When Texaco settled the largest ever racial discrimination suit on November 15, 1996, the company agreed to allocate $35 million for a Task Force to implement changes in their human resources programs. The plan includes revising company recruitment and hiring procedures to reflect diversity in the workforce, focusing on career development and retention of current employees, and increasing the number of women- and minority-owned business partners. The following is Texaco’s new diversity policy outlined in a press release on December 18, 1996.

TEXACO ANNOUNCES COMPREHENSIVE PLAN TO ENSURE FAIRNESS AND ECONOMIC OPPORTUNITY FOR EMPLOYEES AND BUSINESS PARTNERS

Company's Initiatives Follow Rigorous Review of Human Resources and Business Partnering Programs

Texaco Outlines Measures to Enhance Company's Performance in Increasingly Competitive and Diverse Marketplace

FOR IMMEDIATE RELEASE: WEDNESDAY, DECEMBER 18, 1996.

WHITE PLAINS, N.Y., Dec. 18 - Texaco Inc. today announced a comprehensive plan to ensure fairness and economic opportunity for its employees and business partners. The company's plan follows a rigorous review by Texaco of its human resources and business partnering programs. The review was undertaken as a result of events over the past six weeks and was conducted as part of Texaco's commitment to ensure that its employment and business partnering practices enhance its ability to compete even more successfully in the complex global market. In its plan, the company outlined detailed programs and initiatives for all employees, including minorities and women, working for and with Texaco.

Texaco Inc. Chairman and CEO Peter I. Bijur said, "Based on our review, we have set forth comprehensive employment and business partnering initiatives that are well-balanced and beneficial to all our employees and bring us a critical competitive advantage in the constantly changing and increasingly diverse environment in which we operate. Our review encompassed every aspect of employee recruitment, hiring, retention and promotion; workplace environment; and business partnering efforts. We sought input from our employees, numerous organizations and individuals, and we looked at the best practices in industry. The result is a broad program that we believe will ensure a fair and open environment in which all employees and business partners can contribute to the full measure of their abilities.

"The goals of our program," Mr. Bijur continued, "were set by determining what the demographics of Texaco's workforce are likely to be in the year 2000. And, to be clear, these are goals -- they are not quotas. Goals focus and guide the efforts of a committed organization. Quotas arbitrarily impose rigid results and do not recognize fairness or judgement. We will continue to hire the best qualified candidates for all positions, based on merit and capability.

"And let me underscore another point: this plan was designed specifically to meet Texaco's unique business strategies and, as such, singularly applies to our company. This program is good business for Texaco," Mr. Bijur said.

He added, "This plan builds on a number of strong programs already in place that have yielded progress in recent years. But we are moving ahead quickly with new and enhanced efforts, because we believe that we must continue to expand our perspectives and make full use of resources that generate the creativity and innovation to meet our goals for success in today's competitive marketplace."

Texaco will track the progress of all of the new and enhanced programs outlined in this review and report on these efforts.

Review Addressed Recruitment, Hiring And Development, Along With Workplace Environment

Recruitment And Hiring. Texaco's global competitiveness depends, first and foremost, on its ability to attract and retain a highly capable workforce that reflects the diverse talents of its competitive marketplace throughout its organization. To help achieve this goal, Texaco will in 1997:

* Enhance the interviewing, selection and hiring skills of its managers, in order to better enable them to identify and bring to Texaco the best possible and most capable candidates to help the company reach its operating goals;

* Expand its overall college recruitment so that the company can draw upon a broader talent pool;

* Use search firms that have a demonstrated record of recruiting from a wide, diverse range of men and women with key competencies for Texaco; and

* Undertake, as previously announced, a new, nationwide scholarship and internship program in partnership with INROADS Inc. to develop minority students for management careers in disciplines important to Texaco, such as engineering, the physical sciences, information systems and international business.

Through its previous efforts to improve performance by diversifying its workforce, Texaco increased total minority employment from 16% in 1991 to 23% today. As part of its effort to enhance its marketplace competitiveness through the implementation of the above programs, the company expects that it will reach a level of 29% by the end of the year 2000. Also by that time, Texaco expects that its African-American employment will increase from 9% to 13% of total employment, and employment of women from 32% to 35%. These increases will take place in the context of modest overall employment growth during this period.

Retention And Career Development. Texaco believes it can continue to enhance its performance and lower its costs by strengthening career development and promoting the retention of employees. A series of enhanced and new programs will be implemented by mid-1997, under which the company will:

* Develop and implement a new set of core skill and behavior standards required of managers to help ensure that leaders are able to maximize the performance of their teams over the long term;

* Establish a mentoring process that will link managers and senior professionals with aspiring employees to provide them with feedback and advice on career success; and

* Enhance its global succession planning system to improve the identification, selection and development of individuals from all sources using a dynamic, rigorous and disciplined approach.

These programs will provide managers and supervisors with the information and improved skills they need to ensure that promotions are fair and equitable throughout the company.

Workplace Initiatives. Texaco will launch several programs by mid-1997 that will enhance the efficiency of its team-based approach and, as a result, help reduce cycle times and improve productivity. They will do so by creating a more open and inclusive environment, which will promote better understanding, cooperation and teamwork among all employees. The company will seek to:

* Implement a redesigned diversity learning experience, launched last year for Texaco managers and supervisors, to encompass all U.S.-based employees. This experience will help all employees evaluate interpersonal skills and behaviors, especially in a more diverse environment, and enable them to communicate and cooperate more effectively;

* Ensure that the decisions of Human Resource Committees are aligned as closely as possible with the company's broadened business imperatives by including women and minorities on all such Committees throughout the company;

* Introduce a comprehensive, core learning program to supting and coaching; and

* Implement an Alternative Dispute Resolution process to include mediation and arbitration, and introduce an ombuds program in which employees may also make use of a confidential outside counselor -- both of which should help create a more positive, productive work environment.

Accountability And Oversight. Texaco is committed to achieving its immediate and long-term goals and will continue to hold all employees, especially managers and senior executives, responsible for the success of these programs. The company will establish rigorous reporting structures to increase accountability and also will:

* Expand the company's 360-degree feedback process for 1997 to include all managers and supervisors. The employees, peers and supervisor of each manager will complete a confidential questionnaire annually to help evaluate how well that manager demonstrates expected leadership behavior;

* Revise further the company's performance evaluation system to ensure alignment between individual and organizational goals, and more closely link managers' compensation to their performance in creating openness and inclusion in the workplace as a means of fostering improved team performance; and

* Redesign the company's employee opinion survey, to be conducted annually beginning in 1997, to help managers and teams improve overall performance and monitor the success of Texaco's change efforts.

Texaco To Expand Business Partnering Efforts

Texaco believes that, by broadening its base of vendors and suppliers of services, it will be able to draw upon additional resources that will contribute to the company's competitive position. The company noted that the accelerated and expanded programs being implemented at this point in its review process are consistent with its existing business plans, are expected to help the company achieve or exceed its goals, and will not negatively impact profitability.

The review identified the following areas in which the company will strengthen its business partnering efforts:

Purchasing, Contracting And Services. Texaco's goal is to increase its overall purchasing activities with minority- and women-owned businesses, including providers of professional services, from $135 million in 1996 to a cumulative total of more than $1 billion over the next five years, with the expectation that it will reach at least 6%. The program to accelerate purchasing activities is already underway and will encompass the following areas:

* Expanding the scope and focus of programs with minority- and women-owned vendors, suppliers, engineering and construction firms, environmental remediation companies and sub-contractors; and

* Increasing the amount of work Texaco does with minority- and women-owned professional service firms in the areas of law, advertising, accounting, tax, government and public relations. Texaco also intends to increase its use of women and minority professionals at other firms. In addition, the company has already started to contract with minority-owned advertising agencies, and this program will be expanded in 1997.

Finance. In order to broaden the range of its financial relationships, the company will seek to increase financial activities with minority- and women-owned banks and money managers from $32 million to $200 million.

* Texaco is already increasing the number of women and minority banks with which it does business from 21 to 50 and increasing deposits in those banks. Texaco will work to expand its use of other banking services with minority- and women-owned financial firms in key marketplaces.

* Texaco will increase the number of women and minority fixed-income and equity managers of its pension fund from 1 to 8, and the funds under management will increase from $31 million to $186 million, or 13% of the fund.

* Texaco intends to increase its involvement with minority and women businesses by investing $10 million in 1997 in a minority-managed domestic emerging market fund investing in such companies.

Insurance. Texaco will increase insurance coverage from minority- and women- owned insurance companies from $25 million to $200 million. Texaco will seek women- and minority-owned companies to write property and liability coverage for contractors.

Improving Retail Performance In A Diverse Marketplace

Texaco's wholesale and retail operations must be responsive to the shifting demands of the marketplace. The company will accelerate its program to diversify wholesalers/retailers in key markets. These efforts include:

* Wholesalers: Texaco's goal is to double the number of minority- and women-owned wholesaler marketers from 43 to 85 (from 5.5% to over 11%) within a five- year period. The company also plans to encourage wholesalers to maintain the number of minority and women retail operators at the current level of at least 20% of their more than 10,000 retail outlets and to increase the number of under-represented minority retail operators.

* Independent/ Lessee Retailers: Texaco will work to maintain women and minority independent retail owner and lessee operators at the current level of at least 45% of retail outlets in this category. Within five years, it will work to more than triple African-American-owned retail outlets from 35 to 117 (from 2% to 6% of the total).

* Texaco Owned/Operated Outlets: Texaco will work to maintain its current level of at least 70% of minority and women managers at company-owned and -operated retail outlets, and will seek to increase its under-represented minority retail and store managers from 67 to 100 (7.4% to 12% of the total).

* Lubricants: Texaco will strive to double the number of minority- and women- owned lubricant distributors from 29 to 58 (from 4.5% to 9% of the total), and to double the number of lube outlets from 52 to 104 (from 8.7% to 17% of the total).

* Financing: The company will make available financing support for the development and expansion of minority and women wholesale marketers and retailers, as set forth in Texaco's goals. This financing will also support the development of Texaco-owned or Texaco-branded retail outlets in urban core areas. The company will assist minority entrepreneurs in the start up of business operations for branded outlets in these areas, which represent under-developed opportunities for business expansion.

Community Programs. Texaco has long recognized and acted upon the critical importance of local community outreach and support, and has in particular established a strong record of local volunteerism by its employees. Texaco will evaluate in the coming months its level of support for all programs, including women and minority organizations, that complement its business focus and further promote community improvements.