The worldwide pandemic has had Fortune 500 companies scrambling to protect their dividends and keep their shareholders happy. Almost every economic sector took a hit, but the Oil & Gas Industry was among the most affected. The results have been generally negative for workers at those companies. In April, The Houston Chronicle reported that ConocoPhillips was planning to cut $2.2 billion in spending. According to Reuters, Chevron plans to, “cut 10% to 15% of its worldwide workforce as part of an ongoing restructuring at the second-largest U.S. oil producer”. Other companies like ExxonMobil have been in the news a lot recently for taking on cost cutting measures in the name of preserving their dividend. ExxonMobil is by no means the only company trying to please its shareholders but for this article we’ll use them as an example.
Last month Reuters reported that Neil Chapman, ExxonMobil’s Senior Vice President, stated that the company would be cutting capital and operating expenses to protect their dividend. ExxonMobil has since announced that they will no longer be matching U.S. employee’s contributions to their retirement savings plans. The suspension of these benefits will officially begin on October 1st, 2020. This is the latest step in a long line of troubling economic developments in which companies are attempting to save their dividend. According to Reuters, ExxonMobil has now experienced, “its first back-to-back quarterly loss in 36 years because of the drop in demand during the novel coronavirus pandemic”. This announcement comes on the heels of several stories claiming that ExxonMobil was effectively laying people off through PIP.
A PIP or “Performance Improvement Plan” is essentially a severance offer to leave the company. According to Forbes, ExxonMobil made changes to their performance evaluation process in order to justify more job cuts. Back in April they raised the number of employees who were in the “Needs Significant Improvement” (NSI) category from 3% to 8% of all US workers. Employees who were placed in the NSI category qualified for a PIP. ExxonMobil employs about 75,000 people, so an 8% reduction would result in about 6,000 people out of a job. According to Business Insider, the changes made to ExxonMobil’s employee evaluation process were an attempt to, “cut more jobs without traditional layoffs.”
All of these decisions are being made in the name of protecting dividends. ExxonMobil has raised the payout on their dividend for 37 straight years, and they would very much like to continue that streak. When corporations prioritize their dividend the result is typically a lot of employees out of a job.
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- XOM Summary Plan Description, 2017