Management Succession: Who'll Be Next to Climb the Greasy Pole?

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Lee Raymond, Exxon Mobil's chairman and chief executive, recently turned 63, but he won't be planning leisurely days of golf and fishing just yet. The company has announced that Raymond would stay on beyond his official retirement date of Aug. 2003 for an indefinite period, while a successor is groomed. In stark contrast to the extensive coverage of leadership succession at another US industrial giant, General Electric, Exxon's announcement attracted little publicity -- even though it identified the two frontrunners for the job, Exxon men created in the same mold as the incumbent. Choosing a successor to Raymond is no light task, given the company's tradition of strong leaders who can hold office for a decade. What's clear is that, by staying on a little longer, Raymond is paving the way for a younger man to take the job long-term, rather than appoint a caretaker from a group of three older, but experienced senior executives. BP -- another company ruled with a somewhat autocratic style -- will face a similar challenge in coming years, as Chief Executive John Browne approaches the normal retirement age of 60. Royal Dutch/Shell, by contrast, has a unique structure of rule by committee, which traditionally involved rotating the top job every couple of years. This appears to be changing. Exxon's late-July announcement openly declared that the firm is laying plans for "the smooth transition to the next generation of leaders." Five executives were named to a senior management committee, but it's apparent that two -- Ed Galante, 50, and Rex Tillerson, 49 -- are in line for the chairman's suite. Although the official line is that others could also be considered, one equity analyst comments that this is likely only if the two frontrunners "flame out." The job, he adds, "is theirs to lose." Model Employees Both Galante and Tillerson are model Exxon employees, with backgrounds in engineering and careers at the company dating to the early 1970s. Galante has been executive vice president of chemicals for the last two years, has a background in the downstream, and has served as executive assistant to the chairman. Tillerson rose up through the upstream ranks: He is currently head of Exxon Mobil Development Co., an arm in charge of upstream project development and drilling, and has held various positions in planning and production. Both could be assigned to new positions broadening their experience in the next couple of years, much as Chevron's downstream-oriented Dave O'Reilly was appointed to head the company's upstream operations before he took the reins at that company. Of the Exxon management committee's other members, upstream chief Harry Longwell and his chemicals and coal counterpart, Rene Dahan, are simply too old to be long-term successors, at 60 and 59, respectively. In theory, the 56-year-old downstream head, Gene Renna, had a better chance. But he joined from Mobil in the 1999 merger, a factor that probably ruled him out. Raymond has been chairman and CEO since 1993. Analysts say the company should really have started to prepare for the transition a couple of years ago, but was distracted by the Mobil combination. Exxon, in a statement, said that "the high level of change during the past three years has resulted in the delay of some executive moves required to develop the next generation of corporate management." Succession would not appear to be an immediate issue at either Shell or BP. After all, Phil Watts has only just taken over from Mark Moody-Stuart at the helm of Shell, while BP's Browne is, at 53, in theory a good six or seven years away from retirement. Some changes at the board level are likely at BP in coming years, however. Deputy Chief Executive Rodney Chase and Chief Financial Officer John Buchanan are both 58, while downstream chief Doug Ford is 57 -- leaving all three only a few years from BP's usual retirement age of 60. The competition to find replacements for these three may well offer a pointer to a likely eventual successor to Browne, given that none of the existing top management is expected to be around when he does finally step down. Browne's successor, analysts and other industry sources suggest, will come from the current second tier of executives, involving a cluster of managers -- including current group vice presidents -- thought to number around 20, who are now being prepared for possible promotion. "There are a number of people being groomed and being looked at," one knowledgeable source says. These executives are drawn from various spheres of BP's operations, and are now "being allowed out in public," as another source puts it, to front strategy briefings and presentations to analysts alongside their more senior colleagues. Basically, the process should be similar to Exxon's, with succession jumping down a management level, and one or more frontrunners becoming apparent a few years in advance. Baptism of Fire Shell's management method has traditionally been collegiate, built around the Committee of Managing Directors (CMD), which drew top executives, in turn, from the Royal Dutch Petroleum and Shell Transport & Trading sides of the company. Moody-Stuart's reign saw movement away from this, toward an approach more in line with that of a regular chief executive. After the group's watershed strategy review in 1998, for example, Moody-Stuart took personal responsibility for turning around Shell's performance, and became closely associated with the success of these efforts. Watts' appointment marked another break with tradition, as it was technically Royal Dutch's turn to provide a chairman. The Hague's favored candidate, Jeroen van der Veer, was appointed vice chairman last year, but failed to make the top job. Watts could also hold the reins longer than the past norm of two or three years, given that he recently turned 56. There is no reason why Watts shouldn't continue until retirement, Shell says -- giving him four years or so. One US equity analyst criticizes the past rotation of Shell chairmen as eroding consistency and accountability. "It's like a Rubik's cube. You never know what's going on there," he says. Watts has had a baptism of fire. At the second-quarter results presentation to analysts early this month, he admitted that the company was adjusting downwards its growth targets for oil and gas production, but declined to give any figures until an upstream presentation in September. "It was disastrous," one analyst says. "It was just a stonewall." But does inexpert handling of a presentation really matter that much in the running of an international petroleum company? "Only when your share price goes down 8%," the same analyst responds, referring to the battering Shell's stock received in the wake of the presentation. Moody-Stuart had a similarly bumpy ride with investors at the start of his term, but learned quickly and recovered well. "There's a learning process at these companies, even at the very top management level," another analyst notes. Watts' poor reception last month "isn't necessarily that disastrous in the long-term scheme of things." Watts will want to extend this approach, and will need to, according to analysts. Shell needs dynamic, responsive leadership, they say, particularly after this month's volume growth debacle, when questions are starting to be asked about the management. As for an eventual successor to Watts, the smart money in banking circles seems to be on Walter van de Wijver, who has just replaced Watts as the group's upstream head. Van de Wijver is 10 years younger than Watts, and a clear seven years younger than the other members of the CMD. His Shell career has included time in the upstream, in the UK and the US, as well as a year running the group's international gas and coal operations. While several analysts see him as the strongest contender to follow Watts, much will depend on the performance of the upstream in coming years. EXXON MOBIL'S MANAGEMENT COMMITTEE Lee Raymond, 63. Chairman and chief executive since 1993, and added title of president in 1996. Educated in chemical engineering, he joined Exxon in 1963. Held a variety of management positions in domestic and foreign operations. Elected senior vice president and director in 1984. Harry Longwell, 60. Senior vice president and director since 1995. Responsibilities include worldwide upstream activities, upstream research, Canadian affiliate Imperial Oil, aviation, and human resources. Educated in petroleum engineering; joined Exxon in 1963. Rene Dahan, 59. Senior vice president since 1995 and director since 1998. Responsibilities include worldwide chemical and coal operations, global services, corporate planning, public affairs, and safety. Educated in nautical science; joined Exxon in 1963. Gene Renna, 59. Formerly president and chief operating officer of Mobil, he became senior vice president and director of Exxon Mobil in 1999. Responsibilities focus on downstream operations. Educated in business administration; joined Mobil in 1968. Ed Galante, 50. Executive vice president of chemical arm since 1999. Previously served in various domestic and international marketing, refining, and general management positions, and as executive assistant to the chairman. Educated in civil engineering; joined Exxon in 1972. Rex Tillerson, 49. Executive vice president of Exxon Mobil Development Co. since 1999, involving responsibility for upstream project management and drilling. Previously served in various domestic and international production, natural gas, planning, and general management positions. Educated in civil engineering; joined Exxon in 1975.

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