Ethics advance…or decoy?
While COI aficionados (not to mention concerned citizens) await the President Elect’s plan to mitigate his conflicts of interest, there is interesting ethics news regarding his nominee for Secretary of State, Rex Tillerson, CEO of ExxonMobil. As described in today’s NY Times, in addition to selling ExxonMobil stock he owns outright to avoid a COI, “a more complicated task involved resolving the fate of two million shares of ExxonMobil stock, worth about $180 million, that Mr. Tillerson was set to receive over the next decade. If he held on to this promised future payout from ExxonMobil, he would still have a financial interest in matters that might affect the company and the oil industry. So ExxonMobil agreed to take the unusual step of paying out the value of these sales and putting the money into an independent trust, with the money invested in neutral assets like Treasury bonds and mutual funds. Under the terms of the agreement, if Mr. Tillerson, 64, goes back into the oil industry during the next decade, he will forfeit any money left in the account.”
With respect to this forfeiture provision, Richard W. Painter, a White House ethics lawyer during the administration of President George W. Bush, told the Times that it “was unusual and positive, as it removes the incentive for him to take steps while in government that might benefit an industry he planned to return to work for upon his departure. ‘It gives up something I had never been able to get from other government officials — a promise not to go back to an industry from which you came,’ Mr. Painter said.”
There is, however, a more negative way of looking at the agreement – one that focuses not on the forfeiture provision but rather on the payment for the loss of the restricted stock itself. As noted in this article by Climate Central: “What makes the Tillerson deal unusual is that ExxonMobil has agreed to provide him with benefits it had no legal obligation to provide. ‘This was not a clause in his employment contract that was triggered,’ Stanford law expert Michael Wara said. ‘It’s a special arrangement of massive economic significance to Tillerson that was given to him purely because of his move into government…’ Wara described the arrangement between Tillerson and the ExxonMobil’s board of directors as a legally questionable ‘sweetheart deal.'”
Viewed through this lens the forfeiture provision is not praiseworthy but should be seen as an ethics decoy. In this view, it is a clever way of distracting attention – at possibly little real cost to Tillerson (given that he may have no interest in ever going back to the oil industry) – from a questionable payment of a magnitude that would engender gratitude in all but the most hard hearted of recipients.
Note, however, I am not 100 % sure that the sweetheart deal analysis is correct. I say that because while I read quite a few press accounts of the Tillerson agreement this article was the only one to make the point. And, since I’m not an employment lawyer I don’t feel like I know enough to make a judgment on this point based on the agreement documents alone.
But what does seem certain from the Climate Central article is that, in addition to the traditional COI problems, there are other reasons for concern about Tillerson’s impartiality on issues facing oil companies: “‘I want to see some questions at the confirmation hearing about how much those oil companies are going to be coming around and chatting him up,'” ethics attorney Painter said. “‘Are there going to be cognitive biases and personal loyalties?'”
In sum, a mixed bag. The forfeiture provision does seem like a genuinely important advance in the state of the art regarding forward looking, revolving door conflicts. But the payment for restricted stock could be a powerful backward-looking COI – particularly when coupled with the COI-like bias and loyalty concerns identified by Painter. Rather than passing judgment on which view seems more right to me, I’ll fall back cryptically on the life philosophy espoused long ago by a Doonesbury character who described himself as cynical but eternally optimistic.