Follow the Money

Does it seem strange that some oil companies seem willing to acknowledge the massive implications of global warming while others are fighting it tooth and nail?

David Anderson was wondering the same thing when he was Canada’s Environment Minister between 1999 and 2005. About half of the oil companies he dealt with including Exxon Mobil were very resistant to reducing carbon emissions, or even to admitting that global warming was real. And the other half?

According to Anderson, “the other half were very friendly. Shell, PB, Syncrude, Suncor, all those companies were quite willing to put in restrictions [to curb climate change].”

And why not? Ballooning oil prices meant soaring profits so they could easily afford the costs of mitigating carbon emissions.

“God, they were making money like it was going out of style. You just wouldn’t believe the money that’s being made. They could quite afford the trivial amount, which was about 38 cents a barrel as the calculation for climate change measures to make them carbon neutral. Christ, they were getting up to $75 a barrel... Everything over $20 a barrel is profit,” says Anderson.

So why does the former Minister think companies like Exxon Mobil weren’t willing to move on this? He offers some interesting speculations:

“One of the issues that I think is really important is the impact of the quarterly statement. No one likes to have their quarterly statement doing anything but going up and up because that affects share price. Share price affects bonuses and pay of executives. The head of Exxon gets paid $70 million per year. A lot of money would be affected by what you might call tremors in the market that might come from climate change measures…”

Stock options have become a very popular way for North American companies to motivate senior executives to pump up the share price. The idea is simple, rather than paying managers a straight salary, companies give them stock options to buy company stock at a set price. If these executives can increase the share price they can cash in those options and reap staggering profits.

“The use of stock options has skyrocketed over the last 20 years,” said Kin Lo, Associate Professor of Accounting at the University of British Columbia Sauder School of Business.

However, making senior management fixated on share price rather than business fundamentals can also affect corporate ethics. “I believe the prevalence [of stock options] contributes to some of the malfeasance that you have seen, the big blowups with Enron and WorldCom”, says Lo.

However in the case of oil companies, it also creates a gravy train that most senior executives would want to keep going at all costs.

Soaring global oil prices have meant that oil companies are recording record profits, and sending share prices into the stratosphere – regardless of company performance. For instance, Exxon Mobil’s share price has almost doubled since 2004. This is making some senior oil executives very rich, whether they are doing a good job or not.

According to a recent study from the Institute for Policy Studies, in 2005 the average CEO compensation for top 15 US based oil companies was a whopping$32.7 million - more than four hundred times what the average oil industry worker is paid. Compare that with the average pay of CEOs for all large US firms at $11.6 million.

And then there is the paycheque of former Exxon Mobil CEO Lee Raymond. In 2005, Mr. Raymond’s base salary was $4 million - not bad jack to be sure, but the real money came from soaring share prices. That year, Mr. Raymond made an additional $65 million compensation in the form of stock options and other benefits - fully 93% of his compensation. With a payday like that, who wants to rock the boat by dealing with climate change?

Compare that to the compensation paid to executives with the world’s number two and three oil companies in the world: BP and Shell – both based in Europe. BP CEO Lord Browne made $5.6 million in 2005 – not so shabby either, but a mere 8% of what Exxon’s CEO was paid. Shell CEO Jeroen van der Veer made just $4.1million – one sixteenth what Lee Raymond was paid.

Interestingly there are also some striking differences in the way these companies dealt with climate change. BP now officially stands for “beyond petroleum”. The CEO of Shell has stated publicly that global warming makes him "really very worried for the planet". Both companies signed onto a letter to UK Prime Minster Tony Blair calling for urgent government regulation on climate change and are investing heavily in alternative energy technologies.

In contrast, Exxon has been dubbed by Greenpeace the “the world’s number one climate criminal” stating that they have “done more than any other company to stop the world from tackling climate change”. They were recently implicated by the Union of Concerned scientists of funding a Big Tobacco-style PR campaign to misinform the public on climate science.

Anderson speculates that the over reliance on stock options puts many North American oil company executives in a compromised position. “Deep down most of these people knew the game had to end eventually and we had to take climate change measures. Deep down what they were really saying was ‘I know that I’m not doing the right thing but I am going to pass that on to my successor to handle the problem. I’m going to get out of here with my bonuses intact and I am going to get out of here a wealthy man.’”

That last point might be particularly poignant in the case of Exxon Mobil. When Lee Raymond retired as CEO of Exxon Mobil at the end of 2005, he was awarded one of the most lucrative retirement packages in corporate history – totaling almost $400 million, including stock options, pension, use of a corporate jet, and $210,800 in country club fees and other perks. This includes the $69 million in cash and stock options he made that year.

When I contacted Exxon Mobil by phone they denied that compensation schemes of senior executives like Mr. Raymond could effect on how the company has responded to climate change. “The largest portion of his compensation is restricted stock and those restrictions are five and ten years and those restrictions maintain on stock even after he retires…He can’t sell it until the restriction matures and some of those restrictions go out to the year 2015”, said Mark Boudreaux, Media Relations Manager for Exxon Mobil Corporation.

Mr. Raymond will be 77 in 2015. It seems rather strange that he will not be able to fully collect for all his years of work at Exxon Mobil until he is two years past the life expectancy of the average male in the United States.

Perhaps is not as simple as that. According to Lo, “what someone can do is to arrange an 'equity monetization,' which allows him in essence to ‘short’ the [restricted] stock with an investment banker. It’s the same as selling the restricted stock at that date. Later on when the restriction comes off you can net out the two positions… There are plenty of investment bankers that would be willing to do that for a fee.”

If there are specific restrictions prohibiting Raymond from short selling his restricted stock, Exxon is not telling their shareholders about them. Looking at the legal filings of Exxon Mobil to the US government, it appeared to Lo that “there is nothing to prevent to Lee Raymond… to arrange for a separate side deal to get around the restrictions.”

Interestingly, Raymond also sits on the advisory board of the American Enterprise Institute (AEI), which recently offered scientists $10,000 plus expenses to undermine or dispute the findings of the fourth assessment report of the Intergovernmental Panel on Climate Change. Exxon partially funds the American Enterprise Institute.

Could something as trivial as the personal finances of already obscenely wealthy individuals caused some powerful oil companies to resist dealing with the most pressing issue of our times? It's a big world. Stranger things have happened.

Mitchell Anderson is a freelance writer living in Vancouver. The piece ran in the February 15, 2007 issue of the Georgia Straight.


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Maud Boggins said...

So, by your rationale, does that mean that Volkswagen is not a reliable make of car if the person who conducted the research that showed it is owns one? Does it mean that if a scientist conducts research on potatoes and shows they are very high in vitamin C that the evidence is flawed if he happens to be a member of the British Potato Board? Has it ever occurred to you that these people may take sponsorship and funding from certain bodies BECAUSE they believe in the cause? It is very dangerous indeed to a) assume scientists should only be listened to if they do not share the opinions of their funders and b) to assume most scientists or anyone else who conducts research are ever completely objective.

It is a very romantic view indeed to assume most people who do not have at least SOME interest in showing certain facts to be more true than others (journalists included I'm afraid, before you put your halo and wings on).

Your assertion that Tim Ball is being paid by oil companies is surely the same as all the other researchers who are supported by Government funding (i.e. nearly all of them). Research in global warming is currently the easiest way to get paid for research and only second to cancer research (certainly true in the UK).My boyfriend wanted finding from MAFF in the eighties to show that we were over-fishing in the waters around Britain (which they have finally cottoned on to 20 years too late) - the government would not offer funding - it simply wasn't fashionable enough.

It is important for journlists to recognize that even if a scientist is paid by a company that has an interest in holding back certain information/data, it does not automatically make their statements false. You get paid by newspapers and journals - your funding is easier to obtain - all you need to do is write about a currently hot topic. The same applies to science - it is no different to the media (who are the real sluts in life...at least science can be argued one way or the other - unlike mere opinions/ethics).

If you chose to write articles that the public had little or no interest in, such as metal detecting or the amount of bunions people have on their feet, you would be a very poor chap indeed.

But I suppose journalists never do anything purely for money, do they? Of course not...

Your mind seems to made up on climate change - so much so that you have not even attempted to review data offered by other scientists given in The Great Global Warning Swindle (download this if you have not seen it using BitTorrent). Let me know what you think after you have seen it. Many British scientists feature, some Japanese. I suppose they all got paid by Shell and BP? I suppose the graphs showing a direct relation between the fact the sun is actually behaving differently are all fabricated? Would you change your mind if this could be shown to be 100% true - (which it is, by the way)? I don't think so - your mind is totally and utterly made up - and you would die before you did a u-turn (don't be embarrassed to though - we're all in the same boat here - we've all been fed the same stinking bull!).

The documentary I have quoted took over 10 years to get shown. Doesn't that tell you something?
My boyfriend is a scientist who worked for the UN - the people who like to shut global warming sceptic scientists up, he too resigned as he could take no more of the ethical racketeering and cronyism. The utter malfunctioning of the organsation drove him insane. He is one of the most highly respected marine biologists in the country. The UN is trying to justify funding to keep people in jobs. Simple.

This world runs on flimsy alarmist knee-jerk science - we need it as human beings to make us feel better about our miserable insignificant lives where celebrity and anti-bacterial handwash is more important than common-sense. You may be interested to hear there is also no shred of 'scientific' evidence for the following (that is not to say none of them are true - there is just not the evidence available enough to make the assertions - BIG DIFFERENCE - REMEMBER THE MAIN SCIENTIFIC TENET 'PROOF OF ABSENCE IS NOT ABSENCE OF PROOF!'):

1. That eating "five portions of fruit and vegetables a day can prevent cancer" - a piece of British government propoganda that has NEVER been proven - yet everyone in the UK seems to believe it. Hilarious.

2. That smoking causes cancer. Cancer will never disappear - thank the Lord - it is there for a reason - mother nature is not an idiot - certain people get cancer so others can be healthy, it's not exactly rocket science. We all have a pre-disposition to it, but simply some more than others. Smoking/poor diet/environmental factors may increase the speed of its onset, but there is no conculsive evidence that it CAUSES it, certainly not in the way most governments would have us believe (I am a non-smoker, by the way - as you seem so concerned that all opinions are inextricably linked to one's own vested interests).

3. That olive oil can prevent cancer and make us live longer. Another favourite of the UK government. No study has EVER shown this to be incontrovertibly true, yet food manufacturers have jumped on it like rats up a drainpipe. A fine example of how the government purports to offer scientific data to affect our lifestyles. Laughable, but very disturbing.

4. That we should all be drinking pro-biotic yoghurt. Fact: our bodies have their own intestinal flora - if we eat a healthy diet we do not need to tamper with this - it occurs naturally. What these companies are saying is - "Drink this so you can carry on eating your appalling food". Again, proposterous and dangerous.

6. That germs are bad. America is the worst for this one. I once met a girl in a public toilet in New York who would only open the cubicle door with a glove on. WRONG - GERMS ARE GOOD - VERY VERY GOOD (not in hospitals though, or around medical equipment) - but in homes and around our children they are exactly what is required to develop and maintain a healthy functioning immune system, yet people are hell bent on buying 'Anti-bacterial' handwashes and 'surface sprays'. Propoganda gone mad. Just like man-made global warming.

7. That speed cameras save lives. Bullshit. The road accident admissions to hospital per 100,000 of the population has pretty much stayed the same for years (and even more people have started driving during this time - meaning it's double bull). But because the government gets revenue from them - speed cameras are staying (human beings compensate for risk - so make something too safe and they will seek risk elsewhere, meaning accidents will never be eradicated, in fact, it can actually be shown the accident rate goes UP when a perceived risk is removed. Take Esther Rantzen's campaign for the removal of concrete from school playgrounds - she replaced the concrete with wood mulch - accident rate went up immaditely due to kids hurling themselves off the roundabouts and swings...yet were much more careful when it was concrete - silly meddling cow...).

Just think how hard it would be for the UN and policitians to do a U-turn on global warming now? Can you imagine how stupid they would look? Hell would freeze over before this happens - which it may do in a few hundred years due to something else us mere humans have 'caused' no doubt.

I think within the next year or so there are going to be a lot of very embarrassed journalists/scientists/politicians/governments with egg on their faces. It is truly poetic and something wonderful. Finally a revolution of sorts - which in this decadent media-fed society we all need. Hopefully what will follow is a backlash to all the anti-west, anti-political right, anti-America bullshit. I wish I had been on earth when Pythagoras asserted the world was flat - this thing with global warming is much the same. We can't believe because we don't want to believe.

As human beings in an inreasingly secular society we need to feel that fire and brimstone is going to come crashing out of the sky at any moment. We over-compensate for risk when we don't have any - there is nothing really to fear in modern life - we don't get invaded, we can save everyone from illness, we can travel to the other side of the world in a few hours - everything is possible.

There has always been 'end of the world' theory - it is essential for our existence. We need, as humans, to feel there is some kind of Armageddon due - that way we can try to feel we have a) a reason to live and bee good people and b) some control over it, or even get to heaven. In the case of climate change it's "ride your bicycle and turn your tv standby off at night and you will surely be saved". The religiosity of this movement is scary, but as in the case of religion - a very good form of control.

So, the religous undertones coupled with the anti-west attitudes and tax raising formula give us an instant winner - hey presto! Kill 3 birds with one stone! (and a lot of people living in under-developed countries because we won't be alowing them to use their natural resources of coal and oil, instead forcing them to use unreliable solar and wind energy). How's that for fair?

I have spent the last month analysing the data for man-caused global warming. I came into this argument with no pre-defined ideas about propoganda or the like - I am a pragmatist and I consider myself to be very objective. I have no interest in the results being either way. I drive a diesel car (unlike most people across the pond), refuse to shower unless I see my boyfriend or go out for the night, refuse to wash up unless it piles up, use public transport where possible etc etc. Yet I am very very concerned indeed that we have all been fed a horrible, terrible lie.

Check out the programme, read ALL the evidence, do not rely on bitching between scientists. Academics are the most huffy people on earth.

Only then will you see, hopefully, that this is just another case of bullying (which, incidentally, is also essential to the human race - particularly in schools. Another bandwagon the government has jumped on - but I warn, at their peril! It is essential for children to experience what the outside world is like and for parents to bring up their children to take no shit - the point is that governments are becoming increasingly involved in our lives where they should keep their noses out!).

Please also bear in mind how the global warming movement was started in the west most recently- good old Margaret Thatcher wanted to shut the coal mines of Britain - so showing that burning coal was 'bad' was essential. Since then it has simply snowballed into a frenzy of hype and panic - something us human beings are especially adept at.

Maud Boggins

Maud Boggins said...

I meant Pythagoras said the world was globular - not flat - mistake...