The New York Times notes that “record numbers of shareholder votes” are “pressing major, publicly traded petroleum companies to prepare for a zero-carbon world.” And then they tell the story of two activist investors who attempted to pack Exxon Mobil’s board of directors with a slate of climate-friendly nominees at its annual shareholder’s meeting:
It had been a bruising year for the industry, with oil prices trading negative last spring and record numbers of shareholder votes pressing major, publicly traded petroleum companies to prepare for a zero-carbon world. Just that morning, as the meeting was starting, the news broke that a Dutch court had declared that Shell must accelerate its emissions-reduction efforts. As Exxon Mobil’s meeting was underway, so was Chevron’s, and shareholders there voted in favor of a proposal to reduce the emissions generated by the company’s product, which would call for a re-evaluation of the core business…
[T]he core of [activist investor Charlie Penner’s] argument rested on mobilizing shareholders with classic activist tactics: focusing on the company’s financials, underscoring its flagging profitability and setting out an argument for how to raise the value of the company’s stock by making smarter expenditures. He didn’t aim to undercut the core business necessarily; rather than urging Exxon Mobil to give up all oil and gas, he wanted the company to practice what finance people like to call “capital discipline,” which basically just means not spending prodigiously. He also reasoned that, given mounting pressure from society and governments to decarbonize the global economy, it would be strategically smarter for Exxon Mobil to be part of an energy transition, rather than letting itself be outstripped by other companies innovating to meet demand for low-carbon power…
With plans to increase oil-and-gas production by 25 percent over the next five years, the company seemed out of step with the market. Profitability had already been slipping for a decade. Exxon Mobil earned the largest annual profit in U.S. history in 2008 and nearly eclipsed that record in 2012; last year it lost $22 billion. In part, the loss was due to a historic $19 billion write-down on the value of its assets. That assessment may still be too rosy; a whistle-blower reportedly told the Securities Exchange Commission in January that Exxon Mobil had overvalued its assets by at least $56 billion, in part by pressuring employees to inflate expectations about the drilling timelines in the Permian Basin in Texas and New Mexico, which remains the company’s U.S. cash cow. (Exxon Mobil called the claims “demonstrably false….”) Penner already sensed that Exxon Mobil was an industry outlier, more reluctant than others to recognize that if the world enacted the emissions reductions that its governments had committed to, there would be no viable business for a publicly traded oil company in 30 years…
[Exxon Mobile] spent more than $35 million blanketing shareholders with appeals to reject the activists and stick with management… Just days before the proxy votes would be tallied, Exxon Mobil announced that it would add two more yet-unnamed directors, one with “climate experience” and one with experience in the energy industry. But the company’s efforts at placating the activists fell short, and a week after the annual meeting, it became clear by how much; the company announced that Andy Karsner, the energy entrepreneur, had also been elected to the board, giving Engine No. 1’s candidates a quarter of the seats.
The small activist hedge fund Engine No. 1 holds just 0.02 percent of ExxonMobilâ(TM)s stock, points out the Washington Post, “but marshaled commanding support from investment managers, pensions funds and individual shareholders.”
The Times called their victory “shocking,” and dubbed them “the little hedge fund taking down big oil.”
Read more of this story at Slashdot.
Source: Slashdot – Exxon Mobil Challenged by Activist Investors at Its Shareholder Meeting