Hiltzik: CalPERS targets a corporate bully

Exxon Mobil can't say it wasn't warned.

After choosing to pursue the lawsuit against two activist investor groups even after withdrawing a shareholder proposal that company management opposed, the giant oil company was flayed by shareholder advocates for its bullying.

Now the big shoe has dropped: CalPERS, the nation's largest public pension fund, announced Monday that this will happen vote against all twelve Exxon Mobil board members, including CEO Darren Woods, at the May 29 annual meeting.

“If ExxonMobil succeeds in silencing voices and subverting the rules of shareholder democracy, what other topics will the leaders of any company declare off limits? Employee safety? Excessive executive compensation?'

— Marcie Frost, CEO of CalPERS

CalPERS says it is acting because it believes the company's campaign against the two investor groups “is designed to punish investors” who “dared to speak truth to power.”

The pension fund said: “The consequences of the lawsuit could be devastating. If ExxonMobil succeeds in silencing voices and subverting the rules of shareholder democracy, what other topics will the leaders of any company declare off-limits? Employee safety? Excessive executive compensation?”

The announcement is a major step forward compared to the pension fund's previous statements about its intentions. Michael Cohen, CalPERS' chief operating investment officer, had previously said only that the fund was considering voting against Woods.

Voting against the entire board and publicly urging other investors to “do the same” significantly raises the stakes for Exxon, at least theoretically. CalPERS – the California Public Employees' Retirement System – is an institutional investor to be reckoned with. The $496 billion fund owns about $1 billion in Exxon Mobil stock.

Exxon Mobil's lawsuit “is a real problem for us as shareholders,” CalPERS CEO Marcie Frost said during a news conference Monday. “We believe that our voice matters, that we should be able to make proxy requests to ask the company to be more transparent in certain areas.”

Exxon called CalPERS' action “a poor fiduciary decision.” The company said through a spokesperson: “It is unclear why CalPERS is spending their time and energy defending the abuse of a shareholder process… Far from having a chilling effect on shareholder proposals, our efforts are intended to provide clarity on the rules to promote an environment for open and meaningful shareholder dialogue. If anything, CalPERS' vote against our entire board appears to be an attempt to 'chill' shareholder votes.”

As I reported last week, in February Exxon Mobil has sued US investment firm Arjuna Capital and Netherlands-based green equity firm Follow This to prevent a shareholder resolution they support from appearing on the agenda of the annual meeting. The resolution was a simple environmental proposal push the company to work harder to reduce greenhouse gas emissions from its products and to be more transparent about the impact of its activities on the climate.

Days after the company filed a lawsuit, shareholders, calculating their relative strength against the oil giant, withdrew the proposal and promised not to resubmit it in the future. That made the lawsuit moot, but the company has refused to drop it.

What makes the lawsuit particularly cynical is that the investors' proposal, like all such proposals, is not binding on management – ​​it is only advisory in nature. Furthermore, as Frost noted, similar proposals in 2022 and 2023 failed to gain majority shareholder support; they won just 10.5% of the vote in 2022 and 27% last year.

“Exxon won,” Frost said.

CalPERS' action is unlikely to result in the board's ouster. As Marcie Frost, CEO of CalPERS, noted during a press conference on Monday, no alternative board has been appointed for the upcoming annual meeting, so it would be “very difficult to say that we are transferring this board.”

But she said the vote on the fund is “more than symbolic” – it is more about “sending the right messages to this fund about their responsibilities in governance; If they don't want to be involved in governance, they should step aside.”

Although CalPERS supported a series of activist board members nominated in 2021 — three of the four nominees won board seats — the fund said it voted against the entire board because it “enables CEO Darren Woods to undertake a reckless and destructive effort.” ”

Frost said CalPERS is not considering taking more aggressive action against Exxon Mobil, such as divesting its shares. “The problem with divestiture if you are CalPERS is that you completely lose your voice. The moment you don't own shares, you can't respond to the proposals of other owners, you can't take action to say that we don't believe that executive compensation is commensurate with the performance of the company.”

Exxon Mobil claims in its lawsuit that the proposed mutual fund resolution violated Securities and Exchange Commission standards governing the propriety of such resolutions — it was related to “the company's ordinary business activities” and closely resembled resolutions on similar topics that failed to cross the threshold votes at the 2022 and 2023 annual meetings. Both standards allow a company to block a resolution from the meeting agenda or proxy.

That may be so, but the conventional practice is for managers to seek approval from the SEC to preclude such resolutions by requesting a so-called 'no action' letter from the agency.

CalPERS says this would have been “the better option” than a lawsuit. It's not that the SEC has set the bar high for issuing no-action letters; the pension fund notes that the agency has approved two-thirds of these requests so far this year. Frost surmised that given the poor performance of similar proposals in the recent past, the SEC would likely have allowed the company to exclude the latest proposal from the proxy for the annual meeting.

Exxon Mobil's rationale for pursuing the lawsuit is that the proposed rules “must be enforced or abuse by activists posing as shareholders will continue to threaten the system.”

Frost questioned the company's position. She described Exxon Mobil's goal in the lawsuit as gaining “clarity around the ordinary course of business.” But “to me it doesn't feel like 'clarity'; it feels like a decrease” in shareholder votes. As for the company's insinuation that the system is broken, she said: “The system works, if you use the system.”

Related Posts

  • Business
  • June 19, 2024
  • 3 views
  • 3 minutes Read
A new Boeing whistleblower claims defective aircraft parts may have been used in jetliners

A new whistleblower report claims defective aircraft parts may have been used in Boeing jets. It comes as the company suffered a series of safety and quality issues, including a…

  • Business
  • June 19, 2024
  • 5 views
  • 3 minutes Read
FEMA pushed to add extreme heat and smoke from wildfires to the list of disasters

A coalition of organizations is calling on the Federal Emergency Management Agency to add extreme heat and smoke from wildfires to the list of scenarios worthy of being declared a…

Leave a Reply

Your email address will not be published. Required fields are marked *

You Missed

10 ways BPD services can effectively manage symptoms and improve quality of life

  • June 19, 2024
10 ways BPD services can effectively manage symptoms and improve quality of life

How grounding came into existence and its modern applications

  • June 19, 2024
How grounding came into existence and its modern applications

As 'zombie deer disease' spreads, scientists search for answers

  • June 19, 2024
As 'zombie deer disease' spreads, scientists search for answers

Here are Wall Street's favorite picks in the S&P 500 for the second half of the year

  • June 19, 2024
Here are Wall Street's favorite picks in the S&P 500 for the second half of the year

Here is the complete list of hurricane names for the 2024 season

  • June 19, 2024
Here is the complete list of hurricane names for the 2024 season

How to protect yourself from a passive-aggressive partner

  • June 19, 2024
How to protect yourself from a passive-aggressive partner

Large wildfires create weather that promotes more fire

  • June 19, 2024
Large wildfires create weather that promotes more fire

Britain is investigating HPE's planned $14 billion takeover of Juniper Networks

  • June 19, 2024
Britain is investigating HPE's planned $14 billion takeover of Juniper Networks

Nvidia overnight rally lifts chip-related stocks in Asia on AI optimism

  • June 19, 2024
Nvidia overnight rally lifts chip-related stocks in Asia on AI optimism

Six scary predictions that early science fiction authors got completely wrong

  • June 19, 2024
Six scary predictions that early science fiction authors got completely wrong

Navigating the home buying process: tips for first-time buyers

  • June 19, 2024
Navigating the home buying process: tips for first-time buyers