This year’s wild proxy season continued yesterday when ExxonMobil announced that a dissident won at least two seats on the company’s 12-member board. The dissident — Engine No. 1 — has waged a campaign that pressures the company to set a “climate transition” plan that would result in net-zero emissions from the company and its products by 2050.
Considering Engine No. 1’s ownership stake in Exxon is only about 0.02%, it’s remarkable that the hedge fund pulled this off. It came at no small cost — this has been one of the most expensive proxy fights ever, with Exxon spending at least $35 million and Engine No. 1 spending $30 million. Reports are based on preliminary voting results, so until the final vote results are released, it’s unclear how close the vote was for the two seats that were won. As of yesterday afternoon, there were two more seats still up for grabs. The vote was so hotly contested that Exxon called a recess during the meeting as votes were still being cast.
A WSJ article summarizes the proxy contest. Here’s a snippet about yesterday’s drama:
Both sides feverishly made their case to investors until the last minute. Exxon delayed the closing of the voting by an hour Wednesday morning and Engine No. 1 said the company was calling investors to ask them to change their votes. In a message sent to shareholders, the fund urged them ‘not to fall prey to any such strategic efforts.’
In another somewhat new practice, Vanguard posted a vote bulletin saying it backed two dissident nominees and BlackRock posted its vote bulletin for Exxon’s meeting yesterday afternoon, nearly in real time. As I blogged yesterday morning, word was already out that BlackRock was planning to support three dissident nominees. BlackRock said that, although Exxon had announced more commitments and transparency, it believes more urgent action is needed. Here’s an excerpt from BlackRock’s bulletin:
We believe that three of the four directors nominated by Engine No. 1 bring relevant private sector experience including independent U.S. energy production (Mr. Goff); renewable products, including wind energy (Ms. Heitala); and energy infrastructure, legislation and new energy technology (Mr. Karsner). Hence, we believe that this suite of directors will complement the skills and experience of the remaining incumbent directors, bringing fresh perspectives as well as successful track records of value creation for shareholders.
BIS supported the re-election of Mr. Frazier and Mr. Woods because our engagement with each of them over the past several months has given us greater confidence that they are prepared to internalize shareholder feedback, and lead the company, in their respective roles as Lead Independent Director and CEO, on a more ambitious course of action in adapting to the energy transition and responding to shareholders. We also believe some leadership stability is important in the context of the urgency with which the company is expected to deliver on its commitments.
Many predict the vote result will force the company to change its strategy, which has been fossil fuel focused. Institutional holders are signaling that they’re willing to take drastic action to reduce climate risks, which may also jolt the energy sector and others. The vote is even more shocking in light of the fact that the company had already added three directors earlier this year in response to activist pressure, including Jeff Ubben. That means that if any additional dissidents are certified as elected, new directors would comprise at least half of the board.
As an exclamation point yesterday, shareholders not only approved a change in leadership, but also approved proposals calling for more info on climate lobbying and other lobbying activities, which weren’t supported by the board.
-Lynn Jokela, TheCorporateCounsel.net May 27, 2021
