Exxon’s Board Has Been Targeted By Activists. What to Know Before Wednesday’s Vote.

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Exxon said Sunday that it plans to add two new directors over the next year.

Logan Cyrus /AFP via Getty Images

Not even a decade ago, it was inconceivable that someone could win a proxy battle against


Mobil. Now, shortly before shareholders vote Wednesday to determine its new board, it looks increasingly likely that an upstart group of activist investors could prevail against a company that was the largest in the world just eight years ago.

Over the past six months, shareholders led by a newly formed investment firm, Engine No. 1, have been clamoring for change at Exxon (ticker: XOM). The activists have gained some support from proxy -advisory firms over the past few weeks, making it seem likely that at least one of their four candidates could get a board seat.

Exxon Mobil said in a letter to shareholders on Sunday that it plans to add two new directors to its board over the next year—one with energy expertise and one with experience in the effort to combat climate change. It added that it plans to engage with shareholders more frequently, particularly when it comes to providing disclosures on its strategy, investment priorities, the transition to renewable energy, and corporate governance.

But Exxon’s 11th-hour gesture was swiftly decried by Engine No. 1 as a “last-minute tactic” to influence voters before Wednesday’s shareholder meeting. The activists went on to note that Exxon’s move suggests that the company isn’t willing to trust its shareholders to nominate directors to the board. 

“If ExxonMobil’s Board is sincere in its desire to add more relevant experience, then it can wait to see what the outcome of this election is,” Engine No. 1 said in a statement. “If the Board after this election decides it needs more relevant experience it should of course consider doing so.”

Shortly after it was launched late last year, the activist firm announced plans to nominate four members to Exxon’s board, calling out the company for what it called a poor capital-allocation strategy and a failure to prepare for a decarbonizing world. The firm quickly attracted the support of the California State Teachers’ Retirement System, the California Public Employees’ Retirement System, the New York State Common Retirement Fund, and the Church of England.

The proxy-advisory firm

Institutional Shareholder Services

(ISS) has backed three of Engine No. 1’s candidates, while Glass-Lewis supports two of them. The opinions of proxy-advisory firms tend to carry a lot of weight with pensions and other institutional investors.

While it isn’t known how the so-called Big Three—

BlackRock (BLK),

State Street

(STT), and Vanguard—plan to vote, all have spoken about the need for businesses to address climate change. Together, the Big Three hold nearly 21% of Exxon’s shares. 

In a conversation with Barron’s last week, Exxon Chief Executive Darren Woods said the company disagrees with the notion that the board needs changing. The company has “one of the strongest boards in corporate America,” he said, noting that it is constantly refreshing itself.

Exxon’s action Sunday suggests it sees a need for an overhaul nonetheless.

Write to Carleton English at [email protected]

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