Are shareholders smarter than Congressmen? No contest.
Click here to listen to the broadcast of You Tell Me on Newstalk 600 KTBB, Friday, May 30, 2008.
There is a key similarity and there is key difference between being a shareholder in a publicly traded company and being a member of Congress.
The similarity is that if you own shares in a publicly traded company or if you are a member of Congress, you get to vote at the meetings.
The difference is that a shareholder of a company has to live with the consequences of his or her vote but a member of Congress too frequently does not.
I bring this up in the wake of the annual meeting of shareholders of Exxon Mobil Corporation held Wednesday, May 28, 2008 in Dallas.
You’d have to be living under a rock to not know that the subject of oil production has become ridiculously politicized. As gasoline prices have soared, the top executives of the top oil companies have been hauled before Senate and House committees that are “investigating” the companies’ roles in high fuel costs.
Except in very rare instances, Congressional investigations constitute the American version of Kabuki theater, the highly stylized and very overdrawn form of Japanese drama characterized by grossly exaggerated acting. The posturing of Congressional committee members and their often hostile questions directed at the oil company executives get good play on the evening newscasts and in the morning papers.
The fact that these Congressional hearings always conclude with no meaningful findings is never reported.
With this backdrop, let’s consider the Exxon Mobil shareholders meeting earlier this week in Dallas (Wed. May 28, 2008). At the meeting, chairman and CEO Rex Tillerson was called upon by dissident shareholders and activists (who had purchased shares for the sole purpose of attending the meeting) to defend the fact that the company does not invest heavily in so-called “environmentally friendly” fuels. In fact, various shareholders put forth a total of 17 environmental and social proposals, all of which failed when voted upon.
The proposals failed for a very good reason. And it’s not because Exxon Mobil doesn’t care about the environment and has no social conscience. The proposals failed because Exxon Mobil is not an eco-fuels venture capital start-up and the shareholders know it.
Exxon Mobil is an oil and gas company. And accordingly, the majority of shareholders recognize that it is not in their interest to send the company down rabbit trails away from the company’s core business of finding and producing oil and gas. To divert company resources away from oil and gas production during a period of high demand for oil and gas does not make economic sense. Doing so has little chance of enhancing shareholder value through growth in earnings and appreciation of the stock price.
Because of their investment, the shareholders must live with the consequences of their votes on Wednesday and they voted accordingly.
Congress is not so constricted. Members of Congress ride around in cars that are provided, insured and fueled at taxpayer expense. The fact that they own personal vehicles notwithstanding, having what amounts to a small fleet of company cars at one’s disposal blunts the impact of high fuel prices. If you ever go to Washington to visit your congressman, you’ll find that members of Congress have succeeded in creating what amounts to a small parallel universe in which they are able to cosset themselves and remain shielded from much of what you and I must deal with daily together with much of the consequence of the laws they enact.
And that’s why it’s no skin off their noses to block every rational attempt by U.S. oil companies to add to energy supplies while demanding that those same companies invest in “green” energy alternatives and subject themselves to “windfall profits” taxes in order to fund “new technologies” that will make us “energy independent.”
At $130 per barrel, oil is still the cheapest, most usable form of energy. If we as a nation incrementally deny it to ourselves, in the name of pursuing some far-in-the-future “new energy” technology, while other nations continue to consume it, everything we do will be at a competitive disadvantage and our economy and thus our way of life will suffer.
Exxon Mobil’s Rex Tillerson said it Wednesday.
“The world is going to have to use oil and gas whether people like it or not – that’s a fact. You can run and you can hide, but that’s what you’re going to be using 25 years from now.”
So it’s time to quit posturing and start drilling. Time for Reid, Pelosi, Clinton, Obama, McCain, nearly all the Democrats and way too many Republicans to stop demagogueing, shut up and get the U.S. government out of the way of developing and producing U.S. oil reserves that we know are there.
If demand for oil exceeds supply and Congress can do something about supply, to allow them to do otherwise is irresponsible.