ExxonMobil (NYSE: XOM) CEO Rex Tillerson’s decision to accept President Elect Donald J. Trump’s nomination for U.S. Secretary of State (Foreign Secretary) raises a host of ethical and business questions.

The most obvious of these is the decision good for ExxonMobil. Tillerson’s decision to join such a controversial; and somewhat unpopular, administration might put the company in the crosshairs of Democrats and other Trump opponents.

That already seems to have happened U.S. Senator John McCain (R-Arizona) has announced plans to grill Tillerson over his relationship with Russian President Vladimir Putin. It sounds as if McCain is planning to launch an investigation of Tillerson that might ensnare ExxonMobil in controversy.

The Ethical Quandary

Even greater problems might arise from Democrats; some of whom have been very critical of ExxonMobil’s position on climate change. Democratic Attorney Generals (Chief Prosecutors) in New York State and Massachusetts have taken legal action against the company over allegations it conspired to spread global warming denial.

A worry for ExxonMobil’s leadership would be a future Democratic congress; American congressional elections are scheduled for 2018. Congress has the power to investigate and subpoena almost anybody. Another potential conflict would be with a Democratic administration, if the White House were to change hands in 2020.

There are many ways that Trump’s political opponents can harm ExxonMobil if they want to. They can deny government contracts, use environmental regulations to block oil and gas exploration efforts and pressure foreign governments to deny the company’s oil concessions.

An even greater problem for ExxonMobil would be Trump’s political foes in league with its competitors. Politicians would use Tillerson’s role in the administration as a cover for favors they were performing for other oil companies.

The ethical quandary raised here is an obvious one; should a businessperson put aside his or her political aspirations for the good of the company? Which is greater; Tillerson’s obligation to ExxonMobil, or his obligations to his country and political party?

Is it good for ExxonMobil?

Is it ethical for an executive to take a political stand or post that might embroil his or her company in controversy? Should high-profile CEOS like Tillerson forgo politics entirely, or wait for a specific period time before assuming a political role. Under US law military officers have to wait seven years after they leave the service before serving in some government positions including the cabinet.

Even if Tillerson’s actions are ethical they certainly raise questions from a public relations and business standpoint. Would associating with a political party damage a company’s marketing efforts? Democrats buy gasoline and other oil products too.

There are international repercussions; ExxonMobil does business in many Muslim nations. Would Tillerson’s decision to join the administration of man with a reputation for being anti-Muslim harm future deals in those countries?

As a former CEO Tillerson certainly has an obligation to ExxonMobil, its investors and its employees. By taking a position that might harm the company, it can be argued that Tillerson is violating that trust.

Is it good for Rex Tillerson?

Tillerson has a reputation for integrity; he was an Eagle Scout and served as president of the Boy Scouts of America. Yet there is some questionable self-interest in his decision.

ExxonMobil’s revenues have been falling dramatically in recent years, the company lost $71.47 billion (€67.91 billion) in revenues between September 2015 and September 2016. That has prompted many investors; including Warren Buffett, to dump their ExxonMobil stock.

Tillerson owns 2.6 million shares of ExxonMobil stock, Fortune reported. To avoid conflict of interest charges he would have to sell that stock before becoming Secretary of State.

Under normal circumstances such a sale would badly damage ExxonMobil; because other investors seeing the CEO cashing out would rush to dump its stock. That would almost send its stock price falling, and possibly damage business relationships. By joining the Cabinet, Tillerson is in a position to sell the stock without hurting ExxonMobil or making himself look dishonorable.

Yet serious ethical questions would arise because Tillerson might make $234.80 million (€223.10 million) from such sale. The big payday comes from the most recent price of XOM which was trading at $90.31 (€85.81) a share on December 30, 2016. That potential windfall is already raising eyebrows in the business press in the United States.

Is it Ethical?

Although it must be pointed out that Tillerson has figured out how to sell the stock without hurting ExxonMobil. That of course will raise serious questions about his real motivations and where his loyalties lie. Particularly with ExxonMobil’s close relationship with Russia, a country that many Americans perceive as a threat.

There are no easy answers to the ethical questions raised by Tillerson’s decision. Business ethicists and political scientists will be debating these issues for years to come.

Yet there is one certainty here, Tillerson is definitely qualified to be Secretary of State. He has had broad administrative experience and many dealings with foreign leaders. Tillerson is actually far better qualified than the current Secretary; John Kerry, who is a career politician from Massachusetts, and Kerry’s predecessor Hillary Clinton.

The real problem here is one of obligations and ethics. Is it ethical for former executives to participate in politics? More importantly, is Tillerson violating his obligations to ExxonMobil by taking such a political role. There are no easy answers, only ethical dilemmas and potential political controversies.


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