Ever since the pandemic took its toll on the Oil & Gas industry, Fortune 500 companies have been scrambling to protect their dividends and keep their shareholders happy. The results have negatively impacted workers at those companies. ExxonMobil has been in the news a lot recently for taking on cost cutting measures in the name of preserving their dividend. However, CNBC reported today that ExxonMobil may be in a position where they need to cut their dividend after all. The article makes it clear that a dividend cut is not set in stone, but the “implied dividend” (Where traders believe the dividend is heading) seems to be trending in the wrong direction. Neil Chapman, ExxonMobil’s Vice President, stated that the company will look to reduce costs and by doing so they will, “maintain the dividend and hold debt at its current level.”
Anyone working at ExxonMobil knows that cost cutting is already underway. A recently leaked ExxonMobil memo indicated that the company is looking into job cuts in the near future. Gizmodo has reported that ExxonMobil is, “planning for contraction into 2021 and could target cutting jobs in the U.S. and outsourcing them overseas where labor is cheaper.
ExxonMobil has also recently 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.”
The 401(k) announcement came on the heels of several stories claiming that ExxonMobil was effectively laying people off through PIP or “Performance Improvement Plan”. A PIP 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.
- Bailey, Tyler. “Options Market Predicts Exxon Mobil’s Dividend Could Be in Danger.” CNBC, CNBC, 9 Sept. 2020, https://www.cnbc.com/2020/09/09/options-market-predicts-exxon-mobils-dividend-could-be-in-danger.html.
- “The Retirement/Transition Guide for ExxonMobil Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://energy.theretirementgroup.com/exxonmobil-guide-download-google
- Nichols, Ashton. “AT&T’s $6 Billion Cost-Cutting Plan Includes Job Cuts, Store Closings.” Dallas News, The Dallas Morning News, 16 June 2020, https://www.dallasnews.com/business/local-companies/2020/06/16/atts-6-billion-cost-cutting-plan-includes-retail-store-closings/.
- Jones, Benji. “Leaked Documents Reveal Exxon Changed Its Employee Ranking System amid the Coronavirus Pandemic, Putting More Workers at Risk of Getting Cut.” Business Insider, 24 July 2020.
- Jones, Benji. “Exxon Made Managers Dub Some Employees Poor Performers to Cut Staff – Business Insider.” Business Insider, Business Insider, 30 July 2020, https://www.businessinsider.com/exxon-managers-dub-some-employees-poor-performers-cut-staff-2020-7.
- Hiller, Jennifer, et al. “Exxon Prepares Spending, Job Cuts in Last Ditch Move to Save Dividend.” Reuters, 30 July 2020.
- Gross, Elana. “ExxonMobil Reportedly Changed Its Employee Review Process To Increase Performance-Related Job Cuts.” Forbes, 24 July 2020.
- “Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
- “ExxonMobil Corp. Layoffs – TheLayoff.Com.” TheLayoff.Com – Layoffs Discussion Board, 27 July 2020, https://www.thelayoff.com/exxon-mobil
- Sklover, Alan. “‘My Severance Agreement Says I Can Never Re-Apply; Can I Get around That?’ – Sklover Working Wisdom.” Sklover Working Wisdom, 20 Mar. 2014, https://skloverworkingwisdom.com/my-severance-agreement-says-i-can-never-re-apply-can-i-get-around-that/.
- “Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.