Exxon Mobil is suing two activist investors to prevent their proposal to cut emissions at the oil giant from reaching a shareholder vote.
In a complaint filed Sunday in the U.S. District Court for the Northern District of Texas, Exxon accused investors Arjuna Capital and Follow This of abusing the shareholder vote proposal process to advance their priorities through votes “aimed at improving the existing “to diminish the company’s business”. .”
Arjuna filed a proposed nonbinding resolution in December calling on Exxon to accelerate its plans to reduce its carbon emissions and expand the scope of emissions it measures to its suppliers and customers. According to the complaint, Follow This soon joined in supporting the proposal.
The proposal “does not seek to improve ExxonMobil's economic performance or create value for shareholders,” Exxon said in the complaint, but rather “restricts and regulates the company's operations in every detail.”
Exxon said it had already planned to exclude the proposal from a vote for shareholders at the company's annual meeting in May, arguing that U.S. securities law allows the company to file petitions that address “matters relating to the normal operations of its business.” of the company”. In an unusual twist, the company also sued the investors to get a “declaration” from a judge supporting its request to throw out the proposal.
The company said the instructions from Securities and Exchange Commission staff were informal and subject to interpretation. A court ruling in Exxon's favor could lead to stricter scrutiny of the types of shareholder proposals companies allow for voting in the future.
Under the Biden administration, the SEC has adopted a stricter standard for companies to challenge activist proposals, said Joshua T. White, a finance professor at Vanderbilt University.
“This is Exxon saying, 'If the SEC is no longer an option for us to keep proposals off the proxy that we believe will destroy value, then we will go directly to the courts,'” he said.
Exxon noted in its lawsuit that similar proposals from Follow This in 2022 and from Follow This and Arjuna in 2023 were rejected by a large majority of shareholders.
Mark van Baal, founder of Follow This, said in a statement on the company's website that the move shows Exxon wants to “prevent shareholders from exercising their rights.” Ajuna did not immediately respond to a request for comment.
Exxon's complaint comes amid a backlash against climate change and related policies, with some companies and investors beginning to distance themselves from environmental, social and governance (or ESG) initiatives.
The volume of ESG proposals among companies increased in 2023, but support among shareholders fell compared to the previous year, with the decline being greatest for environmental proposals. according to the Conference Board.
According to a recent Morningstar report, investors withdrew more than $13 billion from ESG funds last year.
ESG issues have also become a hot political issue on Capitol Hill and in the election campaign. Republicans in Congress have proposed measures to restrict investments that take ESG factors into account, and some presidential candidates have vowed to crack down on the movement.
Laurence D. Fink, BlackRock's chief executive and long-time advocate of “conscious capitalism,” expressed frustration at how the term ESG had become politically “weaponized” at a conference in June.