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Norway’s oil fund to vote against ExxonMobil in clash over shareholder rights

Sovereign wealth fund to oppose re-election of energy company’s lead director

Exxon’s lawsuit stems in part from a change at the Securities and Exchange Commission to allow more environmental, social and governance motions to proceed to shareholder votes. Photograph: AP

Fri May 24 2024 - 18:19

Norway’s oil fund has become the latest ExxonMobil investor to commit to voting against the re-election of director Jay Hooley as concerns intensify over the impact on shareholder democracy of a lawsuit launched by the US oil group.

The $1.5 trillion (€1.4 trillion) sovereign wealth fund is the biggest investor yet to come out against Exxon after the company filed a case against two climate-focused shareholder groups to block their resolution demanding it do more to cut its greenhouse gas emissions.

Although the pair have since withdrawn the motion and asked the court to throw out the case, a judge ruled this week that proceedings could continue against one of them, US investment adviser Arjuna Capital. The case against Amsterdam-based Follow This was dismissed over jurisdiction issues.

Norges Bank Investment Management, a top-10 shareholder, said it would vote against Hooley, Exxon’s lead independent director, at the company’s annual meeting on May 29th.

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NBIM said on Friday that while it appreciated “the significant value generated during Mr Hooley’s tenure”, it continued “to place utmost importance on the protection of shareholder rights and raises concern around the potential impacts of litigation against shareholders stemming from the submission of a shareholder proposal”.

Exxon’s lawsuit has sparked fears among parts of the financial community of a broader attack on shareholder rights in the US, with critics warning it will have a chilling effect on the willingness of small investors to file motions, especially on climate issues. With concerns mounting, big investors have come under pressure to vote against Exxon directors at the annual meeting.

NBIM’s decision follows a similar move by Calpers, the largest US public pension plan, which has committed to voting against the re-election of all Exxon directors over the group’s “reckless” legal action.

Exxon’s lawsuit stems in part from a change at the Securities and Exchange Commission to allow more environmental, social and governance motions to proceed to shareholder votes. The agency has become less inclined to use its powers to halt shareholder proposals that companies argue are frivolous or micromanage their day-to-day affairs. Exxon argues that the SEC has allowed too many burdensome proposals on to the ballot, leaving it with no option but to turn to the courts.

Exxon said on Friday it was “disappointed with Norges’ decision, as it and other investors have clearly benefited from Mr Hooley’s leadership”.

Mark van Baal, founder of Follow This, said Exxon’s goal was “to get a court ruling, to get a precedent, to block any shareholder from filing shareholder resolutions that ask for emissions reductions”, adding that the company wanted to circumvent the SEC.

“This is an unwarranted and cynical attack on shareholder rights in the world’s leading capital market,” he said.

The US Chamber of Commerce and the Business Roundtable have sided with Exxon’s challenge in court filings. “Public corporations are inundated with proposals from a limited set of special interest activist shareholders pushing social and political agendas that are divorced from shareholder value,” they said. “The court should take this opportunity to confront this abuse of the proxy-solicitation process.”

Two other top-30 shareholders said they had spoken to Exxon over their concerns about the lawsuit’s impact on shareholder democracy, but did not say how they would vote at the annual meeting.

A group of US treasurers, comptrollers and pension plan trustees, including New York City comptroller Brad Lander and Washington state treasurer Mike Pellicciotti, sent letters this week to the world’s biggest asset managers including BlackRock, JPMorgan and State Street, calling on them to vote against the re-election of Hooley and Exxon’s chief Darren Woods.

They argued that Exxon’s “attempts to undermine shareholder rights reflect a fundamental failure of board oversight and a waste of corporate assets on litigation”.

With views on the case increasingly shaped by partisan politics, Republican politicians have warned that the goals of activists deviate from the basic fiduciary duty of corporations: to make money for investors.

“While shareholder activism can be a force for positive change, it must be geared towards maximising shareholder returns, not destroying the target company for political purposes,” said John Fleming, Louisiana state treasurer.

Marcie Frost, chief executive of Calpers, warned against a narrative that shareholder rights should only be guaranteed as “long as they don’t ask any questions that anger a company’s executives”.

“Calpers’s current disagreement with ExxonMobil isn’t about climate change. It’s about company executives seeking to silence shareholder speech that they don’t like,” she wrote in a blog post this week. – Copyright The Financial Times Limited 2024

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