Exxon loses board seats to activist hedge fund in landmark climate vote

A tiny hedge fund dealt a significant blow to ExxonMobil on Wednesday, unseating at the very least two board members in a bid to power the corporate’s management to reckon with the chance of failing to regulate its enterprise technique to match world efforts to fight climate change.

The success by hedge fund Engine No. 1 in its showdown with Exxon shocked an power trade struggling to address growing investor concerns about global warming. It occurred on the identical day activists scored an enormous win in opposition to one other oil main, Royal Dutch Shell – a Dutch courtroom ordered the corporate to drastically deepen pledged cuts to greenhouse gasoline emissions.

Eight of Exxon’s nominees together with CEO Darren Woods have been re-elected to its 12-member board of administrators, together with two of Engine No. 1’s nominees, the corporate stated. The counting is just not completed, so Engine No. 1 may doubtlessly see three of its 4 nominees be a part of the Exxon board.

The consequence will add strain on Woods, who campaigned to persuade shareholders to shoot down the board problem and argued the corporate was already diversifying away from fossil fuels and mustn’t jeopardize its earnings in doing so.

Under Woods, Exxon incurred a $22 billion loss last year as the COVID-19 pandemic destroyed fuel demand worldwide. Exxon has lagged different oil majors in its response to climate change issues, forecasting many extra years of oil and gasoline demand development and doubling down on spending to increase its output – in distinction to world rivals which have scaled again fossil gasoline investments.

The addition of two board members nominated by activist hedge fund Engine No. 1 will increase pressure on ExxonMobil CEO Darren Woods.
The addition of two board members nominated by activist hedge fund Engine No. 1 will improve strain on ExxonMobil CEO Darren Woods.
AFP through Getty Images

“It’s a huge deal. It shows not just that there is more seriousness apparent in the thinking among investors about climate change, it’s a rebuff of the whole attitude of the Exxon board,” stated Ric Marshall, govt director of ESG Research at MSCI.

The dissident shareholder group led by Engine No. 1 put up a slate of 4 nominees in the primary large boardroom contest at an oil main that makes climate change the central situation. The fund’s stake in Exxon – an power behemoth with a market worth of shut to $250 billion – is price simply $50 million.

The two Engine No. 1 nominees elected have been Gregory Goff, a 64-year-old former prime govt at Marathon Petroleum and Andeavor, and former Neste Oyj govt Kaisa Hietala.

“We welcome the new directors, Gregory Goff and Kaisa Hietala, to the board and look forward to working with them constructively and collectively on behalf of all shareholders,” CEO Woods stated on the finish of Exxon’s shareholder assembly.

Vote counting to decide the ultimate two seats was persevering with. That left the re-election of administrators Steven Kandarian, Douglas Oberhelman, Samuel Palmisano and Wan Zulkiflee up in the air. Alexander Karsner, one in every of Engine No. 1’s nominees, was nonetheless in the working, Exxon stated.

Activist hedge fund Engine No. 1 argued ExxonMobil needs to be better prepared to move away from gasoline and other fossil fuels to ensure future value to investors.
Activist hedge fund Engine No. 1 argued ExxonMobil wants to be higher ready to transfer away from gasoline and different fossil fuels to guarantee future worth to buyers.
Los Angeles Times through Getty Images

Governments and firms have moved to scale back emissions from fossil fuels which are warming the planet by investing in wind and photo voltaic power. Investors led by Engine No. 1 have stated Woods wanted to make large modifications to guarantee Exxon’s future worth to buyers.

The fund efficiently rallied help from institutional buyers and shareholder advisory companies upset with Irving, Texas-based Exxon for its weak financial performance in recent years. Among these have been BlackRock, Exxon’s second-largest shareholder, who agreed to vote for 3 members of Engine No. 1’s slate.

BlackRock stated the three convey “fresh perspectives and relevant transformative energy experience” that will help Exxon evaluate “the risks and opportunities presented by the energy transition,” in accordance to a observe posted on its web site.

Exxon shares rose 1.2 % to $58.94 on the day. The inventory has lagged its friends over the past 5 years.

Woods had argued that Exxon’s board understood the corporate’s complexity and that Exxon helps a path towards carbon reductions in the Paris accord, the worldwide settlement geared toward combating climate change.

However, in one other sign of investor dissatisfaction with the corporate’s strategy to climate change, shareholders additionally authorised measures calling on Exxon to present extra info on its climate and grassroots lobbying efforts.

“Exxon Mobil shareholders chose real action to address the climate crisis over business as usual in the fossil fuel industry,” stated New York State Comptroller Thomas DiNapoli, who in April stated the state’s pension fund backed Engine No. 1.

DiNapoli stated that for years, buyers have “received platitudes and gaslighting in response” from Exxon in response to issues concerning the climate disaster.

Exxon had fought to maintain climate activists at bay, spending tens of hundreds of thousands of {dollars} on a high-profile PR marketing campaign, agreeing to publish extra particulars of its emissions and popping out in help of carbon discount. Activists stated it was too little, too late, and that Exxon wants a much less reactive technique.

“We are sending new board members, seasoned in managing change in the fossil fuel industry, to help put the company back on track,” DiNapoli stated.

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