ExxonMobil's thorny issue in entering the energy trading market: whether to give traders huge bonuses.

In recent years, ExxonMobil, the American oil giant that has made a fortune in the high oil price environment, is ambitiously expanding into the energy trading sector. However, the company's plan has encountered a tricky problem: whether to pay millions of dollars in performance bonuses to traders.

On Wednesday, July 5th, media reports cited insiders as saying that ExxonMobil is currently recruiting traders and support staff for its new global trading division, but it does not intend to pay huge cash bonuses tied to trading profits, which is common in the industry. This puts ExxonMobil in a dilemma of potential talent drain.

Paying performance-based bonuses to traders is essentially an industry consensus. In contrast, after earning record profits last year, multinational commodity company Trafigura recently paid $3 billion in bonuses to its top traders and executives, averaging about $2.5 million per person; traders at BP also received substantial bonuses; and traders at Vitol, the world's largest private oil trader, will also receive unprecedented bonuses. Not to mention, against the backdrop of last year's booming commodity trading, many hedge funds offered millions of dollars in signing bonuses to snatch experienced traders.

Compared to the generosity of its competitors, ExxonMobil's salary offerings to traders can be considered meager. Insiders said that the compensation for ExxonMobil traders is mostly on par with the company's engineers. In addition to fixed salaries, they also receive small stock rewards and traditional pension benefits for top-performing employees.

Insiders said that since 2018, when ExxonMobil began planning to enter the energy trading sector, management has repeatedly told employees in the trading department that the compensation structure will change in the future, but it has not been implemented yet. Many traders expressed frustration with the slow progress, leading to multiple resignations and making it increasingly difficult for the company to recruit new employees.

According to insiders, last year ExxonMobil offered positions to 10 students at Texas A&M University during recruitment events, hoping to quickly fill trading positions, but none of them accepted the offers and instead joined competitors with more mature projects. At least one trader who left ExxonMobil this year said that the uncertainty of the company's compensation plan led to their decision to resign. Another person said that compensation has driven several of the company's US crude oil traders and some analysts to leave.

To attract the best trading talent, the company needs to offer competitive compensation, especially performance-based bonuses, compared to its peers. However, ExxonMobil, known for its conservatism, is more concerned about not taking on the same level of risk as other companies in the industry. CEO Darren Woods stated in April of this year that the company will not engage in speculative bets. Instead, the company will maintain a cautious approach, unwilling to abandon its conservative Texas traditions or fully embrace the free-spirited, high-risk commodity trading practices demonstrated by some of its competitors.

ExxonMobil stated in a statement:

We have been in operation for over 140 years and fully understand the importance of having competitive and innovative compensation to retain and attract the right talent. We apply this principle to all parts of our business, including the newly established Energy Trading Division.

In February of this year, ExxonMobil announced the formation of a new global trading division that will integrate its crude oil, natural gas, power, and petroleum products divisions in an effort to achieve "industry-leading trading results." This is not a simple task for a mature company like ExxonMobil. Its competitors, BP and Shell, have been able to profit billions of dollars through their trading divisions in good years. However, ExxonMobil has long been averse to risk and has invested far less in trading compared to its European counterparts, preferring to focus on its core business of selling oil and gas.

Woods stated in April of this year that ExxonMobil's trading will focus on optimizing the energy flow of its vast network of oil wells, pipelines, refineries, and vessels. He emphasized that while ExxonMobil sees "tremendous opportunities" in the trading business, it will only grow at a "very deliberate and controlled pace."

Insiders have revealed that Woods appointed Tracey Gunnlaugsson, a human resources executive with experience in the shipping and logistics industry, to lead the global trading division, instead of poaching well-known external employees from competitors. This highlights ExxonMobil's conservative approach.