Exxon faces shareholder uprising over climate policies, legal tactics

By Avery Ellfeldt, Lesley Clark, Corbin Hiar | 05/21/2024 06:31 AM EDT

The nation’s largest public pension fund said Monday it will vote against Exxon’s slate for board of directors at the May 29 shareholder meeting.

Exxon Mobil Chair and CEO Darren Woods.

Exxon Mobil CEO Darren Woods is being targeted by investors including two major public pension funds for removal from the board of directors. Richard Drew/AP

Exxon Mobil is facing a shareholder uprising over its climate policies led by two of the nation’s most powerful pension funds that are trying to remove members of the company’s board of directors next week

The protest concerns both Exxon’s overall climate policies and its recent attempt to silence investors who tried to challenge the policies.

The California Public Employees’ Retirement System said Monday it will vote against Exxon’s slate for board of directors at the May 29 shareholders meeting after the company sued investors who filed a resolution urging Exxon to move faster on cutting planet-warming emissions.


CalPERS, with $495 billion in assets and 2 million members, is the largest public U.S. pension fund by a wide margin.

“The repercussions of the lawsuit could be devastating,” CalPERS said Monday.

The move came days after the nation’s third-largest public pension fund — the New York State Common Retirement Fund — said it would vote against 10 of 12 Exxon board members, mostly for failing to address climate change.

“Exxon was the only oil and gas super-major that failed to meet our minimum standards,” said a spokesperson for New York State Comptroller Thomas DiNapoli, who oversees the $260 billion retirement fund.

At least seven other shareholders, including Illinois State Treasurer Michael Frerichs and the Interfaith Center on Corporate Responsibility, have filed documents with the Securities and Exchange Commission protesting Exxon’s actions and in some cases urging shareholders to vote against Exxon directors. Frerichs does not control Illinois’ pension funds but does manage some assets including the state’s college-savings plans, which are moving in the same direction.

The campaign largely targets two Exxon directors: CEO Darren Woods and independent Director Joseph Hooley, who leads the company’s governance strategy. It follows an unusual lawsuit Exxon filed in January to block two shareholder groups from proposing a non-binding resolution on emissions.

While the SEC usually handles disputes over whether companies must take up shareholder proposals, Exxon said at the time of the lawsuit that a “breakdown of the shareholder proposal process” had let activists “advance their agendas through a flood of proposals.”

The lawsuit against shareholder groups Follow This and Arjuna Capital and sparked an outcry from pension and shareholder advocates who say the legal action threatens investors’ right to voice concerns about the companies they partially own.

“If successful, the legal action could diminish the role — and the rights — of every investor in improving a company’s bottom line,” CalPERS CEO Marcie Frost and President Theresa Taylor said Monday in a statement. “We urge other ExxonMobil shareholders to do the same, to send a message that our voices will not be silenced.” CalPERS also filed a statement Monday with the SEC.

Exxon has long worried about CalPERS

It remains unclear how much support the effort might receive.

CalPERS owns 8.4 million shares of Exxon, but that amounts to just 0.2 percent ownership. Toppling the company’s board would require support from large investors including other pension funds and asset managers such as BlackRock.

But the “no vote” campaign is significant regardless of the outcome, some say, because it signals that prominent investors are concerned about whether Exxon is willing to engage with its own shareholders on issues including climate change.

“The company seems more preoccupied with harming shareholders than addressing the really important issues of risk that are being brought up by shareholders in these proposals,” said Danielle Fugere, president of prominent shareholder advocacy organization As You Sow.

“That, at bottom, is the problem,” Fugere added. “The company would rather fight their shareholders than address these important issues.”

“Exxon has left responsible shareholders no other choice than to vote against management,” Follow This spokesperson Karel Kuipéri said in an email Monday. “Investors like CalPERS using their votes in an unprecedented way shows that Exxon’s lawsuit Is not against us, but against shareholder democracy at large.”

Exxon said in a statement after the CalPERS decision that up to 90 percent of its voting shareholders have rejected similar shareholder proposals in recent years and that it’s “unclear” why CalPERS is defending “the abuse of a shareholder process” by activist investors.

“We’ve engaged with CalPERS on this matter and do not understand how they can make such a poor fiduciary decision to vote against a board that has overseen the creation of industry-leading shareholder value,” said Exxon spokesperson Emily Mir.

Although CalPERS’ voting power at Exxon is limited, the oil company has long been concerned about the fund’s ability to influence sustainable investment debates, according to corporate records labeled as “confidential.”

In a briefing document for a September 2019 oil conference, Exxon’s public and government affairs team urged Woods, the CEO, to prioritize “engagement” with Anne Simpson, who was then CalPERS’ investment director. The document, obtained by congressional investigators via a subpoena, noted that Exxon officials had met five times with CalPERS since the previous December in part to push back on what it called “Simpson’s extreme views and focus around climate.”

Simpson, who left CalPERS in 2022 to become the global head of sustainability for the asset management firm Franklin Templeton, did not respond to a request for comment.

Exxon continues to pursue its lawsuit against Arjuna Capital and Follow This even though the groups dropped their proposed resolution calling for the company to speed up reduction of greenhouse gas emissions and promised not to submit it again.

The company said it is continuing the federal lawsuit because it believes the “underlying issue remains and must be resolved.” Exxon’s lawsuit is supported in court by the U.S. Chamber of Commerce and the Business Roundtable.

Though the lawsuit was filed in the U.S. District Court for the Northern District of Texas, a venue seen as friendly to the oil industry, Judge Mark Pittman, an appointee of President Donald Trump, told Exxon after the groups withdrew their proposal that he “struggles to see what the ongoing case or controversy is in this matter.”