In a historic move, CalPERS, the nation’s largest pension fund, has announced that it is voting against Exxon’s CEO and entire board of directors slate, and encouraging others to do so. CalPERS’ public statement, excerpted and broken down below, explains why, and reminds all shareholders why embracing our rights is so critical, regardless of the specific company or circumstance.
Dear CalPERS member,
When you own shares of stock in a publicly traded company, you have a vested interest in how that company is run and whether its leaders are doing all they can to ensure lasting financial success.
You have a right to have your concerns heard by corporate directors and executives. They work for you.
For almost four decades, CalPERS has used its investments in major corporations to hold shareholder-elected directors and top officials accountable. We believe this is key to how we ensure long-term, sustainable investment returns for more than 2 million members. We do so, in part, by asking company leaders tough questions and, in some cases, demanding action through our support for various shareholder proposals. We cast thousands of votes every year.
Now, decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful U.S. corporation, designed to punish two small groups that dared to speak truth to power. If successful, the legal action could diminish the role—and the rights—of every investor in improving a company’s bottom line.
That’s why on May 29, 2024, CalPERS will cast our shareholder votes in opposition to all 12 members of ExxonMobil’s board of directors and its chief executive officer.
We urge other ExxonMobil shareholders to do the same, to send a message that our voices will not be silenced.
The critical background here is that ExxonMobil sued two investors back in January, Arjuna Capital and Follow This, after they filed a shareholder resolution with the company asking it to address its greenhouse gas emissions targets. Even though the investors subsequently withdrew their proposal, the lawsuit continues on as it asks the courts to prohibit the investors from filing climate-related resolutions in the future.
The original resolution noted ExxonMobil was behind its competitors, with “Oil and gas peers BP, TotalEnergies, Repsol, and Eni recognize climate transition risks and have set more ambitious, medium-term emission reduction targets. These companies aim to reduce absolute Scope 1, 2, and 3 targets by at least 30 percent by 2030. Other peers Chevron
Chevron
Traditionally, companies would take concerns about a resolution to the Securities and Exchange Commission rather than a court of law. But Exxon has expressed concern that the SEC is not adequately excluding repeat filers of proposals, particularly on the issue of climate. And yet, a survey by the accounting firm EY found that more than half (56%) of investors “want companies to prioritize climate change and environmental stewardship this year.” They also “were clear that they continue to see alignment to longer-term growth for climate-impacted companies,” the survey found.
This surprising move of sidestepping the SEC has not been taken lightly by the investor community, which is increasingly seeing this case as not about climate, but about shareholder rights writ large. As Los Angeles Times columnist Michael Hiltzik argued in a recent piece last:
“You wouldn’t think that Exxon Mobil has to worry much about being harried by a couple of shareholder groups owning a few thousand dollars worth of shares between them — not with its $529-billion market value and its stature as the world’s biggest oil company.
But then you might not have factored in the company’s stature as the world’s biggest corporate bully.”
While Exxon did not respond to a request for comment, the company published a statement on its website about why it has filed this lawsuit and believes it has a “responsibility to fight back.”
Here’s what CalPERS said in its statement about that same lawsuit:
ExxonMobil had a better option and didn’t choose it. Why?
In fact, we urged ExxonMobil to drop the anti-shareholder lawsuit that is now pending in a Texas federal court. The company’s allegations, both about the shareholders in question and the existing regulatory process for relief, just don’t match the facts.
A company that wishes to block consideration of a shareholder proposal at its annual meeting can seek permission from the U.S. Securities and Exchange Commission. And the agency frequently provides relief: SEC officials have approved two-thirds of all such requests this year.
But ExxonMobil insists the regulatory process isn’t good enough and instead seeks a sweeping, dangerous precedent in the courts.
Even after the shareholder groups dropped their proposal, ExxonMobil insists its lawsuit will continue.
The existing rules work for both shareholders and corporate America. ExxonMobil is seeking radical change.
What issues will be off-limits if ExxonMobil wins?
The repercussions of the lawsuit could be devastating.
Shareholder rights are a cornerstone of CalPERS’ approach to corporate governance and an essential component of our investing principles…
The two small shareholder groups being sued by ExxonMobil seek additional actions on climate change, a serious threat to long-term investment returns. But let’s be clear: This is not about climate change. The company’s decision to seek new, broad corporate power puts every issue on the table.
If ExxonMobil succeeds in silencing voices and upending the rules of shareholder democracy, what other subjects will the leaders of any company make off limits? Worker safety? Excessive executive compensation?
Might future shareholders who seek answers from a company’s leaders be ignored because of the legal precedent now sought by ExxonMobil?
The lawsuit is reckless. ExxonMobil’s directors should know better.
CalPERS ends its statement by pointing to the practical implications of this matter, which go far broader than Exxon and are about shareholder rights more generally:
It’s important to point out that almost all shareholder resolutions are non-binding, meaning that ExxonMobil’s real agenda here seems to be intimidation, empowering corporate leaders at the expense of the investors who own the company and provide capital…
CalPERS’ investments make a difference. We make a difference in the lives of our members and their families; we make a difference in financing the creativity that improves our world and generates strong returns; and we make a difference by using the size of our portfolio to demand companies do better.
We hope ExxonMobil’s directors will reconsider the lawsuit, an effort that seems more suited to schoolyard bullying than corporate leadership.
The statement overall is a powerful reminder for shareholders of a few factors tied to ownership: Corporate boards are ultimately decided on by shareholders, and issues at one company will typically have marketwide impact. If you’re an ExxonMobil shareholder, whether directly or as part of a mutual fund: its a great time to make sure to review the issues at stake and vote your proxy.
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