Exxon Mobil Corp's board of directors is considering abandoning current large-scale projects in Mozambique and Vietnam and is reworking its investment strategy. At least three new members were recently voted on after successfully being nominated by an activist investor. This new board has expressed concerns about a few projects in their infancy and is discussing the fate of future projects as the company faces pressure from investors to restrain fossil-fuel investment, return more cash to shareholders, and repay some of its debt (Matthews & Glazer, 2021).

Exxon Chief Executive Darren Woods at a White House meeting in April 2020. He faces pressure from investors to limit carbon emissions. PHOTO: EVAN VUCCI/ASSOCIATED PRESS

The ongoing discussion about the corporation's steps over the next five years to invest in new revenue production is a part of an internal review of Exxon's five-year spending program. This review undoubtedly occurs with adjustments to the underlying drivers their financial team uses to modify assumptions within the corporation's five-year forecast. One of the topics in the article that is repeated more than once and stands out as a red flag is a focus on generating more significant short-term returns to pay back their investors and increase dividends. Exxon is indeed looking much further ahead than the next five years and seems to be concerned about its seat at the energy sector's table in 2050 - a year highlighted as a significant turning point by climate change activists. It is also important to note that analysts expect Exxon to report $6 billion in quarterly profits later this month after losing $680 million during the same period last year amidst the pandemic (Matthews & Glazer, 2021). Beyond returning money to investors, their strategy for the next five years will involve investigating their relationship with renewable energy production. It will attempt to position itself as a proponent of change by what it will classify as setting a good example.

Reference:

Matthews, C., & Glazer, E. (2021, October 20). Exxon Debates Abandoning Some of Its Biggest Oil and Gas Projects [Review of Exxon Debates Abandoning Some of Its Biggest Oil and Gas Projects]. Dow Jones & Company, Inc.; The Wall Street Journal. https://www.wsj.com/articles/exxon-debates-abandoning-some-of-its-biggest-oil-and-gas-projects-11634739779

State Street Corp. has agreed to purchase the investor-services unit of Brown Brothers Harriman & Co., a move that advances its position in the money-management industry above Bank of New York Mellon Corp. In recent history, State Street has struggled to increase revenue in the asset-servicing portion of its business due to pressure from its current clients to lower costs and reduce the fees they pay for tracking their assets. With this purchase, State Streets projects a future rise in its per-share earnings and increases its pre-tax profit margin, along with its goal to cut expenses.

It seems as though the use of the term profit margin in the article is correct. Having spent the past two days reviewing the information in Module 2 concerning financial ratios and more specifically, how we calculate profit margins, I understand that this acquisition will come along with many goodwill assets, which will grow in new revenue. This goodwill may likely include a new, built-in client base and potentially a ton of data that will save State Street money in its administrative and other operating costs in not compiling that data on its own nor working to grow its client base. They're forecasting an increase in their revenue from fees and a potential decrease in their operating expenses, and a hope that this acquisition will realize gains and see an increase in their investment income.

Reference:

Baer, J., & Sebastian, D. (2021, September 7). State Street to Buy Brown Brothers Harriman Investor Services for $3.5 Billion. The Wall Street Journal. https://www.wsj.com/articles/state-street-to-buy-brown-brothers-harriman-investor-services-for-3-5-billion-11631021246?mod=searchresults_pos1&page=1.