Investors Could Take Climate Concerns to Exxon Board

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By Andrea Vittorio

May 26 — Institutional investors who want to make sure their climate change concerns are being heard at Exxon Mobil may have a new audience—the board.

Under an advisory proxy access resolution approved by shareholders at the oil giant's annual meeting May 25 in Dallas, investors that own 3 percent stakes for at least three years could name nominees to the board.

It was the first shareowner proposal to pass at Exxon Mobil since 2006 and the only proposal propelled at least in part by climate change to ever pass.

‘Watershed Moment.'

New York City Comptroller Scott Stringer, who filed the resolution on behalf of the city's pension funds, called the vote “a watershed moment” for Exxon Mobil’s shareowners. “If this company is to properly address fundamental long-term risks like climate change, its board of directors must be diverse, independent, and accountable,” he said in a statement.

The New York comptroller filed similar resolutions at a number of other companies that are carbon-intensive, lack diversity or have excessive CEO pay. More than 215 companies have since enacted proxy access bylaws, including oil industry peers Chevron Corp., ConocoPhillips, Occidental Petroleum, Anadarko Petroleum and EOG Resources.

Even though the proposal was passed by Exxon Mobil shareholders, there’s no guarantee that proxy access will be adopted. The voting results will be considered at the board's next meeting in July.

The board had encouraged shareholders to vote against the idea, out of concern that “special interest groups,” in this case environmentalists, could put forward “single-issue” candidates.

Proxy Access ‘Important.'

“I think the most special interests of all for a board are the owners,” said Anne Simpson, head of corporate governance at the nearly $300 billion California Public Employees’ Retirement System (CalPERS). But share owners don't have access to the board today, she said.

“We can’t talk to the board about climate change. We can’t talk to them about anything,” Simpson said. “That made winning proxy access all the more important.”

Those that hold the biggest stakes in Exxon Mobil—Vanguard Group Inc., Blackrock Inc. and State Street Corp.—are considered unlikely to invoke proxy access. Instead, large institutional investors may be able to get together to collectively meet the 3 percent threshold.

Doing so could elevate the dialogue on climate change, which dominated Exxon Mobil's meeting this year as resolutions on the subject received their highest-ever vote totals but still not high enough to pass. (101 ECR, 5/25/16).

Deflecting Shareholders

So far, “the board has been able to deflect shareholders and ignore strong, although not majority, votes on climate shareholder resolutions,” former Securities and Exchange Commission official Richard Ferlauto said. “But with a core of large institutional investors committed to access, they could trigger a director challenge if they’re not happy with the board's response to their questions around business strategy and climate disclosure.”

Ferlauto is working with a network of institutional investors called the 50/50 Climate Project to encourage boards of energy companies to respond more aggressively to climate change (67 ECR, 4/7/16).

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com