Exxon investors warn of dilution of shareholder rights

Exxon announced earlier this month that it intends to continue its case against the campaign group Follow This and the investor Ardian Capital, despite the fact that both organisations have dropped the resolutions amid legal treats.

Follow This and Ardian Capital are now asking the court to dismiss the lawsuit, arguing that with the resolution withdrawn, there was no longer a case to be heard.

Exxon had accused the investors of “manipulating shareholder activism for the sole purpose of destroying Exxon Mobil from within” it also made the case that there was no good reason to believe they would stop.

However, the shareholders argue that the original resolution had merely called on Exxon to accelerate the pace of its medium-term GHG Scope 1, 2 and 3 emissions reductions.

“Exxon's continued legal attack against two shareholders who withdrew their proposal reveals the company's true intention: to circumvent the SEC in order to prevent any shareholder to exercise the right to table a shareholder proposal about whether or not to accelerate efforts to cut greenhouse gas emissions, the root cause of the climate crisis,” said Mark van Baal, founder of Follow This.

Norges pushes back

Exxon’s move has raised concerns among the wider asset owner community where many investors have in the past backed very similar Follow This resolutions.

This includes Norges Bank Investment Management (NBIM), which manages $1.5trn in assets and holds a $5.4bn stake in the oil giant.

NBIM CEO Nicolai Tangen described Exxon’s case as a worrisome development. “We think it’s very aggressive and we are concerned about the implications for shareholders rights.”

Carine Smith Ihenacho, chief governance and compliance officer at NBIM added: “We are concerned with anything that takes away shareholder rights. This is a shareholder proposal that is quite similar to shareholder proposals we have supported earlier.”

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Exxon’s stance has also been criticised by the Interfaith Center on Corporate Responsibility (ICCR) which is backed by pension funds, foundations and other institutional investors.

“Exxon is asking the court to silence the voices of its shareholders, even though it is their capital that is at stake. This is especially dangerous for diversified shareholders like pension funds and retirement savers, who suffer lasting economic harm when companies like Exxon prioritize their own short-term cash flows over the health of the critical systems upon which our economy relies” ICCR said in response to the case.

Critical mass?

For the backers of Follow This, a key question will now be whether voices challenging the court case will gain critical mass. The Climate Action 100+ stewardship leads on Exxon are BNP Paribas Asset Management and Catholic Responsible Investors (CBIS), who have in the past backed similar resolutions.

BNP Paribas Asset Management has been approached by Net Zero Investor but declined to comment on the matter. CBIS is yet to comment, it has in the past backed Follow This resolutions.

However, the biggest shareholders in Exxon to date are Vanguard, which holds more than 18% across two subsidiaries, State Street Corporation, which holds more than 5%, Fidelity Management & Research and BlackRock, according to Marketscreener data. While neither of these managers have backed the Follow This Climate resolutions in the past, State Street BlackRock and Vanguard did in 2021 support the climate resolution put forward by Engine No 1.