When Rex Tillerson takes his seat before Senate Foreign Relations for his confirmation hearing to be secretary of state, one line of questioning will almost certainly concern his compensation -- primarily, his yet-unrealized compensation -- from the biggest oil and gas company in the world.
Tillerson has made millions, especially in the last 10 years of his 44-year career, when he was promoted to CEO, president and chairman of the conglomerate. Last year, he was paid a base salary of $3,047,000, with $2,386,000 in a cash bonus and $18,288,000 in stock.
He faces mandatory retirement next year, when he reaches his 65th birthday, but even once he leaves ExxonMobil, Tillerson will have some 2 million unvested shares that are currently worth somewhere in the neighborhood of $200 million. ExxonMobil’s vesting period is a long one, and currently, his SEC disclosures show it will be a decade before the last of Tillerson’s stock vests in 2026, well after his tenure as secretary of state is over.
Given that the shares haven’t vested, Tillerson can’t sell that stock. Exxon is not commenting on how those unvested shares will be dealt with, but the company is almost certainly working on resolving the question before his confirmation hearing. This is certainly not the first time a wealthy CEO has accepted a high-level cabinet position, but what is unusual is the amount he has in unvested shares.
In some cases, government appointees forfeit any unvested shares, but the amount at issue in Tillerson’s case is a much higher and more significant portion of his compensation.
Norm Eisen, the former top White House ethics lawyer for President Obama (as well as the former ambassador to the Czech Republic), said of Tillerson’s situation that “the board is going to have to find a way to accelerate vesting.” One approach could be “applying a haircut and accelerating the rest,” Eisen said, that is, making a deal in which Tillerson forfeits some of the shares and is able to cash in the remaining shares on an accelerated schedule. But Eisen cautioned that if the number is very high, there may still be pressure on Tillerson to recuse himself in some instances.
Vice President Dick Cheney faced a similar dilemma when he was elected. As CEO of Halliburton, he too, had millions in shares that would vest after he took office. According to the New York Times, Cheney’s attorneys did not arrive at a conclusion about what to do with his unvested options until early March, 2001, about a month and a half after he took office.
The vice president pledged to take the options which could not immediately be converted into stock and donate all of them, as they vested, to the University of Wyoming, Capital Partners for Education and George Washington University Medical Faculty Associates. According to the Wall Street Journal, Cheney’s gift was administered by Williams & Connolly, since the options themselves were nontransferable. Willams & Connolly, according to a White House disclosure, set up the gift to be tax neutral to the Cheneys, so that they derived no tax benefit from the gift.
But the bar for Tillerson is higher than that faced by Cheney. The law on conflict of interest that applies to cabinet nominees does not apply to the president or vice president, a fact that has been mentioned a few times by the president-elect -- he said as much to the New York Times in November.
Mr. Trump is right that the federal law (18 Section 208) that bars executive branch employees from participating in matters in which they have a financial interest exempts the president. It also exempts the vice president (and Congress and federal judges, too), which is why Cheney faced much less legal scrutiny regarding his Halliburton stock than Tillerson will regarding his ExxonMobil stock.
Should he be confirmed, Tillerson will take a deep pay cut -- current Secretary of State John Kerry makes $205,700 annually.
CBS News’ Laura Strickler and Margaret Brennan contributed to this report