation
5959 Las Colinas Boulevard
Irving, TX 75039-2298
  Patrick T. Mulva
Vice President, Investor Relations


May 7, 2003

Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549-0609

E-mail address: rule-comments@sec.gov

Attention: Jonathan G. Katz, Secretary

RE: File No. SR-NYSE-2002-33
NYSE Standards Relating to Corporate Governance
Release No. 34-47672

Ladies and Gentlemen:

On behalf of Exxon Mobil Corporation, I would like to offer the following comments on the New York Stock Exchange's amended corporate governance rule proposal.

As illustrated in more detail below, we believe certain aspects of the proposed rules -- especially, the broad definition of "immediate family member" under Rule 303A(2)(b) -- will be unnecessarily burdensome and should be conformed to the definition adopted by the SEC in its rules relating to listed company audit committees. We also recommend certain additional clarifications to the independence standards.

To ensure compliance with the independence criteria required by the proposed rules, and to support the CEO's annual certification, we believe listed companies will need to implement a compliance program along the following lines:

  • Each non-employee director must identify each of his or her "immediate family members," which under the current proposal include a broad range of in-laws, and describe the employment and other business affiliations of each such person.

  • The listed company must compare the affiliations identified by each director against the company's own records to determine whether any business dealings trigger disqualification.

  • If any business relationship exists between the listed company and an identified entity (even a relationship that is insignificant from the standpoint of the listed company), the listed company must determine whether that relationship triggers disqualification under Rule 303A(2)(b)(iv)(B), which depends on the gross revenues of the other entity.1

  • Each non-employee director must instruct each "immediate family member," including in-laws, to keep the director continuously apprised of any change in employment or other business affiliation, change in marital status, or the occurrence of any new business transaction with the listed company.

We believe this process will be difficult to administer, especially in the context of the broad definition of covered family members.2

Large listed companies may have thousands of business relationships in the ordinary course of business. Relationships that are not significant to the listed company will likely be overseen by local management without any direct knowledge or involvement by the company's board of directors. Yet those relationships could easily trigger disqualification under Rule 303A(2)(b)(iv)(B) if the counterparty is a small private entity.

Simply gathering the necessary information could also prove difficult. A director may reasonably be expected to know, or be able to obtain, information about the business affairs of the director's spouse or dependents. The same cannot be said for the broad range of extended family members encompassed by the proposed definition of immediate family member. In today's highly mobile society, extended families do not always maintain communication. Divorce and re-marriage are common. It is to be expected that some directors will be unable to obtain the required information from some extended family members. It is also to be expected that some extended family members will fail to give prompt notice of changed personal or business circumstances.3

These difficulties are especially acute in the case of new director recruitment. Listed company nominating committees will want to know whether a potential director candidate would be "independent" under the proposed rules in order to determine whether to contact the candidate regarding potential service on the company's board. Yet such a conclusion cannot be reached without the extensive family member research outlined above. Conducting such research during the early evaluation stage of a potential new director will be problematic. Yet, the same rules which will make the identification of potential new directors more difficult will also increase the need for listed companies to maintain a number of standby candidates, since unexpected events outside the control of a sitting director (for example, marriage of an in-law to a person with a disqualifying relationship) could cause the director to cease to be independent.

Taking the above analysis into consideration, we recommend the following modifications to the proposed rules:

  1. Limit the definition of "immediate family member" to the director's spouse, minor children or stepchildren, and children or stepchildren sharing the director's home.4 This is the definition adopted by the SEC in its rules implementing Section 301 of the Sarbanes-Oxley Act, regarding independence of audit committee members, and in our view comports with the common understanding of "immediate family." This more limited definition encompasses those persons whose economic interests can reasonably be attributed to the director, and from whom a director can reasonably be expected to obtain personal information.5

  2. Qualify the bright-line disqualification standards by reference to the actual knowledge of the director. This will address situations in which a director is unable to obtain necessary information, or is unaware of a family member's changed circumstances. We believe a director's independence cannot be compromised by the existence of a relationship of which the director is not aware.

  3. Provide that the bright-line independence screening only needs to be run once a year in connection with the proxy statement for the election of directors. If no relationship is discovered with respect to the look-back period, the director should not be disqualified by the occurrence of an unexpected event during the director's succeeding term of office.

  4. Clarify that a director will not be disqualified by virtue of a business relationship with an entity that occurred before a covered family member became associated with the firm.

Without these changes, we believe that good, independent directors will be disqualified due to the existence of remote relationships or the inability to obtain the necessary information to verify independence.

We also recommend the following additional changes:

  1. Modify Rule 303A(2)(b)(ii) to apply only in the case of family members who have actually participated in the audit of the listed company. This is comparable to the standard adopted by the SEC as part of the conflict of interest rules for auditor independence. We believe the current NYSE proposal is unnecessarily broad, especially in the context of the remaining "Big Four" accounting firms with thousands of employees around the world. Alternatively, this standard should at least be limited to members of the audit committee, and should not disqualify a director from being considered independent for purposes of service on other board committees or the board as a whole.

  2. Clarify that Rule 303A(2)(b)(i) does not question the independence of non-employee directors who receive restricted stock as part of their compensation for service as directors. Restricted stock is commonly awarded to non-employee directors, in part to encourage retention. As such, and in accordance with the requirements for taxation deferral, such awards are subject to forfeiture and are contingent, among other things, on the director's continued service. We have been advised by NYSE representatives that restricted stock grants of this nature are not intended to be covered by the parenthetical proviso in the Rule, but this should be explicitly clarified in the rule text or commentary.

Thank you for the opportunity to offer these comments.


/s/ F. Lynn Reid

for P. T. Mulva

cc: The Honorable William H. Donaldson, Chairman
The Honorable Paul S. Atkins, Commissioner
The Honorable Roel C. Campos, Commissioner
The Honorable Cynthia A. Glassman, Commissioner
The Honorable Harvey J. Goldschmid. Commissioner
Alan L. Beller, Esq., Director of Division of Corporation Finance
Darla C. Stuckey, Corporate Secretary, New York Stock Exchange, Inc.

1 If the other entity is a public company, such information may be readily available. In the case of a private entity, however, the listed company's ability to determine compliance with the independence rules may depend on the willingness of the entity or the particular family member to provide the necessary private information.
2 Because of the bright-line nature of the disqualification standard, we believe compliance procedures for the new rules will need to be more extensive than the director and officer questionnaire historically employed by most public companies to identify disclosure matters under SEC rules, which are generally premised on a standard of materiality to investors.
3 In some cases, a family member may not be able to provide the necessary information. For example, a family member may be an executive officer of a private entity and yet not have access to, or freedom to disclose, information regarding that entity's consolidated sales.
4 Boards would still be required to make an affirmative determination of independence. Thus, while we believe in-laws and other non-dependents should be excluded from the bright-line test, the existence of a truly significant relationship with a parent, sibling, or in-law would still need to be considered in the board's subjective analysis.
5 We recognize that the NYSE currently uses the broader family definition for purposes of the existing audit committee rules. However, under those rules the definition is only used in the context of whether directors themselves are related to an executive officer of the listed company. This is a very narrow data point which should reasonably be within the knowledge of the director, and does not raise the compliance difficulties that we foresee under the proposed new rules. The existing rule also only applies to members of the audit committee.