Why JPMorgan Chase should vote the former Exxon CEO off its board.
The big banks and the oil industry have continuously worked together to finance each other’s interest at the expense of not just the average consumer, but the planet as a whole. By looking at just one man’s life, we can see how these relationships form and the catastrophe they bring.
In 1963, having just completed his PhD, Lee Raymond joined Exxon as a low level engineer. A small-town South Dakotan, Raymond was seemingly as average as they come.
No one could know that in the years to follow, Raymond would find himself as not just CEO and Chairman of the world’s largest oil company, but also second in command of the largest bank in the United States. His ruthless ascent to power illustrates the incestuous relationship between big banks and big oil. As Raymond’s power grew in one industry, so did his ability to end up at the top of the other.
In 1987, Lee Raymond became President of Exxon, serving under CEO Lawrence Rawl. Raymond was already a force to be reckoned with, but his true power had yet to be fully realized. That same year Raymond joined the board of J.P. Morgan & Co. as a director. But this conflict of interest was so routine it was barely reported on.
Throughout the 1990s, Raymond’s path to success at Exxon relied on convincing Wall Street that it was wrong about the future of the oil industry, which was struggling. Oil investors were worried whether the industry could find new reserves while also dealing with countries that were determined to keep private companies like Exxon away from their oilfields.
Raymond had to prove that Exxon could find new oil reserves and add them to his balance sheet. To do it, Raymond exploited loopholes in securities laws, creating competing narratives for himself and Exxon. On the one hand, he told the SEC that Exxon was indeed struggling to replace its oil reserves. On the other, he told Wall Street Exxon was replacing its reserves at a rate never seen before in the industry.
While Raymond was spinning tales to Wall Street, there was another issue that was harder to spin. In the late 1970s, Exxon employed scientists to research global warming and its impact on its business model. In 1981, Exxon researchers reported that the company’s own products were big contributors to global warming; some even concluded the damage to the planet could be catastrophic within just a few decades.
Throughout the 1980s, Exxon’s scientists continued to sound the alarm. The company’s research became one of the most reliable sources for global warming science. Even the U.S. government turned to the company for data. But it wasn’t long before Exxon’s management realized the evidence its scientists were uncovering was detrimental to the company’s bottom line. In 1989, management decided to embark on a full-fledged campaign to discredit global warming, and in turn, its own scientists. During the strongest and most active part of this campaign in the 1990s and early 2000s, Lee Raymond was CEO and Chairman of Exxon.
As the world continued to wake up to the risks of global warming, Raymond went on the offensive. Exxon ran ads to misinform the public about the dangers of global warming and even went as far as to join a secretive group of fossil fuel corporations to lobby the government against regulations. An adamant climate denier, Raymond made speeches actively attempting to discredit the findings of his own researchers and campaigned against climate regulations.
At an annual shareholders meeting, Raymond was accused of mocking environmentalists and not listening to their views. To attempt to prove there was a reasonable debate about the science behind global warming, he displayed a petition authored in part by an Exxon-backed front group. The petition listed thousands of signatures from scientists and the public who supported Exxon’s skeptical position on global warming. However, many of the scientists lacked training in climate science, and some of the signatures were entirely fake, such as the Spice Girls, Perry Mason, James Brown and several Star Wars characters.
Meanwhile, Raymond was busy consolidating his power within the oil industry and on Wall Street.
In 1998, when Raymond decided to merge Exxon with Mobil to form ExxonMobil, he turned to JPMorgan, on whose board he served, to guide the deal. Then, not long after, when JPMorgan was in merger talks with Chase in 2000, it was Lee Raymond who helped guide that deal as well. In the process, he landed the top seat on the newly combined JPMorgan Chase board. When it was all over, Raymond had become not only the CEO and Chairman of the world’s largest oil company but second in command on the board of one of the world’s largest banks.
Back then, Raymond’s dual role was barely reported on. That’s because such relationships between industries were par for the course. Throughout the 1970s, over 80 directors of the United States’ largest banks also served as directors of two or more oil companies. But such intermingling between the fossil fuel industry and the banking industry was actually much more severe than many understood.
On Exxon’s board, there were directors from Chase. On Mobil’s board, there were directors Exxon. Chase’s board had directors from both Exxon and Mobil including the CEO of Exxon (and by 1982, the President of Exxon). On JPMorgan’s board, there were directors from Mobil. Exxon and Mobil directors served on at least eight boards together before their merger. Exxon’s largest shareholder (and Mobil’s fourth largest) was Chase. JPMorgan was the largest shareholder of Mobil and the third largest shareholder in Exxon.
A congressional report from this period noted that the public is left completely in the dark about who owns and operates these powerful corporations as well as who is setting corporate policies. The report further said that no single federal agency reported that information to the public, nor was there a system for monitoring all corporate interlocks. This opened up the door for influential oil giants like Lee Raymond to end up in multiple unchallenged, powerful positions with little accountability.
Another report stated that corporate interlocking was especially egregious when it came to banks and oil companies because it created favoritism and limited the ability of other energy companies to find financing.
“Even if the banks were neutral with respect to such entry, the interlocked oil companies could establish preferential access to credit so that little credit would be left for their non-interlocked competitors.”
The implications carry over to today’s green economy and oil’s competitors. It’s fair to ask whether a renewable energy company looking for financing can get a warm reception from J.P. Morgan Chase given its ties to ExxonMobil and while Lee Raymond still sits on its board.
One expert told congress:
“Oil company directors who are directors of banks and other corporations form a cozy and exclusive club where it is convenient for them to reach understandings and agreements which result in common if not conspiratorial action.”
An example of this kind of action occurred with Exxon Valdez. When Exxon needed cash quickly after the disastrous oil spill in Alaska, it was JPMorgan that invented credit default swaps to bail them out. Lee Raymond was on the board of J.P. Morgan and was president of Exxon during this period.
By 2001, JPMorgan Chase was still listed as one of the top ten most central interlocking companies. The more central a company is, the more power and influence it is said to have over other corporations. JPMorgan Chase was so connected that if a flu virus hit the corporate board in January, it could affect 80 percent of Fortune 1000 companies by May just through exposure in monthly board meetings.
When Raymond retired from Exxon in 2005, he kept his second-in-command position on Chase’s board, eventually becoming the oldest and longest serving board member out of any of Wall Street’s largest banks. During his tenure at Chase, Chase was the bank most responsible for fueling climate change. Within just the past three to four years, Chase spent nearly $270 billion financing the fossil fuel industry. One of the top recipients of that cash was Exxon.
JPMorgan @Chase has poured more money than any other bank into fossil fuels since the Paris Agreement. Why?
— The YEARS Project (@YEARSofLIVING) February 25, 2020
There is some positive news. After Lee Raymond announced he would once again run for reelection in 2020, a massive campaign was kicked off to put an end to Raymond’s reign at Chase. The campaign, organized by environmental activists and shareholders, became more than just an annoyance for Chase. The campaign gathered massive support and resulted in New York City’s Comptroller, Scott Stringer, leading the city’s pension system to demand Raymond’s retirement over Raymond’s climate denial and lack of impartiality.
On May 1st, Chase announced that Raymond would step down as “lead independent director” and a search would begin for a replacement. While a demotion from his second-in-command position is a step in the right direction, it isn’t nearly enough. Lee Raymond should not be anywhere near Chase’s board.
Even if Raymond were to leave Chase’s board entirely, it won’t be easy to untangle the century-long web of ties between big oil and the banking industry. It’s a monumental task, but it is already in motion. Due to the persistence of journalists, activists, and shareholders, JPMorgan Chase is feeling the pressure to move away from the fossil fuel industry. The general public is becoming increasingly aware of the dangers the banking industry poses to the planet.
If we insist that institutions move away from fossil fuels, we have a real chance of replacing oilmen and climate deniers with executives ready to build a livable future. Ousting Lee Raymond is a formidable undertaking, but the progress already made should make others like him very nervous.Share This