Mr.

"Exxon Mobil:

An Analysis of Corporate Social Responsibility"

Group Project by:

Lajvir Gundhu

and

Brock Melnyk

Managing Responsibly in a Global Environment

Dr. David Ohreen

MGT 3031

Due: November 27th, 2003

Table of Contents

Introduction ...1

Corporate Governance ...2

Corporate Citizenship ...4

Health and Safety ...8

Environmental Considerations ...10

Conclusion ...12

Introduction

The Esso retail outlets are the commercial face of Imperial Oil Company Limited (Imperial Oil), which in turn is controlled by its majority shareholder, Exxon Mobil Corporation (Exxon). Imperial Oil is a major crude oil and natural gas producer and the largest refiner and marketer of petroleum products in Canada. When Exxon and Mobil merged in 1999 they formed one of the largest oil and gas companies in the world. With this size and power comes great responsibility - both corporate and social.

Exxon Mobil has faced major public scrutiny, since the conception of its parent companies in the late 1800s, through to present day. The corporate social responsibility of this company can be examined in the areas of corporate governance, corporate citizenship, health and safety, and environmental considerations and customer relations.

While some factors present evidence that favorable decisions were made by Exxon, others are contradictory. When a company of this size operates on such a large scale, social responsibility becomes even more important.

Corporate Governance

Exxon has formed an intricate corporate governance agenda in order to promote effective management of its subsidiaries. These corporate governance guidelines outline that the sole purpose of the board of directors is to uphold their fiduciary duty to their shareholders by exercising their decisions in the best interests of the company. Exxon is taking a synthesis approach by considering that the only fiduciary duty they owe is to share-holders (maximizing profit) while an ethical responsibility must be shown towards stakeholders. The approach illustrates their proactive intent to provide the proper information to the correct people. While the board is elected by the common-shareholders, their interests may not reflect those of all stakeholders. A stakeholder is an "individual or group with a multitude of interests, expectations, and demands," that is affected by the decisions of a large multinational company (MNC) such as Exxon.

Stakeholders affected by Exxon can be defined into four classes: Primary social stakeholders include shareholders and investors, employees and managers, customers, local communities, and business partners which have a direct involvement and are influential. Also having a bearing on decisions because of their affect on reputation and public opinion are secondary social stake holders. This class contains government and regulatory boards (such as the SEC), civic institutions, social pressure groups, competitors, and the media. The relationship is more detached and therefore Exxon has less accountability towards them. Primary non-social stakeholders are the environment (affected greatly by a Petroleum company of this size), future generations and 'non-human' species. The secondary non-social stakeholders are organizations and pressure groups such as Greenpeace and People for the Ethical Treatment of Animals (PETA). These secondary non-social stakeholders, in relationship to Exxon, can shift their importance and act as primary non-social stakeholders. This is possible due to the affects of demonstrations and other acts that will be examined further at a later time.

Exxon has adopted guidelines in which standing committees of the board oversee audit and corporate governance in order to provide accountability to all stakeholders. These committees are comprised of non-employees in order to ensure appropriate business conduct. When standing committees, specifically those responsible for matters such as audit and governance, consist of independent members, stakeholders' rights can be upheld. This independent component is one of the requirements outlined in the Sarbanes-Oxley Act of 2002, is a new regulation adopted by the Securities Exchange Commission (SEC), and is widely accepted as an essential component in ensuring a corporation is governed properly. This initiative of Exxon to respect this legal doctrine supports the notion of legal responsibility as outlined by Carroll, and described in further detail later in this paper. The removal of management from these committees provides for a more autonomous decision making process and is key, in a company such as Exxon. If management were able to make all choices, there would be no accountability, and the rights of stakeholders would be put behind the endeavor for profits. In addition to independence boards must also practice true disclosure, especially in the case of board overlap. It is very difficult to act in the best interest of stakeholders, or even shareholders, if members sit on more than one board. This overlap, and outside relationship is the next key item to be targeted by the SEC. Here Exxon is quite guilty, as two of its members sit on the Verizon Communications board beside two members from Shell Oil Inc. and Marathon Oil. This relation can result in a conflict of interest where privileged information is shared between members of different boards. These types