Executive Privilege

Executive Privilege


By INVESTOR'S BUSINESS DAILY | Posted Thursday, August 14, 2008 4:20 PM PT

Economics: When capitalists fail to defend the system that's done more than any other to end human misery, they make a fatal mistake. That's why it's so encouraging to see Exxon Mobil's CEO stand up for his business.

On July 31, Exxon Mobil reported an $11.7 billion second-quarter profit, breaking the record for a U.S. company that it previously set.

Naturally, politicians and the public, provoked by a financially ignorant media, reacted as if the company had stolen the money.

Barack Obama called the earnings "outrageous."

Sen. Charles Schumer, Democrat from New York, called oil industries "the most selfish group of companies that I've ever seen — and the most hypocritical" and said it was "Christmas in July" inside the Big Oil boardrooms.

NBC "Today" co-host Meredith Vieira moaned that "oil companies seem to be rolling in dough."

Perhaps the most asinine comment came from Rep. Ed Markey, a Massachusetts Democrat.

"These oil companies cannot continue to earn these profits, spend a pittance on renewable fuels to move America beyond oil and then block any efforts to shift billions in tax breaks to companies trying to bring about the next generation of clean energy," he said.

Too often, business leaders choose to duck when the arrows of outrage come flying. But Exxon Mobil CEO and Chairman Rex Tillerson made an unusual and courageous stand Wednesday, appearing on ABC's "World News" with Charles Gibson.

"I saw someone characterize our profits the other day in terms of $1,400 in profit per second," Tillerson told Gibson.

"Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost. We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it."

We can't think of anyone who would be willing to pay $4,000 in taxes for every $5,400 they earn in salary or wages. Yet many in our country believe it's OK, even desirable, for oil companies to do just that.

What's needed here is a bit more perspective, a sense of proportion. Though Exxon Mobil set a record for nominal profit, the oil industry isn't actually making the biggest profits.

In the first quarter of this year, the profit margin for oil companies was 7.4%. That trailed the electronic equipment industry (12.1%) and the pharmaceutical and medical industry (25.9%).

Last year, 63 industrial groups posted bigger profit margins than the oil industry.

Also obscured by the moaning over Exxon Mobil's profit is the fact that investors expected higher earnings from the company. After second-quarter profit was announced, the company's stock price fell almost 5% because of its disappointing performance.

That's not an aberration for this corporate behemoth that is ruining everyone's lives by selling them the gasoline they need.

Since May 20, less than a month after its first-quarter profit — then the fifth highest in history — was reported, Exxon Mobil stock has fallen 18%, from 94.56 to 77.45 at Thursday's close.

Falling stock prices aren't good news for Exxon Mobil shareholders, those average Americans trying to finance their futures, retirements and kids' educations. And with more than half of all Americans owning stock, that means millions are poorer when Exxon Mobil shares fall.

But in the eyes of the political class and media know-nothings, those invested in Exxon Mobil should be making less on their investments.

Such is the quality of our media and elected officials, who seemingly don't understand even the most basic rudiments of a free-market system.

This is the big reason Tillerson has to go on national TV to defend an indispensable private enterprise.



Email To Friend |