SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT. SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to 'SS'240.14a-11(c) or 'SS'240.14a-12 EXXON CORPORATION ................................................................. (Name of Registrant as Specified In Its Charter) ................................................................. (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ................................................................. (2) Aggregate number of securities to which transaction applies: ............................................................ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ............................................................ (4) Proposed maximum aggregate value of transaction: ............................................................ (5) Total fee paid: ............................................................ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ................................................................. (2) Form, Schedule or Registration Statement No.: ................................................................. (3) Filing Party: ................................................................. (4) Date Filed: ................................................................. Notice of Annual Meeting April 29, 1998 and Proxy Statement [TIGER GRAPHIC] [LOGO] CORPORATION 5959 Las Colinas Boulevard Irving, TX 75039-2298 Dear Shareholder: We invite you to attend our annual meeting of shareholders on April 29, 1998, in Dallas, Texas. At the meeting, you will hear a report on our operations and have a chance to meet your directors and executives. This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our director candidates. Our proxy statement has a new look this year. We hope you find it easy to read and understand. Even if you only own a few shares, we want your shares to be represented at the meeting. I urge you to complete, sign, date, and return your proxy card promptly in the enclosed envelope. To attend the meeting in person, please follow the instructions on page 1. If you are not able to attend, look for a report on the meeting in the June issue of Exxon Perspectives. Sincerely yours, /s/ Lee R. Raymond Lee R. Raymond Chairman of the Board March 18, 1998 [LOGO] NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF EXXON CORPORATION Time: 10:00 a.m., Central Time Date: April 29, 1998 Place: Morton H. Meyerson Symphony Center 2301 Flora Street Dallas, Texas Purpose: Elect directors Ratify appointment of independent accountants Vote on two shareholder proposals Conduct other business if properly raised Only shareholders of record on March 2, 1998 may vote at the meeting. Your vote is important. Please complete, sign, date, and return your proxy card promptly in the enclosed envelope. /s/ T.P. Townsend T.P. Townsend Secretary March 18, 1998 Exxon Corporation Proxy Statement 1998 Table of Contents page -------------------------------------------------- General Information .............................1 Election of Directors ...........................2 Director Compensation .........................7 Board Committees ..............................7 Director and Officer Stock Ownership ..........9 BCC Report on Executive Compensation .........10 Executive Compensation Tables ................14 Stock Performance Graphs .....................17 Board of Directors Proposal Ratification of independent accountants ......17 Shareholder Proposals ..........................18 Additional Information .........................23 Proxy Statement 1998 Exxon Corporation GENERAL INFORMATION Who may vote Shareholders of Exxon, as recorded in our stock register on March 2, 1998, may vote at the meeting. How to vote You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the meeting. You can always change your vote at the meeting. How proxies work Exxon's Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for all, some, or none of our director candidates. You may also vote for or against the other proposals or abstain from voting. If you sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of our director candidates; in favor of the management proposal; and against the shareholder proposals. You may receive more than one proxy or voting card depending on how you hold your shares. Shares registered in your name and shares held in your Shareholder Investment Program (SIP) account are covered by one card. Exxon employees receive a separate card for any shares they hold in the company's Thrift Plan. And if you hold shares through someone else, such as a stockbroker, you may get material from them asking how you want to vote. Revoking a proxy You may revoke your proxy before it is voted by submitting a new proxy with a later date; by voting in person at the meeting; or by notifying Exxon's Secretary in writing at the address under "Questions?" on page 23. Confidential voting Independent inspectors count the votes. Your individual vote is kept confidential from us unless special circumstances exist. For example, a copy of your proxy card will be sent to us if you write comments on the card. Quorum In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in person. Shares owned by Exxon are not voted and do not count for this purpose. Votes needed The director candidates receiving the most votes will be elected to fill the seats on the Board. Approval of the other proposals requires the favorable vote of a majority of the votes cast. Only votes for or against a proposal count. Abstentions and broker non-votes count for quorum purposes but not for voting purposes. Broker non-votes occur when a broker returns a proxy but does not have authority to vote on a particular proposal. Attending in person Only shareholders, their proxy holders, and Exxon's guests may attend the meeting. For registered shareholders, an admission ticket is enclosed with your proxy card. Please bring the admission ticket with you to the meeting. If you hold your shares through someone else, such as a stockbroker, send proof of your ownership to the Secretary at the address under "Questions?" on page 23, and we will send you an admission ticket. Or, you may bring proof of ownership with you to the meeting. Acceptable proof could include an account statement showing that you owned Exxon shares on March 2. 1 Exxon Corporation Proxy Statement 1998 ELECTION OF DIRECTORS (Item 1 on the proxy card) The Board has nominated the director candidates named below. The Board of Directors oversees the management of the company on your behalf. The Board reviews Exxon's long-term strategic plans and exercises direct decision-making authority in key areas, such as declaring dividends. Just as important, the Board chooses the CEO, sets the scope of his authority to manage the company's business day to day, and evaluates his performance. The Board also reviews development and succession plans for Exxon's top executives. Most Exxon directors -- including nine of our thirteen nominees -- are not Exxon employees. Only nonemployee directors serve on Exxon's Audit, Board Compensation, and Board Affairs committees. All Exxon directors are elected for one-year terms. Nonemployee directors may not stand for election after age 70. Employee directors usually leave the Board when they retire from Exxon. Personal information on each of our nominees is given below. All our nominees currently serve as Exxon directors except for Mr. Shipley. Each current director was elected by shareholders at the last annual meeting except for Dr. King and Mr. Dahan. Dr. King was elected by the Board in June 1997, and Mr. Dahan was elected by the Board in January 1998. The Board met 10 times last year. On average, Exxon's directors attended 96% of Board and committee meetings. If a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one. The Board recommends you vote FOR each of the following candidates: - -------------------------------------------------------------------------------- Michael J. Boskin T. M. Friedman Professor of Economics, and Senior [PHOTO] Fellow, Hoover Institution, Stanford University. Age 52 Holds bachelor's, master's, and Ph.D. degrees in Director since 1996 economics. Joined Stanford University in 1970. Adjunct Scholar, American Enterprise Institute; Research Associate, National Bureau of Economic Research. Director, AirTouch Communications, Inc.; First Health Group Corporation; Oracle Corporation. Chairman, Congressional Advisory Commission on the Consumer Price Index; Council of Economic Advisors, 1989-93. Member, Advisory Committee of the Joint Committee on Taxation of the U.S. Congress; Panel of Advisors to the Congressional Budget Office; Economic Advisory Council to the Governor of California; Los Angeles Times Board of Advisors. Dr. Boskin is the recipient of numerous professional awards. 2 Proxy Statement 1998 Exxon Corporation D. Wayne Calloway Retired Chairman of the Board and Chief Executive [PHOTO] Officer, PepsiCo, Inc. Holds bachelor of business Age 62 administration degree. Joined PepsiCo, Inc. Director since 1988 (beverages, snack foods, and restaurants) in 1967. Held a variety of management positions, including President, Chief Operating Officer, Chairman of the Board and Chief Executive Officer, Frito-Lay, Inc. Elected Chairman of the Board and Chief Executive Officer of PepsiCo, Inc. in 1986. Retired in 1996. Director, Citicorp; General Electric Company; PepsiCo, Inc. Member, The Business Council. Chairman, Board of Trustees, Wake Forest University. - -------------------------------------------------------------------------------- Rene Dahan Senior Vice President. Holds a degree in nautical [PHOTO] science. Principal responsibilities include Age 56 Exxon's worldwide refining, marketing, and Director since 1998 transportation activities; middle east operations; Exxon Chemical Company; Exxon Research and Engineering Company; environment and safety; medicine and occupational health. Since joining the Exxon organization in 1963, Mr. Dahan has held a variety of management positions in domestic and foreign operations, including President and Chief Executive Officer of our Benelux affiliate; President, Exxon Company, International. Elected Senior Vice President of Exxon in 1995 and Director in 1998. Member, International Advisory Board of Instituto de Empresa; Board of Directors, Junior Achievement International. - -------------------------------------------------------------------------------- Jess Hay Chairman, Texas Foundation for Higher Education; [PHOTO] HCB Enterprises Inc (private investment firm). Age 67 Holds bachelor of business administration and law Director since 1981 degrees. Prior to his retirement in December 1994, Mr. Hay served for 29 years as Chief Executive Officer of The Lomas Financial Group, a diversified financial services group of companies engaged principally in mortgage banking and real estate lending. Practiced law in Dallas, Texas prior to joining Lomas in 1965. Director, The Viad Corporation; SBC Communications Inc.; Trinity Industries, Inc. Member of the Board, Greater Dallas Planning Council; Southwestern Medical Foundation; Texas Research League; Zale-Lipshy Hospital of Dallas; World War II Memorial Advisory Board; State Fair of Texas. Member, American, Dallas, and Texas Bar Associations. 3 Exxon Corporation Proxy Statement 1998 James R. Houghton Retired Chairman of the Board and Chief Executive [PHOTO] Officer, Corning Incorporated. Holds bachelor of Age 62 arts and master of business administration Director since 1994 degrees. Joined Corning Incorporated (specialty glass and ceramic materials, communications, and consumer products) in 1962. Held a variety of management positions, including Vice President and European Area Manager, Corning Glass International, S.A. Elected Chairman of the Board and Chief Executive Officer of Corning Incorporated in 1983. Retired in 1996. Director, Corning Incorporated; J.P. Morgan & Co. Incorporated; Metropolitan Life Insurance Company. Trustee, Corning Museum of Glass; The Metropolitan Museum of Art; The Pierpont Morgan Library. Member, The Business Council; Council on Foreign Relations; Harvard Corporation. - -------------------------------------------------------------------------------- William R. Howell Chairman Emeritus, J.C. Penney Company, Inc. [PHOTO] Holds bachelor of business administration degree. Age 62 Joined J.C. Penney Company, Inc. (department Director since 1982 stores and catalog chain) in 1958. Held a variety of management positions. Elected Chairman of the Board and Chief Executive Officer in 1983. Relinquished Chief Executive Officer position in 1995 and retired as Chairman of the Board in 1997. Director, Bankers Trust New York Corporation and Bankers Trust Company; Central and South West Corporation; Halliburton Co.; Warner-Lambert Company; The Williams Companies; Dallas Citizens Council; National Organization on Disability; National Retail Federation. Chairman, Board of Trustees, Southern Methodist University. - -------------------------------------------------------------------------------- Reatha Clark King President and Executive Director, General Mills [PHOTO] Foundation; Vice President, General Mills, Inc. Age 60 (manufacture and marketing of consumer food Director since 1997 products). Holds bachelor of science degree in chemistry and mathematics, master of science degree in chemistry, master of business administration degree in finance and management, and Ph.D. degree in thermochemistry. Prior to joining the General Mills Foundation in 1988, Dr. King held a variety of scientific and educational positions, including Research Chemist, National Bureau of Standards; Chemistry Professor, Associate Dean for Division of Natural Science & Mathematics, and Associate Dean for Academic Affairs, York College, City University of New York; President, Metropolitan State University. Director, H.B. Fuller Company; Norwest Corporation. Trustee, H.B. Fuller Foundation; Minnesota Mutual Life Insurance Company; University of Chicago. Dr. King is the recipient of numerous awards, including 12 honorary doctorate degrees. 4 Proxy Statement 1998 Exxon Corporation Philip E. Lippincott Retired Chairman and Chief Executive Officer, [PHOTO] Scott Paper Company. Holds bachelor of arts degree Age 62 and master of business administration degree in Director since 1986 food distribution. Joined Scott Paper Company (sanitary paper, printing and publishing papers, and forestry operations) in 1959. Held a variety of management positions. Elected Chief Executive Officer in 1982 and Chairman in 1983. Retired in 1994. Director, Campbell Soup Company. Chairman of the Board and Director, Fox Chase Cancer Center. Trustee, The Penn Mutual Life Insurance Company. Board of Overseers, The Huntsman Center for Competition and Innovation, The Wharton School, University of Pennsylvania. Member, The Business Council. - -------------------------------------------------------------------------------- Harry J. Longwell Senior Vice President. Holds bachelor's degree in [PHOTO] petroleum engineering. Principal responsibilities Age 56 include Exxon's oil, gas, coal and minerals Director since 1995 exploration and production activities; venture operations in the Commonwealth of Independent States and China; Exxon Coal and Minerals Company; Exxon Exploration Company; Exxon Production Research Company; human resources. Since joining the Exxon organization in 1963, Mr. Longwell has held a variety of management positions in domestic and foreign operations, including Vice President-Production and President, Exxon Company, U.S.A.; Vice President, Esso Europe Inc.; Vice President-Exploration and Production, Senior Vice President-Exploration, Production, and Gas, and Executive Vice President, Exxon Company, International. Elected Senior Vice President and Director of Exxon in 1995. Director, U.S.-China Business Council; Louisiana State University Foundation; United Way of Dallas. Member, Advisory Board, Dallas Habitat for Humanity; Board of Visitors, University of Texas, M.D. Anderson Cancer Center; American Petroleum Institute; Society of Petroleum Engineers. - -------------------------------------------------------------------------------- Marilyn Carlson Nelson Vice Chair and Chief Operating Officer, Carlson [PHOTO] Companies, Inc.; Co-Chair, Carlson Wagonlit Age 58 Travel. Holds bachelor's degree in international Director since 1991 economics. Since joining Carlson Companies, Inc. (travel, hotels, restaurants, and marketing services) in 1989, Mrs. Nelson has held a number of management positions, including Director, Senior Vice President, and Vice Chair, Carlson Holdings, Inc. Director, Carlson Companies, Inc.; U.S. West Inc. Member, Center for International Leadership; Committee of 200; International Advisory Council; United States National Tourism Organization; World Travel and Tourism Council. Mrs. Nelson is the recipient of numerous awards, including two honorary doctorate degrees. 5 Exxon Corporation Proxy Statement 1998 Lee R. Raymond Chairman of the Board and Chief Executive Officer. [PHOTO] Holds bachelor's and Ph.D. degrees in chemical Age 59 engineering. Since joining the Exxon organization Director since 1984 in 1963, Mr. Raymond held a variety of management positions in domestic and foreign operations, including Exxon Company, U.S.A.; Creole Petroleum Corporation; Exxon International Company; Exxon Enterprises; Esso Inter-America Inc. Elected Senior Vice President and Director of Exxon in 1984, President in 1987, Chairman and Chief Executive Officer in 1993, and added title of President in 1996. Director, J.P. Morgan & Co. Incorporated; Morgan Guaranty Trust Company of New York; American Petroleum Institute; United Negro College Fund. Trustee, Southern Methodist University; Wisconsin Alumni Research Foundation. Member, The Business Council; The Business Roundtable; Council on Foreign Relations; Emergency Committee for American Trade; National Petroleum Council; Singapore-U.S. Business Council; Trilateral Commission; University of Wisconsin Foundation. - -------------------------------------------------------------------------------- Walter V. Shipley Chairman of the Board and Chief Executive Officer, [PHOTO] The Chase Manhattan Corporation and The Chase Age 62 Manhattan Bank (banking and finance). Holds bachelor of science degree. Joined Chemical Bank in 1956. Held a variety of management positions, including Chairman of the Board and Chief Executive Officer. [In 1996, Chemical Banking Corporation and The Chase Manhattan Corporation merged.] Director, Bell Atlantic Corporation; Champion International Corporation; Federal Reserve Bank of New York; Lincoln Center for the Performing Arts, Inc.; New York City Partnership and Chamber of Commerce; United Way of Tri-State; United Cerebral Palsy Research and Educational Foundation, Inc. President and Director, Goodwill Industries of Greater New York, Inc. Member, The Bankers Roundtable; The Business Council; The Business Roundtable; U.S.-Japan Business Council, Inc. Board of Trustees, American Museum of Natural History. 6 Proxy Statement 1998 Exxon Corporation Robert E. Wilhelm Senior Vice President. Holds bachelor of science [PHOTO] and master of business administration degrees. Age 57 Principal responsibilities include Exxon Company, Director since 1992 U.S.A.; Imperial Oil Limited; accounting and financial control; corporate planning; public affairs; treasurer's. Since joining the Exxon organization in 1963, Mr. Wilhelm has held a variety of management positions in domestic and foreign operations, including Vice President-Petroleum Products, Esso Europe Inc.; President, Esso Inter-America Inc.; Executive Vice President, Exxon Company, International. Elected Senior Vice President of Exxon in 1990 and Director in 1992. Vice Chairman, Council of the Americas. Board of Governors, Foreign Policy Association. Member, Coal Industry Advisory Board of the International Energy Agency; Council on Foreign Relations; Massachusetts Institute of Technology Corporation. Vice President, Circle 10 Council, Boy Scouts of America. Trustee, Greenhill School, Dallas, Texas. - -------------------------------------------------------------------------------- DIRECTOR COMPENSATION Exxon employees receive no extra pay for serving as directors. Nonemployee directors receive a base fee of $40,000 a year; $1,500 per Board and committee meeting attended; and reimbursement of meeting expenses. Except for the Executive Committee, nonemployee directors also receive $3,000 per committee membership and $5,000 per committee chairmanship. We also pay a portion of director compensation in stock. Each nonemployee director receives 4,000 shares of restricted stock when first elected to the Board and, if the director remains in office, an additional 600 restricted shares each following year. While on the Board, the nonemployee director receives the same cash dividends on restricted shares as a holder of regular common stock, but the director is not allowed to sell the shares. BOARD COMMITTEES The Board appoints committees to help carry out its duties. In particular, Board committees work on key issues in greater detail than would be possible at full Board meetings. Each committee reviews the results of its meetings with the full Board. The Audit Committee is responsible for accounting and internal control matters. Subject to shareholder approval, the committee chooses the independent public accountants to audit Exxon's financial statements. The committee consults with the independent accountants and reviews their audit and other work. The committee also consults with Exxon's Controller and General Auditor and reviews Exxon's internal controls and compliance with policies. In addition to its regular activities, the committee is available to meet on call of the independent accountants, Controller, or General Auditor whenever a special situation arises. 7 Exxon Corporation Proxy Statement 1998 Committee members: Dr. King; Mrs. Nelson; Messrs. Calloway (Chairman), Houghton, and Howell. Meetings last year: three The Board Advisory Committee on Contributions reviews the level of Exxon's support for education and other public service programs, including the company's contributions to the Exxon Education Foundation. The Foundation works to improve the quality of education in America at all levels, with special emphasis on math and science. Committee members: Mrs. Nelson; Messrs. Hay (Chairman), Lippincott, Longwell, and Wilhelm. Meetings last year: two The Board Affairs Committee recommends director candidates; reviews nonemployee director compensation; and reviews other corporate governance practices. The committee will consider your suggestions for possible director candidates if you submit the name and biographical information in writing to Exxon's Secretary at the address under "Questions?" on page 23. On request, the Secretary will also provide a description of the qualifications we look for in director candidates. Committee members: Mrs. Nelson (Chairman); Messrs. Hay and Howell. Meetings last year: four The Board Compensation Committee or BCC oversees compensation for Exxon's senior executives, including salary, bonus, and incentive awards. The committee also reviews succession plans for key executive positions. The committee's report on executive compensation starts on page 10. Committee members: Dr. Boskin; Messrs. Howell (Chairman), Lippincott (Vice Chairman), Calloway, and Hay. Meetings last year: eight The Finance Committee reviews Exxon's financial policies and strategies, including our capital structure, and authorizes corporate debt within limits set by the Board. Committee members: Dr. Boskin; Messrs. Raymond (Chairman), Calloway, and Houghton. Meetings last year: four The Public Issues Committee reviews Exxon's policies and practices on relevant public issues, including their effects on the environment, safety, and health. The committee hears reports from operating units on environmental and safety activities. The committee also visits operating sites to observe and comment on current practices, including spill and hazard prevention. Committee members: Dr. Boskin; Dr. King; Messrs. Lippincott (Chairman), Houghton, Longwell, and Wilhelm. Meetings last year: three The Executive Committee has broad power to act on behalf of the Board. In practice, the committee only meets when it is impractical to call a meeting of the full Board. Regular committee members: Messrs. Raymond (Chairman), Calloway, Hay, Howell, and Lippincott. Other directors serve as alternate members on a rotational basis. Meetings last year: none 8 Proxy Statement 1998 Exxon Corporation DIRECTOR AND OFFICER STOCK OWNERSHIP These tables show how much Exxon common stock each executive named in the Summary Compensation Table on page 14 and each nonemployee director and nominee owned on February 12, 1998. None of these individuals owns more than 0.13 percent of the outstanding shares. Shares Covered by Named Executive Officer Shares Owned Exercisable Options - -------------------------------------------------------------------------------- Lee R. Raymond ............................. 348,705(1) 2,628,212 Rene Dahan ................................. 74,805(2) 653,550 Harry J. Longwell .......................... 148,933(3) 924,232 Robert E. Wilhelm .......................... 182,424(4) 1,036,658 Ray B. Nesbitt ............................. 102,275 480,000 (1) Includes 1,200 shares covered by power of attorney for parent (2) Includes 37,032 shares owned jointly with spouse (3) Includes 46 shares owned by spouse (4) Includes 3,070 shares owned jointly with spouse and 8,362 shares in trust for children Nonemployee Director/Nominee Shares Owned - -------------------------------------------------------------------------------- Michael J. Boskin ................................................. 5,200 D. Wayne Calloway ................................................. 10,000 Jess Hay .......................................................... 21,000(1) James R. Houghton ................................................. 8,200(2) William R. Howell ................................................. 8,400(3) Reatha Clark King ................................................. 4,750 Philip E. Lippincott .............................................. 10,000 Marilyn Carlson Nelson ............................................ 16,200(4) Walter V. Shipley ................................................. 1,000 The nonemployee directors are not granted Exxon stock options. (1) Includes 12,400 shares in a defined benefit plan (2) Includes 1,200 shares owned by spouse (3) Includes 2,700 shares held as constructive trustee for former spouse (4) Includes 9,000 shares in trust On February 12, 1998, Exxon's directors and executive officers (22 people) together owned 1,644,501 shares of Exxon stock and 8,797,606 shares covered by exercisable options, representing about 0.43 percent of the outstanding shares. The trustee of Exxon's Thrift Plan holds and votes all the outstanding shares of Exxon's Class A Preferred Stock. See page 23 for more details. The trustee is a committee of five Exxon executives, none of whom is a director or nominee. 9 Exxon Corporation Proxy Statement 1998 BCC REPORT ON EXECUTIVE COMPENSATION Overview Exxon's executive compensation program is designed to motivate, reward, and retain the management talent our company needs to achieve its business goals and maintain its leadership in the petroleum industry. Our program makes a significant portion of senior executives' potential compensation dependent upon increased shareholder value. Exxon's success depends on retaining and motivating executives who have developed the skills and expertise required to lead a global organization. We do this with: Competitive base salaries in keeping with a philosophy of career continuity Rewards for exceptional performance and accomplishments Incentives to meet short-term and long-term objectives The nature of the petroleum business requires long-term and capital-intensive investments. These investments often take years to generate a return to shareholders. Accordingly, we grant incentive awards with a view toward long-term corporate performance. These awards may not fluctuate as much as year-to-year financial results. Exxon pays for performance based on an individual's level of responsibility. For this purpose, performance means both individual and corporate performance. We motivate performance by recognizing the past year's results and by providing incentives for further improvement in the future. Individual performance includes the ability to put Exxon's business plans into effect and to react to unanticipated events. We base compensation decisions for all executives, including the Chief Executive Officer (CEO) and the other executives named in the Summary Compensation Table on page 14, on these criteria. The three major components of Exxon's compensation program are base salary, short term incentive awards, and long term incentive awards. Base Salary In keeping with the long-term and highly technical nature of Exxon's business, we take a long-term approach to management development. This career-oriented philosophy requires a competitive base salary. Each year, we adjust Exxon's salary structure based on competitive positioning (comparing Exxon's salary structure with salaries paid by other companies); Exxon's own business performance; and general economic factors. Specific weights are not given to these factors, but competitive positioning is the most important factor. Business and other economic factors, such as net income and estimates of inflation, are secondary considerations. We use a number of surveys to determine Exxon's competitive salary position. Primarily, we compare our salary structure with the U.S.-based oil companies in the industry group used for comparing stock performance on page 17. We do not consider salary data from the foreign-based oil companies in that group. Their executive compensation structures are not considered comparable. Exxon's business, and the competition for executives, extend beyond the oil industry. Therefore, we also compare salary structure with other major U.S.-based corporations. 10 Proxy Statement 1998 Exxon Corporation Exxon is larger and more diverse than the other surveyed companies. Therefore, Exxon targets its salary ranges between the median and high end of the survey data. Within these ranges, we determine individual executive salaries based on individual performance, level of responsibility, and experience. The BCC recommends the CEO's salary to the Board of Directors, sets the salaries for Exxon's other elected officers, and reviews the salaries of other senior executives. Within the competitive salary framework described above, the BCC determines the CEO's salary by judging the CEO's individual contributions to Exxon's business, level of responsibility, and career experience. The Committee does not use particular formulas or measures, but recognizes Exxon's size and complexity. The BCC does not give specific weights to the factors considered, but the primary factor is the CEO's individual contributions to the business. Mr. Raymond's salary reflects his strong leadership and significant individual contributions to Exxon's business. Short Term Incentive Awards Short term incentive awards consist of cash bonuses and Earnings Bonus Units (EBUs). See page 16 for a description of the terms of EBUs. We grant short term awards to executives to reward their contributions to the business during the past year. We also grant EBUs as incentives for strong, mid-term corporate performance. EBUs help stress that decisions and contributions in any one year affect future years. In 1997, approximately one half of executive bonuses was in the form of EBUs. The cumulative earnings required for maximum payout of each EBU granted this year was increased from last year. Each year, the BCC establishes a ceiling for cash bonuses and EBUs. The ceiling for 1997 was $66 million. Almost all of that amount was granted in awards to approximately 1,000 employees. The ceiling is based on Exxon's business performance, progress toward long-term goals, and competitive position. No particular formula is used. Some of the measures of performance considered by the BCC include net income, earnings per share, return on capital employed, return on equity, and dividends. The BCC does not give specific weights to these measures. The 1997 ceiling was higher than the 1996 ceiling based on several factors: Exxon's third consecutive year of record earnings and overall business performance; continued strengthening of its worldwide competitive position; and progress toward long-range strategic goals. The bonus an executive receives depends on the executive's individual performance and level of responsibility. Each year, we assess relative performance based on factors including initiative, business judgment, technical expertise, and management skills. Mr. Raymond's 1997 award reflects his level of responsibility, his leadership, and his experience which significantly contributed to Exxon's third consecutive year of record earnings and the continued strengthening of its worldwide competitive position. This determination was based on the BCC's judgment regarding Mr. Raymond's overall contribution as CEO. The BCC does not think narrow quantitative measures or formulas are sufficient for this purpose. The Committee believes the combination of Mr. Raymond's base salary and short term awards is appropriate compared to CEOs of Exxon's competitors, taking into account the size, complexity, and business results of those companies compared to Exxon. 11 Exxon Corporation Proxy Statement 1998 Long Term Incentive Awards Long term incentive awards are intended to develop and retain strong management through share ownership and incentive awards that recognize future performance. Stock options were the primary long term incentive granted to executive officers and over 3,200 other key employees in 1997. The BCC believes that a significant portion of senior executives' compensation should depend on value created for the shareholders. Options are an excellent way to accomplish this because they tie the executives' interests directly to the shareholders' interests. See page 15 for a description of the terms of options. The number of options granted to executive officers is based on individual performance and level of responsibility. For this purpose, the Committee measures performance in the same way as described above for short term awards. Option grants must be sufficient in size to provide a strong incentive for executives to work for long-term business interests and become significant owners of the business. The number of options held by an executive is not a factor in determining subsequent grants. Granting options on that basis could create an incentive for executives to exercise options and sell their shares. Last year the BCC granted Career Shares to a limited number of senior executives. Career Shares are shares of Exxon Common Stock that normally may not be sold until after an executive reaches normal retirement age. The shares may be forfeited if an executive leaves before that time. Given the size, complexity, and global scope of Exxon's business, it is essential to retain an experienced senior management team. Career Shares help Exxon retain key strategic and operating executives for the long term. These awards also provide an additional incentive for superior long-term corporate performance. The number of Career Shares granted to senior executives also reflects the increased responsibility and complexity of senior positions. The Committee bases individual Career Share grants on the executive's personal contribution and level of responsibility. The number of shares held by an executive is not a factor in determining individual grants since Career Shares are primarily designed to promote long-term retention. Mr. Raymond's long term incentive awards reflect his level of responsibility, his leadership, and the BCC's judgment of his overall contribution as CEO. In making this determination, the BCC considered the complex, highly technical, and long-term nature of Exxon's business. As with short term awards, the Committee does not think narrow quantitative measures or formulas are sufficient for this purpose. The BCC substantially increased Mr. Raymond's Career Share award this year. The award recognizes his outstanding contributions to Exxon's exceptional performance as reflected by three years of record earnings, continued strengthening of the Corporation's worldwide competitive position, and its progress toward long-range strategic goals. The restrictions on the award are designed to retain his leadership for the remainder of his career. U.S. Income Tax Limits on Deductibility U.S. income tax law limits the amount Exxon can deduct for compensation paid to the CEO and the other four most highly paid executives. Performance-based compensation that meets IRS requirements is not subject to this limit. The short term awards and stock option grants described 12 Proxy Statement 1998 Exxon Corporation above are designed to meet these requirements so that Exxon can continue to deduct the related expenses. Specifically, the shareholders last year approved broad performance measures for short term awards to the top executives. The shareholders also set annual limits on short term awards to these executives (0.2% of operating net income) and on individual option grants (0.2% of outstanding shares at year-end 1996, adjusted for stock splits). These are not targets, only maximums established for deductibility purposes. Actual award levels have been significantly less based on the factors and judgments described in the preceding sections of this report. Summary The BCC is made up of nonemployee directors who do not participate in any of the compensation plans they administer. The BCC approves or endorses all the programs that involve compensation paid or awarded to senior executives. The BCC is responsible for seeing that Exxon's compensation program serves the best interest of its shareholders. To help meet this responsibility, the BCC is guided by an independent analysis of the competitiveness of Exxon's executive compensation. This analysis is prepared each year by a leading public accounting firm. The BCC also considers the results of the salary surveys described above. In the opinion of the Committee, Exxon has an appropriate and competitive compensation program. The combination of sound base salary, competitive short term bonuses, and emphasis on long term incentives provides a balanced and stable foundation for effective executive leadership. William R. Howell, Chairman Philip E. Lippincott, Vice Chairman Michael J. Boskin D. Wayne Calloway Jess Hay 13 Exxon Corporation Proxy Statement 1998 EXECUTIVE COMPENSATION TABLES These tables show the compensation of Exxon's Chairman and the four other most highly paid executives. Share data reflect the two-for-one stock split in March 1997. See the BCC report beginning on page 10 for an explanation of our compensation philosophy. Summary Compensation Table