![Darren Woods, CEO of ExxonMobil. Despite overseeing record results, Woods is under fire from ESG-focused shareholders](/https/www.telegraph.co.uk/content/dam/news/2024/05/28/TELEMMGLPICT000378742184_17168994720330_trans_NvBQzQNjv4BqqVzuuqpFlyLIwiB6NTmJwSX5rhseiWKOo9p9OQ-ymek.jpeg?imwidth=680)
![Darren Woods, CEO of ExxonMobil. Despite overseeing record results, Woods is under fire from ESG-focused shareholders](/https/www.telegraph.co.uk/content/dam/news/2024/05/28/TELEMMGLPICT000378742184_17168994720330_trans_NvBQzQNjv4BqqVzuuqpFlyLIwiB6NTmJwSX5rhseiWKOo9p9OQ-ymek.jpeg?imwidth=680)
As a general rule, nothing positive can come from the mixing of corporate management priorities with crass political considerations. But that toxic mix appears to be at the centre of a looming proxy fight mounted by activist investors, led by pension funds in a handful of big population “blue” states, which will come to a head at ExxonMobil’s annual meeting tomorrow.
By any measure, ExxonMobil has experienced extraordinary financial success in recent years. Under its current management and Board, the company has recorded record profits over the past two years. Its stock price hit an all-time high in April, and the company’s market capitalisation is also at a record high following the closing of its $60 billion takeover of Permian Basin giant Pioneer Natural Resources.
Despite the current Board’s focus on carrying out its fiduciary duty to maximize returns to investors, it now finds itself under attack by public pension fund managers in the Blue states of California, New York, and Illinois, along with several other activist investors. These shareholders are not concerned with stock price or market cap: they want to see Exxon reduce its greenhouse gas emissions.
The activist investors include Arjuna Capital and Follow This, who have sponsored a proposal which would compel Exxon to accelerate its reduction of greenhouse gas emissions so as to reach net-zero emissions by 2050. Exxon management filed suit in federal court in January to quash what it regards as nuisance resolutions.
Arjuna and Follow This are allied with the Interfaith Center for Corporate Responsibility (ICCR), a self-described “coalition of faith- and values-based investors” which contends that “corporations must look beyond the next earnings report to account for the full impact of their businesses on society, and must view the well-being of all of their stakeholders – including their workers and the communities where they operate – as integral to their long-term value”.
Exxon CEO and Chairman Darren Woods, along with lead independent Board member Joseph Hooley, are especially coming under fire from the activists. The assault intensified recently when proxy advisory firm Glass Lewis waded into the battle, advising its clients to oppose the re-election of Mr. Hooley.
Glass Lewis made its recommendation based on its view that Exxon’s decision to file suit in federal court against the activist resolutions amounts to “unusual and aggressive tactics” against what Glass Lewis calls “resource-constrained parties.”
Exxon, which has a long history of aggressively defending its legal rights, shot back in a May 15 letter to Glass Lewis, requesting it withdraw the recommendation, and citing Glass Lewis’s conflict of interest in the matter. Specifically, Exxon points to Glass Lewis’s relationship with the ICCR. The Glass Lewis recommendation extensively cites ICCR material but doesn’t appear to disclose the firm’s conflict, it has been alleged.
While Blue state treasurers have lined up to oppose the Exxon Board, one Red state treasurer, Louisiana’s John Fleming, MD, published a letter in which he chastised the activist investors and his Blue state counterparts for plotting to “[destroy] the company for political purposes.” Fleming adds, “If CalPERS [the California public employees’ pension] and other activists are successful in disrupting Exxon’s shareholder meeting, it will set a dangerous precedent that will threaten the stability of our financial markets and the very sources of revenue that fund state government directly impacting future retirees.”
What it all boils down to is a battle over competing, highly politicised priorities. Although they’ve invested billions in ESG-friendly projects to lower emissions in recent years, Exxon’s board and management team led by Woods have remained focused on maximizing investor returns by prioritising the company’s highly-profitable core oil and gas enterprise.
Ironically, the company’s record success in carrying out its duties has provided great benefit to the pensioners and clients whose interests are supposedly being served by the managers of the Blue state pension funds and ESG-focused investor groups.
The Blue pension managers and ESG-focused advisors and activists don’t appear to care if pensioners lose out and clients’ investments lose value. All they care about is Net Zero, a goal which cannot be achieved by badgering Exxon. The human race – led by China and India – is now consuming more coal and oil than it ever has before, and the trend is only going up.
David Blackmon had a 40 year career in the US energy industry, the last 23 years of which were spent in the public policy arena, managing regulatory and legislative issues for various companies. He continues to write and podcast on energy matters
ESG madness, as investors attack the ExxonMobil board delivering record results
It’s capitalism, but not as we know it