Money Matters

Why Rex Tillerson’s Year In Washington Wasn’t A Total Bust


By Lauren Gensler and Jennifer Wang

While it’s far from ideal to learn that the President of the United States has fired you on Twitter, at least ousted Secretary of State Rex Tillerson has managed to come away from his year in Washington in a better financial position than he was when he started.

Despite the serious pay cut the 65-year-old former Exxon Mobil CEO took in becoming a government operative, Tillerson also managed a lucky break: He dumped shares of his old company at a good time.

In early 2017, in order to distance himself from Exxon and reduce potential conflicts of interest before joining the Trump administration, Tillerson cashed out all of his Exxon stock to the tune of $222 million. Shares have since dived by 10%, falling sharply after the company missed profit expectations in its latest quarter.

Meanwhile, he put his Exxon earnings into a trust that was barred from investing in Exxon. While it’s unclear exactly how he decided to put his money to work, piling into index funds would have been a good bet. The broader market is up by about 21% since Tillerson was confirmed as a cabinet member last February.

By taking a position with the government, he was able to wriggle out of his mass of unvested shares — which have historically unperformed the market — and redeploy the proceeds. Over the last ten years, shares of Exxon have shed 13% in value while the market has gained 111%.

About three-quarters of Tillerson’s Exxon stock hadn’t yet vested, but he reached an agreement with the company to sell them at market rate as part of a $180 million severance package. He then transferred the earnings to a trust that will make payments over a ten-year period, mimicking the vesting schedule of his equity grants had he simply retired from the company. He also sold an estimated $50 million in shares that he owned outright.

Another bonus: He was able to defer a big tax bill from Uncle Sam, too, since he was selling the stock in order to satisfy conflict-of-interest requirements.

That well-timed divestment more than makes up for his lost earnings in leaving the private sector. As CEO of Exxon, he made $4.8 million between his salary and bonuses in 2016, even as the company’s profits halved. His annual salary as Secretary of State was $207,800, according to the federal government’s Office of Personnel Management.

Tillerson also lost $3.9 million in unpaid bonuses that he would have otherwise received, according to the company. He forfeited about $500,000 in annual benefits, too, including $100,000 in life insurance, $64,000 in personal travel on the company’s private jet and $11,000 in financial planning.

Tillerson, who retired from Exxon at the end of 2016 after working at the company for 41 years, was forbidden from returning to the oil and gas industry for ten years when he accepted his cabinet position. If he violates the agreement, he will forfeit his scheduled trust payments and the money would instead go to charities fighting poverty or disease in the developing world.

“I’ll now return to private life, as a private citizen, as a proud American, proud of the opportunity I had to serve my country,” he told reporters on Tuesday.

Tillerson served in the Trump Administration for just over a year. He is being replaced by Mike Pompeo, the director of the CIA.

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