Norway’s sovereign wealth fund, known for its investments in oil and currently holding $1.5 trillion (€1.4 trillion) in assets, has pledged to vote against Jay Hooley’s re-election as director of ExxonMobil. The commitment comes amidst growing unease regarding the potential implications of a lawsuit initiated by ExxonMobil that threatens to undermine shareholder rights. Exxon’s case was filed in response to a proposed resolution demanding reduction in greenhouse gas emissions from two environmentally-conscious shareholder groups.
The lawsuit caused some alarm in the financial sector about potential escalation of attacks on shareholder rights in the USA. Such fears concern the possible lessening of smaller shareholders’ commitment to filing disputes, especially on matters of climate change. As apprehension grows, substantial investors have been urged to vote against Exxon directors during the annual gathering.
As one of the top ten shareholders, Norges Bank Investment Management (NBIM) has indicated its intention to vote against Hooley at the yearly meeting on May 29th. Despite acknowledging the significant value created during Hooley’s term of office, NBIM emphasises its ongoing commitment to the safeguarding of shareholder rights and expresses concerns about potential impacts of litigation against shareholders.
ExxonMobil’s legal action originates in part from alterations at the US Securities and Exchange Commission which allows greater numbers of environmental, social and governance propositions to proceed to shareholder voting. Exxon contends that this change has permitted an excessive number of onerous proposals to be put to vote, leaving it no alternative but to seek legal remedies.
This move by the Norwegian fund is preceded by a similar stance taken by Calpers, the largest US public pension scheme, which has promised to vote against the re-election of all Exxon directors citing the company’s “reckless” legal action.
Exxon has voiced disappointment at NBIM’s decision, claiming that it and other investors have clearly profited from Hooley’s leadership.
Mark van Baal, the initiator of Follow This, declared that Exxon is aiming for a judicial decision that would establish a benchmark to prevent shareholders from proposing emissions cutbacks. He criticised the company’s ploy to bypass the SEC, labelling it a blatant disregard and manipulative assault on stakeholder privileges within the globe’s prime investment bazaar.
Two top-30 shareholders confirmed having discussed with Exxon about the implications of the lawsuit on shareholder democracy, but kept their voting intentions for the yearly meeting under wraps.
The US trade association, Chamber of Commerce, and the business advocacy group, Business Roundtable, have shown support for Exxon’s legal battle. They contended that public corporations are swamped with proposals from a niche group of politically motivated shareholders, alleging that such activists are exploiting the proxy-solicitation procedure for their causes that are unrelated to shareholder value.
In a recent move, an ensemble of US pension fund trustees, finance controllers, and state treasurers, comprising Brad Lander of New York and Mike Pellicciotti from Washington, reached out to the leading asset managers in the world like BlackRock, State Street, and JPMorgan. They encouraged them to vote against the reappointment of Hooley and Darren Woods, Exxon’s CEO. They criticised Exxon for jeopardising shareholder rights and squandering corporate resources on legal battles, pointing out to the dire failure of the board to oversee the company properly.
On the other hand, Republican politicians voiced concerns that activists’ objectives are diverging from the primary fiduciary responsibility of corporations, which is to earn profits for investors. Louisiana state treasurer, John Fleming, asserted that while shareholder activism can lead to positive changes, its main focus should be to enhance shareholder returns rather than politically motivated destruction of target companies.
However, California Public Employees’ Retirement System (Calpers) CEO, Marcie Frost, refuted the argument that shareholder rights should only be respected if they don’t pose uncomfortable questions to the company executives. She expressed that their current contention with ExxonMobil is not related to climate change but is about the company’s attempt to stifle shareholder voices that it takes issue with. She conveyed these views in a recent blog post.