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ExxonMobil has easily rebuffed an attempted shareholder revolt against its board of directors, sparked by the supermajor’s decision to sue two climate-focused investors.
Investors in the largest US oil company voted overwhelmingly on Wednesday to re-elect all 12 members of the company’s board of directors, despite a campaign against two directors – CEO Darren Woods and independent director Jay Hooley – in protest against the lawsuit against activists.
Shareholders voted 95 percent in favor of appointing the company’s directors, a marginal drop from 96 percent last year. The lowest support for an individual director was 87 percent, down from 91 percent last year, according to a preliminary tally of votes at the company’s annual meeting.
“Today our investors sent a strong message that rules and value creation matter,” Exxon said in a statement following the results. “We expect the activist crowd will try to claim victory in today’s vote, but common sense should tell you otherwise in light of the large margin of defeat.”
Wall Street kept a close eye on the outcome of the meeting after some major shareholders vowed to file protest votes. The response followed Exxon’s decision to sue US investment adviser Arjuna Capital and Dutch shareholder group Follow This after they filed a resolution demanding the company do more to cut greenhouse gas emissions.
The groups have since withdrawn their resolution, but Exxon has continued with the lawsuit. A judge last week dismissed the case against Follow This on grounds of jurisdiction, but allowed the case against Arjuna to proceed.
The lawsuit has raised fears in the financial community of a broader attack on shareholder rights in the US. Critics warn this will have a chilling effect on small investors’ willingness to file motions.
Calpers, the largest U.S. public pension fund, voted against the re-election of all Exxon directors to protest what it called a “reckless” legal action to “silence” shareholder voices. Norway’s $1.5 trillion sovereign wealth fund said it would vote against Hooley’s re-election.
“The intent of creating transparency or bringing attention to this lawsuit was not actually to dethrone Exxon’s board,” Calpers CEO Marcie Frost said in a statement. “It was more of a very clear communication that we are saying this is an absolute failure in governance, and governance is the responsibility of the entire board.”
Mark van Baal, founder of Follow This, expressed his disappointment with the shareholder decision. “Most investors missed the opportunity to express their concerns about Exxon’s lawsuit against shareholders and the attack on shareholder rights,” Van Baal said.
Exxon’s lawsuit stems in part from a change at the Securities and Exchange Commission to allow more environmental, social and governance motions to be voted on by shareholders. The agency is less likely to use its powers to block shareholder proposals that companies claim are frivolous or micro-manage their day-to-day affairs. Exxon argues that the SEC has put too many burdensome proposals to the vote, leaving it no choice but to turn to the courts.
George Georgiev, a professor at the Emory School of Law, said Exxon’s large profits and returns helped “insulate the board.” Last year was the oil giant’s second most profitable year, with a profit of $36 billion.
“The presumption is in favor of supporting the board when they have achieved strong shareholder returns,” Georgiev said, adding that Wednesday’s shareholder vote will “have a chilling effect” on future proposals and “reward Exxon’s bad behavior.” ”
In addition to the re-election of the directors, Exxon shareholders voted overwhelmingly in accordance with the board’s recommendations. They include opposition to proposals that would tie executive pay to emissions reductions, and required reports on the oil giant’s gender and racial pay gaps, the economics of its plastics business and the social impacts of the energy transition.
Reclaim Finance, a nonprofit organization, denounced the mood of Exxon shareholders and accused investors of supporting “climate chaos.”
“Through these votes, investors have also supported ExxonMobil’s decision to silence climate-conscious shareholders by taking them to court, despite shareholder dialogue and climate science,” Reclaim Finance campaigner Agathe Masson said in a statement.
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