ExxonMobil’s Opposition to Shareholder Activism Sends a Warning Signal to Investors

ExxonMobil’s recent action to suppress shareholder activism serves as a strong caution for investors. The company asserts its full commitment to responsibly meeting the world’s energy demands. However, it seems they are not equally dedicated to allowing shareholders to voice their opinions on the level of responsibility being demonstrated. This matter has prompted the US oil giant to take legal action in Texas to block a vote on a resolution presented by Follow This, a Dutch green activist investor group pushing for Exxon to accelerate efforts in reducing emissions.

While ExxonMobil may argue that similar-sounding resolutions by Follow This failed to pass in the last two annual meetings, with 27.1% of shareholders supporting the rebels in 2022 and 10.5% in the previous year, their stance appears to be overly legalistic and lacking substance. The company may also question whether US regulators have allowed meeting agendas to become overcrowded, particularly considering that last year’s Exxon meeting included a total of 13 shareholder motions.

However, it’s clear that Follow This is not a fringe organization. Their resolution, which will be addressed at Shell’s annual meeting this year, has gained support from 27 mainstream investment houses, including Amundi, Europe’s largest asset manager. Despite Exxon’s reluctance, it’s evident that the group represents a significant segment of climate opinion in the investment world. Exxon’s refusal to engage in meaningful dialogue and allow shareholders to have a say appears to be a calculated attempt to evade scrutiny.

The essence of Follow This’s motion simply urges Exxon to follow the lead of most other major oil companies and set targets to reduce scope 3 emissions, which are generated by the consumption of its products. If Exxon’s board regards itself as unique in resisting such commitments, it would be beneficial for the company to seek regular validation from its shareholders. Moreover, given that Exxon is unlikely to face defeat in such a vote, it’s unclear why the company is taking such a inflexible stance.

One possible reason behind Exxon’s stance could be the broader reluctance within corporate America to the increasing number of shareholder resolutions being tabled. The company may view its actions as a stand for a board’s autonomy in managing without external interference, particularly on climate-related issues. Despite the nature of the specific proposal at hand, all shareholders should be concerned about Follow This’s struggle to be heard. The right to vote on such matters is crucial and should be safeguarded as a fundamental means of holding corporate boards accountable.

It would be heartening to see major fund managers coming to the defence of Follow This. The right to propose a climate resolution at an oil company is a crucial aspect of shareholder rights. Exxon’s attempts to dismiss dissent by resorting to legal measures in response to an activist group that could command a significant level of support is concerning. This issue is not about the specifics of this particular proposal, but rather it is about the broader principle of shareholder rights and the need for open dialogue between companies and their investors.