The Energy of Charles Matthews
ExxonMobil's GC discusses Valdez, the merging of two oil giants and more
Published in Corporate Counsel Edition® - 2009 magazine
By Paul Sweeney on March 1, 2009
Lawyers around Texas are still talking about the time, a few years back, when Charles Matthews had a little fun at the expense of longtime friend Kenneth Tekell, a prominent Houston attorney.
Matthews, who is vice president and general counsel of ExxonMobil, was fielding questions at a legal conference sponsored by the International Association of Defense Counsel. An audience member asked him to describe the essential qualities in an outside counsel. Matthews asked Tekell to please rise. Recalls Tekell: “I had to stand up in front of several hundred people, and he just looked at me. And looked at me. And finally he said, ‘No, no—that’s not it.'”
Not only did the prank incite gales of laughter, but the incident was widely retold in Texas legal circles. Lost in the retelling was the fact that Matthews’ gag was payback for a wisecrack Tekell, known for his practical jokes, had made earlier. “He’s pretty tricky—and pretty vicious,” says Tekell, chuckling.
For Ron Krist, a Houston plaintiff’s attorney, the lesson was not just that Matthews gives as good as he gets. It also speaks to the fact that “Charles is just one of the guys,” Krist says. “He doesn’t take himself too seriously.”
As the top legal counsel and a corporate officer at Irving, Texas-based ExxonMobil, the world’s largest publicly owned industrial corporation with 80,000 employees and more than $400 billion in revenues, Matthews’ job entails a mountain of responsibility. It is no mean task to see that the oil-and-gas behemoth stays on the right side of the law in all its dealings. In addition to working with the attorneys general of all 50 states and Exxon’s employees and labor unions, most of Matthews’ efforts concentrate on compliance with statutory laws and working with both federal and state regulatory authorities, including the U.S. Environmental Protection Agency and the U.S. Securities and Exchange Commission.
His legal concerns go way beyond North America. Nearly three-quarters of ExxonMobil’s operations, people and profits are located outside the U.S. In addition to 250 domestic lawyers, another 200 attorneys are stationed in 40 countries around the globe.
Matthews routinely hires outside counsel from as many as 1,000 national and international law firms to litigate the torrent of trial work that inevitably comes ExxonMobil’s way. Many are environmental and asbestos claims. “We’ve got thousands and thousands of lawsuits pending and we have seven new cases on average filed against us every day,” he says.
Jim Quinn, co-chair of global litigation at Weil, Gotshal & Manges in New York, has won multimillion-dollar judgments representing ExxonMobil as an outside counsel. He says: “What makes Charles unique is that he has both a broad perspective and deep knowledge of many different parts of the law. Not just oil and gas law—with all its twists and turns—but all aspects of commercial litigation, antitrust and securities law, regulation and corporate governance. Whenever we discuss a legal case, he always brings something extra to the table.”
Good Friday 1989 began quietly enough. Then assistant general attorney for Exxon Corporation’s litigation department, Matthews was at home watching television when he learned that the Exxon Valdez oil tanker rammed into a reef in Alaskan waters. Eleven million gallons of crude oil spewed into Prince William Sound: the worst oil spill in U.S. history. Matthews was soon on a flight to Alaska. “I left on Easter Sunday, but couldn’t fly into Valdez because of a huge storm,” he recalls. The Easter storm not only “blew the roof off the airport,” he says, “but it aggravated the damage caused by the spill.”
Appointed associate general counsel, Matthews, from 1989 to 1992, worked as Exxon’s coordinator of litigation, dealing with a panoply of lawsuits arising from the accident. In an interview at the company’s secluded corporate headquarters in the rolling countryside near Dallas/Fort Worth International Airport, Matthews, who at 63 is silver-haired and barrel-chested and speaks in a low-key Texas drawl, discussed how he oversaw legal efforts to settle promptly with some 11,000 Alaskan fishermen, mostly for lost income.
He was also in charge of arranging settlements for state and federal governments on civil and criminal matters. All told, damages and cleanup cost the company some $3.4 billion. “We responded quickly to alleviate the actual damage and pay claims,” he says.
But the company did object to the $5 billion in punitive damages assessed by an Alaska jury in 1994. The issue of punitive damages was twice batted between the 9th U.S. Circuit Court of Appeals and the trial court. In 2006, with punitive damages down to $2.5 billion, ExxonMobil appealed the case to the U.S. Supreme Court.
Matthews is adamant that, despite filing numerous time extensions and myriad motions and briefs, it was never the corporation’s intent to draw out the litigation and wear down plaintiffs. “The story throughout all this was that the timetable was set out by the courts’ rules of procedure. This was also a period of great evolution in the law pertaining to punitive damages,” he says.
In June 2008, nearly 20 years after the spill, the nation’s highest court ruled in a 5-3 decision (with Justice Samuel Alito recusing himself because of his ownership of ExxonMobil stock) that punitive damages could not be larger than the compensatory damages for actual losses, which calculated to $507.5 million to be divided among the 33,000 fishermen, Alaska natives, local businesses and other plaintiffs in the case—roughly 10 percent of the original award. It was, Matthews says, a landmark decision on “the question of what is a proper amount of punishment and deterrence.”
Matthews generally maintains an unemotional demeanor while speaking about what is regarded as a social and ecological tragedy. But in a recent exchange with students at a University of Texas business school class on corporate governance, Matthews was asked whether Exxon employees were actually affected by the spill or if it was just business as usual to them. He disclosed that there was anguish and soul-searching within the corporation, and said the company has taken “drastic” steps to improve safety at all levels and minimize chances of a recurrence. “It damaged the lives of a lot of people who live in Alaska,” he says, “and tremendously embarrassed a lot of people inside the company. … It’s much more than money. People really felt this.”
Another major event in Exxon’s history, in which Matthews also played a key role, was its merger with Mobil Corporation. One day back in 1998, two years after Matthews had taken over as general counsel, he got a telephone call from Exxon’s chief executive who asked him to “come around the corner” for a quick tête-à-tête. It was then that he was commissioned the task of overseeing all legal aspects of the merger.
For the next 18 months, Matthews was in charge of getting regulatory approval around the world. He also gave legal advice on due diligence, made sure there were “no problems on the books” and examined how everything from exploration and refining to sales and marketing could be integrated at the two companies. “Doing the actual deal was quick,” he says. “The hardest part was getting approval from the antitrust authorities” in the U.S. and Europe.
Prior to announcing the merger, the consolidating companies had to anticipate the objections of the Federal Trade Commission, which had jurisdiction over the deal. That required divesting to competitors numerous gasoline stations situated along the Eastern Seaboard.
It also fell to Matthews to consolidate the legal departments into a single organization. Some staff attorneys took early retirement; others “took the opportunity to go elsewhere. It was a painful process,” he says. “But by and large it was not as painful as a reduction in force where you wind up dealing with cost issues. That’s absolutely the worst part of this job.”
Ultimately, the corporate legal department resulting from ExxonMobil’s merger represented “the best of both worlds,” he says. “The unheralded story is that this was a tremendously successful merger, both in combining businesses and the corporate cultures.”
Matthews owns a ranch near the Pedernales River in the Texas Hill Country with his wife, Karen Rodgers Matthews, whom he met at a sorority-fraternity match date in 1966. They married two years later, and have two sons, Charles III and Jeff (also a lawyer), and four grandchildren.
Matthews has received many honors throughout the years, most recently the Lifetime Achievement Award from the Texas General Counsel Forum. And yet his manner is so unprepossessing that, Tekell says, people around Houston who wonder where he’s disappeared to express amazement when they learn of his position at ExxonMobil. “A guy at my health club said, ‘You’ve got to be kidding me.’ A lot of people wonder how in the world did he ever achieve that.”
Stan McCormick, the general counsel at Cullen/Frost Bankers in San Antonio and one of Matthews’ best friends, has an answer. The two have been tight since high school and roomed together at the University of Texas at Austin. McCormick says their fraternity, Sigma Nu, nominated Matthews as treasurer because he inspires trust in people: “He was honest, careful with the books and he watched out for our money.”
Those steady-as-you-go qualities as well as sound judgment are prized in a corporate counsel—not “being ambitious and cutthroat,” McCormick says. “What a good general counsel does is act as an immune system, helping keep the company healthy. My guess is that Charlie’s on the phone all day helping employees who are at the crossroads make good decisions. Charlie will analyze the situation and tell them to go left or right and protect the corporation against reputation and monetary risk.”
Matthews was the first in his family to graduate from college. He received an appreciation for nose-to-the-grindstone hard work from his father, who logged in 40 years with the Southern Pacific Railroad. His mother, who worked for more than 20 years as the attendance clerk at a Houston high school, “was a strict disciplinarian,” he says. And while she encouraged him to pursue a variety of interests—including music, which remains a passion (especially country music)—she also taught him the importance of playing by the rules.
“The first dollar I ever earned was selling my grandmother’s watermelons on the side of the old Highway 75 in Conroe,” Matthews remembers. “I also worked some for my dad at his second, part-time job in charge of ticket sales at high school stadiums. Later, that evolved into the public address announcer job when the regular PA guy failed to show.
“I was in the right place at the right time and volunteered to do the job and made the most of it,” he adds. “Loyalty to the employer and hard work was a given with both my parents as well as providing a strong, unwavering moral compass.”
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