Tensions over climate change, activist investors spark controversy at Exxon shareholder meeting

(CN) — ExxonMobil investors resoundingly reelected the company's board of directors at an annual shareholder meeting on Wednesday amid growing concerns about the company’s handling of activist shareholders.

The reelection of the 12-member board came as some shareholders cast protest votes against some or all of the nominees. Among those shareholders are the New York State Common Retirement Fund, Norway’s sovereign wealth fund and the California Public Employees’ Retirement System (CalPERS), the nation’s largest private pension fund.

Those shareholders were protesting Exxon’s lawsuit against two activist investors, U.S.-based investment firm Arjuna Capital and Dutch-based nonprofit Follow This.

Those investors sought to bring a proposal to accelerate the company’s reduction of emissions. Exxon responded in January by suing them in federal court in Texas.

In its suit, the oil giant sought to obtain a declaration that it could exclude the proposal — and yet even after the two shareholder groups withdrew their proposal, Exxon has persisted with its litigation. The company is seeking legal fees and broadly challenging rules by the Securities and Exchange Commission that allowed the activist shareholders to bring their proposal in the first place. 

In an interview on CNBC on Wednesday morning, CalPERS CEO Marcie Frost said the group planned on voting against all 12 board nominees over what she said was a failure to represent shareholders by allowing the lawsuit to proceed. 

“If you limit the ownership rights and the discussion topics with a company, we see that as a fiduciary risk,” Frost said.

While Arjuna and Follow This were not mentioned by name at the shareholder meeting, the controversy the two groups sparked was nonetheless on full display.

Four proposals were put to a vote on issues such as the production of virgin plastics, gender/racial pay data and workers who have been affected by facility closures due to the transition away from fossil fuels.

All sought to increase reporting from the company on such issues. Meanwhile, the fourth and final proposal would have forced the company to “revisit” executive pay incentives for reducing greenhouse gas emissions. 

Exxon CEO Darren Woods called for shareholders to vote down the proposals. Along with the rest of the board, he argued the measures would hurt returns for investors.

That message won out, as all four proposals were voted down. None received more than 21% of the vote.

Before the votes were cast, Woods gave a brief statement regarding shareholder democracy at the company. 

“We see a process that was designed to give investors access to directors, management and fellow investors to share their views being abused by a coalition of activists masquerading as shareholders,” Woods said. “We're obliged to speak up and take action. For shareholder democracy to thrive, abuses of the process must be addressed.” 

With the annual shareholder meeting behind it, Exxon has for now succeeded in warding off efforts to limit the company’s growth and greenhouse gas output. If the company continues its winning streak by prevailing in the federal court case, it may be able to block what it sees as nuisance proposals in the future.

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