People walking past an Exxon station in Washington. — AFP
HOUSTON: Exxon Mobil Corp has filed a lawsuit against United States and Dutch climate activist investors in an effort to remove what it describes as their “extreme agenda” from the ballot at its annual shareholder meetings, and force a stricter interpretation of Securities and Exchange Commission (SEC) rule-making.
The Texas oil giant is seeking a declaratory judgment from the US District Court in Fort Worth to exclude from its annual meeting this year a proposal from Follow This and Arjuna Capital LLC to accelerate greenhouse-gas emission cuts.
Exxon argues that a judgment in its favour would tighten the SEC’s interpretation of the rules around what proposals get on proxy ballots across corporate America.
Follow This and Arjuna Capital have “become shareholders solely to campaign for change through shareholder proposals that are calculated to diminish the company’s existing business,” Exxon said in the complaint.
They “are aided in their efforts by a flawed shareholder proposal and proxy voting process that does not serve investors’ interests and has become ripe for abuse.”
Follow This and Arjuna didn’t immediately respond to requests for comment outside of normal office hours.
Publicly traded companies typically debate the merits of individual proposals with the SEC, which can advise whether they be excluded from the ballot.
But critics of the process, including Exxon, claim the SEC’s advice can vary widely depending which administration is in office.
The number of environmental and social proposals voted on has more than doubled over the past two proxy seasons, according to the SEC.
Exxon’s decision to seek legal judgment rather than go through the SEC is highly unusual and marks an aggressive pushback against climate activists who use shareholder voting to influence boardroom strategy.
It also comes as the US Supreme Court questions a longstanding legal doctrine known as the “Chevron doctrine” that gives federal agencies wide latitude to interpret unclear mandates from Congress.
Last month, Follow This and Arjuna submitted a proposal calling for a “further accelerating” of Exxon’s emission reduction plans that include Scope 3 emissions, in other words the pollution from customers burning the company’s oil and gas.
Chief executive officer Darren Woods is a vocal critic of Scope 3 emissions accounting, saying it’s misleading and doesn’t capture overall emission-reduction efforts.
A similar proposal last year gained just over 10% of shareholder support, down from 27% in 2022.
“The 2024 Proposal does not seek to improve ExxonMobil’s economic performance or create shareholder value,” the company said in the complaint.
“Like the previous proposals, it is designed instead to serve Arjuna’s and Follow This’ agenda to ‘shrink’ the very company in which they are investing.”
Exxon is seeking to have the proposal excluded on two counts: that it interferes with the ordinary course of business, and that shareholders have rejected similar proposals multiple times.
Exxon was one of the highest profile targets of the environment, social and governance movement, losing a proxy battle against first-time activist Engine No. 1 in 2021, which forced it to replace a quarter of its board with new directors.
Engine No. 1 isn’t named in the complaint. Exxon isn’t seeking monetary relief from the activist investors. — Bloomberg
