What a story. Exxon, once the greatest corporation in the world, now struck out of the Dow Jones Industrial Average and eclipsed in market cap by a wind-farmer! OK, every traditional energy stock has received a smacking this year - some reckon that 2019 will prove to have been 'peak oil' - but Exxon stands out from the Shells, BPs, Chevrons and Totals as having been in slow and steady decline for years before that.
This is the firm that was the triumphant main survivor of the anti-trust purges against the Rockefeller / Standard Oil empire; that for decades managed its stock price carefully through a strategic buyback scheme, so that every pension fund in the USA had more Exxon in it than anything else. That was AAA rated long after that became a distant memory for industrials. That was totally self-confident in its own strength and abilities; that would blithely flout US sanctions if it chose**; that had every bank in the world at its beck and call; that remained magisterially above the hurly-burly of politics, domestic and foreign (until Russia expropiated some of its stake in Sakhalin, to the company's utter amazement: that's the kind of thing that happens to the others, but not us!).
It certainly wan't a single bad decision. I know Exxon well, having dealt with them at length in several different manifestations. On the one hand, they were (let's start in the past tense) totally confident in their own abilities. They never recruited from outside: everyone started at the bottom of the Exxon pyramid, and at each successive layer a few more would drop off. Management were trained to be generalists in a laudable programme of assignments to widely varying divisions. If you'd never worked in the corporate treasury, that was a very good reason for being given a role there for your next job. For this to be feasible, numeracy was the primary requirement; and training needed to be superb. In technical subjects, it was. There was an Exxon way of doing things, in almost every sphere. By dint of the 'no external recruiting' principle, nobody knew any different anyhow. By its own lights (share price, credit rating, ability to take on global mega-projects only Shell could match), this all clearly worked superbly well. If you liked being in a competent, well-resourced, confident, and hence relaxed environment, you could have a very happy career.
The downside? Well, arrogance, natch. And total insularity. Exxon had no idea what it didn't know. Like, absolutely none whatsoever. This even included what else was going on in the oil industry, if Exxon didn't participate in a particular corner of it. This extended to what were the lastest technical breakthroughs, if Exxon hadn't been involved. (I was once set on, as an outsider, to conduct a formal enquiry into a vexed distortion in the UK oil taxation regime and the various ways most companies were finding to dodge around it: HMG wanted to straighten it all out. I was invited to interview any executive in any company I chose and - on the strict basis of 'no names mentioned' - demand full candour from them. This was forthcoming, and we bottomed out the loophole issue quite easily. Exxon, naturally, insisted on being one of the interviewees (fair enough): they sat me down and earnestly assured me, with transparent good faith, that nobody in the industry was dodging anything at all, and the whole thing was a big misunderstanding. Well, they certainly weren't dodging; they showed me their books. They had absolutely no idea what the rest of the oil patch was up to.)
A subsidiary failing was their total lack of interest in entrepreneurial activity. They made their money by being (as they saw it) the best engineers with the biggest balance-sheet, who could thereby command a monopoly on the biggest and most lucrative challenges / opportunities in energy. Anyone piping up with a smart idea for making a few extra bucks was told to get back to their desks: too small to be of interest. That's an attitude that corrodes the spirit of many of the brightest and best.
Well, they've had a good run: but for years now it's become obvious this introspective giant was going to stumble really badly if the world moved on. They'd never realise what was happening outside their frosted windows, for one thing. And when the need came for nimbleness? Forget it. (There was once an Exxon CEO who said he was going to "teach the elephant to dance". No chance.) Two years ago they announced they were going to get seriously into trading - as had, for very many years past been Shell, BP, Chevron, Total ... et al, ad infinitum. What: a massive oil company, not in trading?! Yup. Trading was evil. If you give the toys to the boys, the boys will play with the toys; and then where would we be? Nope, we'll be self-sufficient, thank you very much. Well: try changing course in a volatile, fast-evolving commodity market without a good trading division. Can't be done. Needless to say, their new efforts have made no impact.
If the world moved on ... and so it has proved. Exxon is now pretty paralysed, with most discretionary expenditure frozen while they figure out what the Hell to do next, as the rest of the western world heads along different paths towards Net Zero 2050. (You can see them thinking: the world will still need oil ... maybe there's a niche for just one unreconstructed old dinosaur ...) Their credit rating is still AA - albeit having been downgraded this year by both S&P and Moody's, and with negative outlook - so there's never any problem raising $$$. They might still lash out on something left-field (like in the 1980s when they decided to beat IBM at office systems - sic ++).
Chances of success? Pretty low. Still, it's a big corpse for many a vulture to feed off (see footnote) over the coming years. My name is Ozymandias ...
Update: I found the "elephant dance" story online
** yet again, a story for another day (perhaps when the corpse has been interred)
++ from wiki, the story of a highly instructive $1bn Exxon cockup of old:
Under the guidance of its paid consultants at Boston Consulting Group, Exxon announced in the 1970s, that it would compete against IBM and Xerox. The mantra was ‘Information Is the Oil of the 21st Century’. It launched Exxon Office Systems, which predictably failed, since "the giant oil company failed to fully realize the subtleties of managing small high-tech companies." In the early 1980s, Exxon retailed its fax machines and software through Sears. Exxon announced the closure of the venture at the end of 1984.