Thursday, May 29, 2008

Moral Leadership? 

This is an interesting conundrum. What should the CEO of Exxon Mobil do? Commit the company to greater profit for shareholders or lead the company into uncertain returns from alternative energy? Activists want the company to find new sources of alternative energy and to reduce its carbon footprint. Shareholders enjoy the profits from its current business of mining oil. The CEO apparently has commited himself to satisfying shareholders -- which is his duty. But, is there a time when there is more a CEO should be doing, when a CEO should ignore shareholder demands and embark on a different course? If so, how should the CEO communicate such a decision?

The CEO at Exxon Mobil is balancing short-term gain against long-term health of the company. The short-term gusher of profits is providing capital for the future. On the other hand, that capital can be given back to the shareholders, wasted in a fruitless search for oil, commited to uncertain technologies or any number of outcomes that leave the company no better off 15 years from now. The CEO is paid a hefty salary to make decisions that ensure capital is used productively, and it may not be clear what Exxon Mobil should do. Perhaps the CEO should be discussing publicly the decisions the company faces and the risk-rewards of each. It would show the thought processes the company is undertaking at a time when it is earning enormous returns. On the other hand, there is a risk that the company's thinking might be narrow, and public exposure would earn it greater criticism.

It is a difficult time to be an oil executive.


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