Exxon Mobil Corp.’s ambitious expansion in trading is running into 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 doesn’t currently pay the large cash bonuses linked to trading profits that are common across the industry, according to current and former employees who asked not to be identified discussing internal company matters. Instead, Exxon traders are mostly paid like the company’s engineers, with regular salaries topped up with small stock awards for top performers and benefits such as a traditional pension, the people said.
By contrast, Trafigura Group recently paid $3 billion to its top traders and executives, or an average of about $2.5 million apiece, after record profits last year. Traders at BP Plc also recently received hefty bonuses, and their counterparts at Vitol Group are due for unprecedented payouts.
Exxon managers 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, the 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 recruitment event last year aimed at fast-tracking them into trading roles, but none of them accepted and instead joined rivals with more established programs, according to people familiar with the event. Even so, other students at the university’s Trading, Risk & Investments Program retained interest in learning about job opportunities at Exxon.
To attract the best trading talent, the company needs to offer pay — especially bonuses — that is competitive with peers. But at the same time, Exxon has signaled it doesn’t want to take on the same levels of risk as others in the industry. The company won’t make speculative bets, Chief Executive Officer Darren Woods said in April. Instead, it will maintain a cautious approach, unwilling to abandon its bu-toned-up Texas roots and fully embrace the freewheeling, high-risk version of commodity trading epitomized by some of its rivals.
“We’ve been in business for more than 140 years and fully understand the necessity of having competitive and innovative compensation to retain and attract the right talent,” Exxon said in a statement. “We apply that principle to all parts of our business, including the newly formed trading group.”
Exxon surprised the commodities world in February by announcing a new global trading division that would pull together its crude, natural gas, power and petroleum-product desks and strive for “industry-leading trading results,” a tall task in a sector where more established traders BP and Shell Plc can earn billions of dollars in a good year. Historically, risk-averse Exxon 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 subsequently made it clear that Exxon won’t try to mimic the world’s biggest trading houses. Instead, it will build the division its own way.
Exxon’s trading will focus on optimizing energy flows across the company’s vast physical network of wells, pipelines, refineries and ships, Woods said in April. While Exxon sees a “huge opportunity” in trading, it will only grow at a “very thoughtful, controlled pace,” he said.
Appointing human-resources chief Tracey Gunnlaugsson, who also formerly worked in shipping and logistics, to lead global trading rather than poaching a big-name external hire from a rival, underscores Exxon’s conservative approach, the people said.
Shortly after her 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 presentation indicated that some roles 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 performance-linked pay for traders is minimal, even after Woods tripled the number of employees receiving restricted stock units last year, according to two people familiar with the matter. Staff are evaluated not just on their trading profits, but against other parts of the company and on other skills like leadership and teamwork, they said.
Pay Uncertainty
At least one trader who left Exxon this year said the uncertainty around the company’s pay plans contributed to their decision to leave. Another person said pay helped drive the departures of multiple US crude traders and some analysts.
Exxon’s recent trading expansion began in 2018, when the company attracted high-profile traders with the allure of creating a “bubble” with a different pay structure than the rest of the company and more opportunities to take risk, according to people familiar with the matter.
But the pandemic derailed those efforts. Exxon pulled capital from trading in 2020 during a period of unprecedented volatility when rivals like BP, Shell and Trafigura were on course for huge profits. Some of the recruitment pledges on pay never materialized, people said.
Performance was much better in 2022, when oil and gas prices surged following Russia’s invasion of Ukraine.
“Last year was a good year for everybody in trading — it was good for us as well,” 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” necessary to build a trading organization.
“We’ll always look to make sure we can both attract and retain talent,” he said. “We’ll adjust the compensation schemes wherever we see fit.”