Investor Activism
ExxonMobil sues investor activists for “micromanaging”
Shareholder activism in the oil and gas industry has gained traction in recent years, with activist shareholders pushing multinational conglomerates towards sustainable practices to decrease the negative and harmful impact that fossil fuel production has. Thus far, the companies have been ambiguous in their promises to decarbonise and have not made any significant transitions towards the marketing slogans that they have put forth.
Still, the efforts by activist groups seem to be having an impact beyond what executives in these companies would tolerate, exemplified by ExxonMobil recently filing a lawsuit against Follow This, an Amsterdam-based investor activist group, and Arjuna Capital, a registered investment adviser. The suit claims that the activist proposal violates SEC rules for investor petitions, which disallow resubmitting proposals that do not gain investor support over time.
The goal of the lawsuit is to block a motion that the activist group, as an ExxonMobil shareholder, had put forward at the company’s annual investor meeting, to increase the pace for reducing greenhouse gas emissions. This was the first time that the company had turned to courts to block a shareholder motion. Even though filing the lawsuit that ExxonMobil filed succeeded in practical terms, forcing activist investors to shelve the call to motion, ExxonMobil has decided to continue with the lawsuit.
ExxonMobil, whose 2023 profits amounted to $36 billion and 2022 profits amounting to $56 billion, characterised the motions put forward by the activist investors as being done “for the sole purpose of attacking ExxonMobil from within”, adding that the proposal was “driven by extreme agenda” and “calculated to diminish the company’s existing business.” The company retains this position even as they do not have concrete plans for reaching net-zero by 2050 nor are they even trying to accomplish it, portraying these goals as unattainable.
Reactions from the wider community have been sharp and have described the approach by the company as a method to curtail investor activism and to neglect its wider responsibility. The goal seems to be to overwhelm activist investors with legal costs and processes to intimidate future activist investors from filing similar motions and, from ExxonMobil’s view, “micromanaging” with their business operations.
ExxonMobil notably had accurate projections for global warming by the late 1970s the latest, where its scientists created reliable models to analyse global warming from carbon dioxide emissions. These findings were done in parallel with its public denial and outright falsehoods pertaining to their operations. Part of their public communication language included sowing doubt to the accuracy of the estimates put forward by scientists and downplaying the impact that their own businesses have. This included using phrasing such as “unsettled science”, using misleading graphs in public-facing communications, funding non-profits to advance their PR, and lobbying heavily in the US political system to downplay environmental concerns.
Privately, ExxonMobil, and other oil conglomerates, have used created position papers that use phrases such as “emphasize the uncertainty in scientific conclusions regarding the potential enhanced greenhouse effect.” By the 1990s, such private communications included passages such as “Victory will be achieved when: average citizens “understand” (recognize) uncertainties in climate science – recognition of uncertainties becomes part of the “conventional wisdom”; and “media “understands” (recognizes) uncertainties in climate science.”
Research into ExxonMobil’s communications has concluded that their public communications strongly resemble those of the tobacco industry. The risks involved are heavily downplayed, together with the seriousness of climate change. In addition, with the existence of consumer demand, the company aims to place the responsibility on the individual, similar to how British Petroleum popularised the “carbon footprint” concept. This, coupled with the indifference towards climate change by the United States on a regulatory level, has enabled companies such as ExxonMobil to act without restraint. Such disposition is not unique to ExxonMobil, but rather indicative of the whole industry.
It is not surprising to see ExxonMobil take a hardliner approach towards investor activists, given that they, and most other energy conglomerates, have been ignoring facts that they themselves have reached for over half a century. Given the increased urgency and intensity in the effects that global warming already has, it would not be surprising to more radical opposition towards such companies by the public and by state actors in the near-future.
