Explanation of ExxonMobil Earning Bonus Units (EBUs)
03 Dec 2019Doug Garrison
EBUs are “Earning Bonus Units,” which ExxonMobil employees may be awarded each year as part of their incentive bonus compensation. For those who receive both cash bonuses and EBUs, typically the EBUs are approximately equal to the cash bonus, i.e., half of the annual bonus component of incentive awards is paid through EBUs. Each employee who is awarded restricted stock, cash bonuses and/or EBUs should receive a package from the Corporation with a statement of how much/how many of each type of award they have received.
EBUs when granted have a stated value, such as $6.50 each. The stated value is the amount of earnings per share that ExxonMobil has to achieve before the EBUs are paid out to the employee. The earnings tally begins in the quarter after the grant, so typically, the accumulation begins with the earnings statement following the end of the 1Q in the year after the award is made, generally in late November. It usually takes four to six quarters of earnings before the EBU trigger is reached and the EBU cash payment is made.
Once the corporation’s earnings per share have accumulated to the EBU value or more, the EBU payment is made to the participant. Employees get the payment to their payroll bank of record. Retirees get the payment to an account established for them at Morgan Stanley. The payment is considered earned income and is subject to federal income tax withholding, and FICA and Medicare tax.
The only relation of EBUs to ExxonMobil common stock is the tie to accumulated earnings per share following the grant.
The philosophy behind the design of the incentive program is that restricted stock which only vests after three or seven years (for non-senior executive employees) is intended to promote long-term thinking by employees—make decisions that will be good for the stock price over the next three to seven years, while EBUs focus on more near-term performance, being paid out typically over four to six quarters.
A description of the bonus program (which is cash bonus money and EBUs) from the ExxonMobil 2019 Executive Compensation Overview is shown below.
Disclaimer: Design and implementation of the ExxonMobil incentive program is controlled by Exxon Mobil Corporation and subject to change.
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Meet the Author
Doug is a Partner based in the Houston office and a member of the firm’s Wealth Management practice. He is responsible for delivering investment and planning services to clients. His specialty is assisting clients who are approaching retirement to evaluate the options they have as they prepare for the next chapter in their lives.
Prior to joining Cerity Partners, Doug was a Senior Wealth Advisor at Investec Wealth Strategies. Previously, Doug was Manager, Global Benefits Design, at ExxonMobil. He was responsible for the design of corporate benefit programs including pension, 401(k) plan, medical, and insurance plans. He helped design and implement a corporate health strategies program (“Partners in Health”) and a financial literacy program (“Financial Fitness Program”).
Doug earned a BA in psychology from Yale University and received his MBA in industrial relations from the Wharton School of the University of Pennsylvania. He is a CERTIFIED FINANCIAL PLANNER™ professional.
Doug is an active volunteer at The Woodlands Methodist Church and Jubilee Prison Ministry. He and his wife are also members of the National Leadership Council of World Vision USA.