The Environmental Bottom Line : Exxon: Shareholders, including two California pension funds, must demand that the oil company clean up its act.

Even though the cost of cleaning up the Exxon Valdez spill exceeds $2.3 billion--and counting--there are disturbing signs that Exxon has yet to grasp fully the importance of improving its environmental record. Sadly for Exxon investors, the company’s stock price is lagging about 25% behind its competitors.

This has important consequences for California. The State Teachers Retirement System, with about 453,000 beneficiaries, owns 7 million common shares of Exxon. The Public Employees Retirement System, with 827,000 beneficiaries, owns 8.2 million shares. As a trustee of the pension systems, I believe it is time for Exxon to recognize that environmental responsibility benefits its shareholders as well as consumers.

Since the 11-million-gallon spill in Prince William Sound on March 24, 1989, company facilities have been involved in other accidents that raise safety questions. Last December, an open valve at Exxon’s Baton Rouge, La., refinery released 30,000 gallons of oil, resulting in a explosion that killed two workers and the burning of millions of gallons of fuel. As recently as January, a pipeline from Exxon’s Bayway Refinery in Linden. N.J., ruptured, disgorging 563,000 gallons of heating oil into the waterway between New Jersey and Staten Island. Reportedly, pipeline operators ignored warnings from a leak-detection system. And a month later, a privately owned barge, after taking on oil at Exxon’s Bayonne, N.J., terminal, leaked more than 30,000 gallons of it. Exxon is paying for a $660,000 study to assess the environmental damage.

All told, the bill for these accidents, including the Valdez spill, is likely to far exceed $4 billion. That’s $4 billion-plus of nonperforming assets--money that could have been spent on developing new cleanup technologies and reducing the chances of future accidents. Exxon’s competitors are taking such strides.

At Unocal, a policy requiring that all accidents and job-related injuries be reported directly to the chief executive officer has resulted in improvements in worker safety and fewer injuries. Shell recently announced that it will spend $7.5 billion in the 1990s to clean up its operations. Occidental Petroleum also is investing in environmental safeguards.

At some point, Exxon shareholders need to ask, “When do we see a turnaround? When will Exxon recognize that environmental safety must be a key factor in its business planning and performance?”

Consumers also have been hurt by the oil company’s performance. In the wake of the Baton Rouge explosion, the retail price of home heating oil shot up 10.74 cents a gallon, topping the 1981 peak of $1.35.

Exxon officials contend that they are paying attention to environmental and safety issues, spending at least $1 billion a year on environmental concerns. But how effective have these steps been, judging by the number of company accidents since Valdez.

In corporate governance, one thing is clear: When the chief executive speaks, employees listen. Either Exxon Chairman Lawrence G. Rawl is not speaking the right language, or his message is falling on deaf ears. Neither is acceptable.

One important step he and his company could take to demonstrate their sensitivity to the environment would be to sign the Valdez Principles. Proposed by a coalition of environmentalists, public-interest advocates and government fiscal officers, these principles offer corporations a voluntary path to greater environmental accountability--and profitability. Commendably, Rawl has agreed to meet with pension-fund managers from California and other states to discuss their concerns about the effects of the accidents on the company’s profitability.

Exxon should immediately develop and put in action a comprehensive environmental and worker safety plan. Its shareholders deserve nothing less.