Exxon Mobil’s Last-Ditch Attempt to Stave Off a Climate Coup

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(Bloomberg) — It was a shocking second for Exxon Mobil Corp. and the broader company world: a tiny activist fund had succeeded in altering the corporate’s board.

However within the hours main as much as this week’s annual shareholders assembly, Exxon went to extraordinary lengths to move off the menace from a marketing campaign about which it had been largely dismissive months earlier.

Exxon telephoned traders the morning of the poll — and even throughout an unscheduled, hour-long pause throughout the digital assembly — asking them to rethink their votes, in accordance with a number of of those that acquired calls. Some stated they discovered the last-ditch outreach and halt to the assembly unorthodox and troubling.

“It was a really uncommon annual basic assembly,” stated Aeisha Mastagni, a fund supervisor on the California State Lecturers’ Retirement System, a serious Exxon investor that backed the activist marketing campaign from the start. “It didn’t really feel good as an investor.”

The Could 26 assembly concluded with Exxon stating that two of the dissident’s 4 director nominees had been elected, a coup for Engine No. 1, a little-known funding agency calling for the corporate overhaul its technique, lower prices and give you a plan to handle local weather change. Its victory is broadly seen as a warning to the remainder of the business that traders will now maintain vitality firms to account for environmental considerations.

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The complete outcomes of the vote nonetheless haven’t been disclosed; a 3rd Engine No. 1 nominee continues to be within the operating to fill one of many two remaining board seats. Whereas there’s no suggestion Exxon broke any guidelines throughout Wednesday’s assembly, such techniques are uncommon for a blue-chip firm.

In response to questions in regards to the assembly, the corporate stated it’s been “actively engaged” with traders and welcomes the newly elected administrators.

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Exxon opposed Engine No. 1 from the outset. The fund holds a stake in Exxon of simply 0.02%, valued at about $54 million. The oil firm described the fund’s 4 candidates as unqualified and stated its proposals would imperil Exxon’s dividend.

Nonetheless, the corporate made a concession in March to a different investor, D.E. Shaw & Co., appointing two new administrators, together with activist investor Jeff Ubben. However Exxon nonetheless refused to satisfy with the Engine No. 1 candidates.

A big hurdle confronted by the corporate was profitable assist of huge establishments together with its high three traders, Vanguard Group Inc., BlackRock Inc. and State Road Corp., which collectively maintain a stake of greater than 21%. BlackRock has been vocal about its voting pointers on local weather change.

Discussions with many giant traders within the run-up to the vote had been primarily targeted on Exxon’s technique to get to internet zero emissions by 2050, and never the corporate’s monetary efficiency, in accordance with individuals conversant in the talks. Chief Government Officer Darren Woods bought down within the trenches throughout the proxy struggle and made commitments to holding the dialog going after the assembly, the individuals stated.

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However Vanguard, BlackRock and State Road in the end supported a partial slate of nominees from Engine No. 1.

A sign the struggle could be tilting in Engine No. 1’s favor got here mid-Could with the partial backing from two main proxy advisory corporations. Two days earlier than the vote, Exxon stated it might appoint two new administrators, one with “local weather expertise” and one other with business experience.

‘Banana-Republic Really feel’

On the morning of the assembly, Engine No. 1 issued an announcement alerting shareholders that Exxon might strive, “in a focused method,” to influence them to vary their vote.

Certain sufficient, by the point the digital assembly started at 9:30 a.m. Dallas time, Exxon representatives had been ringing traders. In some circumstances, these calls entailed cajoling holders to at the least scale back their assist to 1 or two dissident nominees quite than all 4, in accordance with individuals conversant in the conversations, who requested to not be recognized as a result of the discussions had been non-public.

At about 10:15 a.m., investor relations head Stephen Littleton introduced proceedings can be paused for 60 minutes, citing the amount of votes nonetheless coming in. As classical music performed on the webcast, emails began flying between traders left bewildered by the halt.

One government at a serious Exxon shareholder stated they had been contacted throughout this hiatus and pushed to vary their vote. The individual, who has a long time of expertise coping with boardroom elections, stated that whereas such appeals a day earlier than a vote are commonplace, it was the primary time they’d fielded such a request throughout a gathering.

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In the meantime, Engine No.1 launched one other assertion saying shareholders ought to “not be fooled by ExxonMobil’s last-ditch try and stave off much-needed board change.” Charlie Penner, head of energetic engagement at Engine No. 1, went on tv to complain.

“They’re doing a tactic referred to as the whittle-down, the place they inform a shareholder to attract down your votes for this individual, they inform one other shareholder they’ll draw down their votes for this individual, and so they regularly attempt to whittle individuals down,” he informed CNBC. “It has a really banana-republic really feel.”

The pause was one thing that Anne Simpson — the California Public Workers’ Retirement System’s managing funding director for board governance and sustainability — had by no means seen earlier than in her three-decade profession.

Simpson didn’t get a name from Exxon about altering her votes. However the apply nonetheless disturbed her. “If the feedback are true, this raises the query in regards to the sanctity of the poll field and whether or not firms ought to have privileged entry,” she stated.

The assembly didn’t conclude till nearly three hours after it first started, with Littleton studying out a abstract of the preliminary tally of votes.

“We welcome the brand new administrators Gregory Goff and Kaisa Hietala to the board,” Woods stated in his concluding remarks, “and sit up for working with them constructively and collectively on behalf of all shareholders.”

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