Tag Archives: Shareholder activism

The Exxon Climate “Victory”

Ten days ago, the President of the United States decided to withdraw from the international Paris Accords. And in typical Trumpian fashion, the news overshadowed all other climate change news that occurred during that time.

But just one day before the President’s announcement, ExxonMobil held its Annual Meeting of Shareholders in Dallas, Texas. Of the thirteen shareholder proposals that were submitted for consideration, the twelfth was a proposition that the firm publish an annual assessment of its ability to meet the Paris Accord’s climate change targets. Exxon management formally recommended that its shareholders vote down the proposal.

But guess what? The shareholders voted to approve it! New York State Comptroller Thomas DiNapoli, who played a key role in the battle, proclaimed that “this is an unprecedented victory for investors in the fight to ensure a smooth transition to a low carbon economy.”

Is it actually a victory, though? Feel free to skim the original proposal on pages 62 and 63 of the Meeting Materials. Then skim Exxon’s formal recommendation on pages 63 and 64. Is it clear to you what DiNapoli and his supporters actually gained from the vote?

In essence, their proposal asked the firm to publicly disclose the impact of the Paris Accords on Exxon’s portfolio of energy assets. It then provided a fair amount of descriptive detail about what they have in mind.

Then Exxon responded that it already publishes equivalent information for public use. In turn, it also provided a fair amount of descriptive detail about the content of its publications, even though it didn’t address the proposal on a point-by-point basis.

So what was the outcome of this legal process? On the one hand, the shareholders of Exxon have approved a proposal to require the firm to disclose meaningful climate change information to the public. But on the other hand, Exxon has asserted that it already does so.

Given the President’s announcement about Paris, it is certainly understandable if environmentalists believe that any victory warrants a celebration. Nevertheless, if this truly represents “an unprecedented victory … in the fight (for) a low carbon economy,” they’re in for a very long fight.

Climate Change: Winning While Losing

Is it possible to win while losing?

Yes, of course it is. Think about Sylvester Stallone’s character Rocky Balboa, for instance. He actually lost the championship match in his very first film. But the loss established and enabled the character — not to mention the actor who played him, the Academic Award winning movie, and the sport of boxing itself — to repeatedly win throughout the forty year run of the Rocky franchise.

And how about this year’s Presidential primary season? Bernie Sanders may soon be ready to cede the Democratic Party nomination to Hillary Clinton, but the progressive movement that he spearheads will probably thrive for years to come. Likewise, even if Donald Trump loses the November election, many experts believe that he will permanently transform the Republican Party.

This “winning while losing” phenomenon occurs in the business world as well. Consider, for example, what happened last week to Chevron and Exxon Mobil, the two global energy giants that are headquartered in the United States. Shareholder activists at both firms lost very similar fights at their corporate annual meetings. But while losing their immediate battles, they may have managed to achieve a victory for the long term.

So what were they fighting about? According to MarketWatch, the activists wanted to require the firms to perform annual “stress tests to determine the risk that … climate change pose(s) to their business.” Just as global banks in the United States perform stress tests to address risks in the world’s economy, these individuals hoped to require global energy companies to conduct similar tests to address climate change factors.

Their proposals were voted down by shareholders, but Chevron’s proposal drew 41% support, and Exxon Mobil’s drew 38% support. Apparently, these represent the highest climate proposal voting totals in the history of the firms. In fact, according to Sustainable Brands, Chevron’s 38% support total occurred after their “investors overwhelmingly rejected the (same) proposal at last year’s meeting with a 96.8 percent “no” vote.”

An increase in support from 3.2% to approximately 41% in one year? Now that is a win, even though any vote total less than 50% is recorded in the corporate records as a loss.

Either way, there’s an important lesson to learn from these events. Whether or not you believe that climate change represents an existential threat to the global environment, the number of investors who express concerns about the topic seems to increase each year.

And let’s face it. A stress test is merely, by definition, a hypothetical exercise. So why wouldn’t any global energy company (or any other organization, for that matter) consider engaging in such an activity? If there is no harm in doing so, and if 40% of its investor base might approve of it, why not give it a try?