The ambitious expansion of Exxon Mobil Corp. in trading is faced with a thorny issue: whether or not to pay traders millions of dollars in performance-related bonuses.
The Texas oil giant is hiring traders and support staff for its new global trading division, but is not currently paying the large cash bonuses tied to trading profits that are common across the industry, according to current and former employees who ask not to be identified. discuss internal company matters. Instead, Exxon traders are paid mostly like the company’s engineers, with regular salaries supplemented by small stock awards for top performers and benefits like a traditional pension, the people said.
By contrast, Trafigura Group recently paid its top traders and executives $3 billion, or an average of about $2.5 million each, after record profits last year. Traders at BP Plc also recently received hefty bonuses and their counterparts at Vitol Group are to receive unprecedented payouts.
Exxon executives have raised the possibility of changing its pay structure with employees numerous times since it began expanding trading in 2018, including in an internal presentation earlier this year, but have yet to follow through. people said The slow progress has frustrated existing staff, contributed to multiple departures and made it more difficult to hire new recruits, they said.
Exxon made offers to 10 students at a Texas A&M University recruiting event last year with the goal of getting them up to speed in business roles, but none of them accepted and joined rivals because of the lack of clarity about the development of the race, according to people familiar with the event. Still, other students in the university’s trading, risk and investment program remained interested in learning about job opportunities at Exxon.
To attract the best sales talent, the company must offer pay, especially bonuses, that is competitive with its peers. But at the same time, Exxon has indicated that it does not want to take on the same levels of risk as others in the industry. The company will not make speculative bets, CEO Darren Woods said in April. Instead, it will maintain a cautious approach, unwilling to abandon its buttoned-up Texas roots and fully embrace the freewheeling, high-risk version of commodity trading represented by some of its rivals.
“We’ve been in business for more than 140 years and fully understand the need to have competitive and innovative compensation to retain and attract the right talent,” Exxon said in a statement. “We apply this principle to all parts of our business, including the newly formed trading group.”
Exxon stunned the commodities world in February by announcing a new global trading division that would bring together its crude, natural gas, energy and petroleum products desks and strive for “industry-leading trading results.” , a difficult task in a more established sector. traders BP and Shell Plc can make billions of dollars in a good year. Historically, risk-averse Exxon has devoted far fewer resources to trading than its European peers, preferring to focus on its core business of selling oil and gas.
But CEO Woods has since made it clear that Exxon will not try to imitate the world’s big commercial companies. Instead, he will build the division in his own way.
Exxon’s trading will focus on optimizing energy flows through the company’s vast physical network of wells, pipelines, refineries and ships, Woods said in April. While Exxon sees a “tremendous opportunity” in the trade, it will only grow at a “very thoughtful and controlled pace,” he said.
The appointment of HR chief Tracey Gunnlaugsson, who also previously worked in shipping and logistics, to run global trade rather than poaching a big name outside of a rival underlines the conservative approach from Exxon, people said.
Shortly after his appointment in April, Gunnlaugsson gave an internal presentation to employees that discussed hiring, career paths and goals for the new division, according to two people who saw it. The filing indicated that some positions may be eligible for variable pay in the future, but staff were disappointed when few details were provided, they said.
At Exxon, the portion of pay tied to traders’ performance is minimal, even after Woods tripled the number of employees who received restricted stock units last year, according to two people familiar with the matter. Staff are assessed not only on their business benefits, but also on other parts of the business and other skills such as leadership and teamwork, they said.
Uncertainty of payment
At least one trader who left Exxon this year said uncertainty surrounding the company’s pay plans contributed to his decision to leave. Another person said the payment helped prompt the exits of several U.S. crude traders and some analysts.
Exxon’s recent trading expansion began in 2018, when the company lured high-profile traders with the lure of creating a “bubble” with a different pay structure than the rest of the company and more opportunities to take on risks, according to people familiar with the matter. .
But the pandemic derailed those efforts. Exxon pulled capital out of trading in 2020 during a period of unprecedented volatility when rivals such as BP, Shell and Trafigura were on course for big profits. Some of the hiring promises about salary never materialized, the people said.
Performance was much better in 2022, when oil and gas prices rose following Russia’s invasion of Ukraine.
“Last year was a good year for everyone in the trade; it was a good year for us, too,” senior vice president Neil Chapman said in an interview in April.
As for how traders will be compensated in the new division, Chapman said pay is just one of the “enabling capabilities” needed to build a trading organization.
“We will always look to make sure we can attract and retain talent,” he said. “We will adjust compensation schemes where we see fit.”
