Exxon Mobil is suing two activist investors to prevent their proposals to reduce the oil giant's emissions from being put to a shareholder vote.
In a complaint filed Sunday in the U.S. District Court for the Northern District of Texas, Exxon said investors Arjuna Capital and Follow This “advance their priorities with votes calculated to reduce the company's existing operations. “They abused the shareholder vote proposal process in order to do so.” ”
In December, Arjuna filed a non-binding resolution calling on Exxon to accelerate its carbon emissions reduction plans and expand the scope of emissions measurements to include suppliers and customers. Shortly thereafter, Follow This Inc. joined in supporting the proposal, according to the complaint.
Exxon said in its complaint that the proposal “does not seek to improve ExxonMobil's economic performance or create shareholder value” but instead “constrains and micromanages” the company's operations. .
Exxon argued that U.S. securities laws allow the company to file petitions “addressing matters related to the company's ordinary business operations,” and has already proposed the proposal to shareholders at its annual meeting in May. He said he plans to remove it from the vote. In an unusual development, the company also sued investors to obtain a “declaration” from a judge supporting the move to exclude the proposal.
The company said the guidance from Securities and Exchange Commission staff is unofficial and subject to interpretation. A court ruling in Exxon's favor could lead to more scrutiny of the types of shareholder proposals companies put on the ballot in the future.
Under the Biden administration, the SEC adopted stricter standards for companies challenging activist proposals, said Joshua T. White, a finance professor at Vanderbilt University.
“This is Exxon saying, 'If the SEC no longer has the option of removing the agency from an offer that we believe is value-destroying, we're going to go straight to court,'” he said.
Exxon noted in its lawsuit that similar proposals submitted by Follow This in 2022 and Follow This and Arjuna in 2023 were rejected by a majority of shareholders.
Follow This founder Mark van Baal said in a statement on the company's website that the move shows Exxon “wants to prevent shareholders from exercising their rights.” Ajna did not immediately respond to a request for comment.
Exxon's charges come amid a backlash against climate change and related measures, with some companies and investors beginning to distance themselves from environmental, social and governance (ESG) initiatives.
In 2023, the amount of ESG proposals made by companies increased, but support from shareholders decreased from the previous year, with environmental proposals having the largest decline. According to the conference committee.
Investors withdrew more than $13 billion from ESG funds in the past year, according to a recent Morningstar report.
ESG issues have become hot political issues on Capitol Hill and on election campaigns. Congressional Republicans have proposed measures to limit investments that take into account ESG factors, and some presidential candidates have vowed to crack down on the move.
BlackRock CEO Lawrence D. Fink, a longtime proponent of “conscious capitalism,” spoke at a conference in June about how the term ESG has been politically “weaponized.” expressed dissatisfaction.
