Attachment 1 Details on Specific Issues with ISS Proxy Analysis
1.
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Quantitative Screen Results
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We have the following concerns with the results of ISS quantitative screen:
Peer Group
As we noted in correspondence with ISS on March 5,
2018, it is difficult to understand how Berkshire Hathaway (Berkshire) was selected by ISS as a benchmark company for the most recent assessment period, given the substantially different profiles of the two businesses. We did not receive a response
from ISS to our March 5 inquiry seeking clarification on this matter.
All other companies in the
ISS-selected
peer
group are companies that are capital-intensive, have engineering or manufacturing profiles, and/or long investment lead times. Regardless of its size, Berkshire is a holding company for unrelated businesses, many of which have business models that
are finance or insurance related and do not align with that of ExxonMobil.
Additionally, we would expect to see similar companies selected by ISS as benchmark
companies for ExxonMobil and our largest U.S.-based competitor in the oil/gas industry. Yet, Berkshire was not selected by ISS as a benchmark for ExxonMobils largest U.S.-based competitor or any other company, according to our analysis. Also,
the
ISS-selected
peer group for Berkshire does not include ExxonMobil, nor does it include our largest U.S.-based competitor. Appropriately, most of Berkshires
ISS-selected
benchmark group includes financial services and insurance companies.
Furthermore, based on our analysis, the
utilization of companies more comparable in size, capital investment profiles, and business models would result in a more positive score. Also, based on our analysis, we believe that utilization of the
ISS-selected
benchmark companies for our largest U.S.-based competitor would also yield a more favorable outcome in the quantitative analysis for ExxonMobil.
Finally, it is impossible to accurately measure market orientation for pay when the ISS selected benchmark companies change substantially on an annual basis. In the
last 4 years, there have been 15 changes to the
ISS-selected
peer group for ExxonMobil. During the same period ExxonMobils Compensation Committee changed only 2 benchmark companies (they removed
Caterpillar and added General Motors in 2017 to ensure that the peer group continues to reflect companies of sufficient size, scale, and complexity for comparison).
Relative TSR Performance
While we agree with ISS that relative TSR
performance is one of several appropriate metrics on which to base company performance, comparing ExxonMobils relative TSR to companies outside of the oil/gas industry is not meaningful for the purpose of determining relative performance
underlying pay decisions.
A cross-industry TSR comparison, especially against companies and industries that are not exposed to commodity cycles or have different
(or sometimes opposite) business cycles, does not accurately portray ExxonMobils relative TSR performance. We believe it is more accurate and informative to compare TSR across companies of similar size, scale, and complexity in the same
industry. This is the basis on which the Compensation Committee measures TSR and other financial and operating metrics for the purpose of determining executive compensation (see our 2018 Proxy, pages
34-35).
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