Shareholder-activists at the Interfaith Center on Corporate Responsibility urged Exxon’s board to convince the company’s management to end the lawsuit
Photo for representation: iStock Shareholders are putting up a fight against the lawsuit by ExxonMobil Corporation that aims to shut down their efforts to question the company’s environmental policies.
The Interfaith Center on Corporate Responsibility (ICCR) announced February 8, 2024 that it had sent a letter to the oil major’s board of directors, requesting they urge management to abandon a lawsuit against shareholder proponents calling for disclosures related to the company’s climate risk management.
The letter said that the “costly and unnecessary suit constitutes a serious threat to shareholder rights. It also sends a clear message that the company is seeking to shut down any debate by its shareholders on actions needed to address climate risk”.
On January 21, 2024, ExxonMobil had filed a complaint in the United States District Court for the northern district of Texas against the shareholders Arjuna Capital and Follow This. The lawsuit sought a declaratory judgment that it may exclude Arjuna Capital and Follow This’s shareholder proposal from ExxonMobil’s proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 and not present it for a shareholder vote at ExxonMobil’s 2024 annual shareholder meeting.
The company requested for relief by March 19, 2024 as ExxonMobil needs to file its proxy statement by April 11, 2024 “in order for it to comply with its obligations under the Exchange Act in advance of its annual shareholder meeting on May 29, 2024”.
On December 14, 2023, Arjuna submitted on behalf of two clients a proposal for consideration at ExxonMobil’s 2024 annual shareholder meeting. The proposal stated the following:
Resolved: Shareholders support the Company, by an advisory vote, to go beyond current plans, further accelerating the pace of emission reductions in the medium-term for its greenhouse gas (GHG) emissions across Scope 1, 2, and 3, and to summarise new plans, targets, and timetables.
Follow This joined the 2024 Proposal as a co-filer with Arjuna.
Eight days after ExxonMobil filed the complaint, Arjuna Capital and Follow This withdrew the 2024 Proposal and said they will not resubmit it in future years.
Arjuna Capital said that “investing in a more equitable, environmentally responsible economy is simply smarter long-term investing to secure your wealth and the prosperity of future generations”.
While the website of Follow This describes the organisation as a grassroots non-profit organisation based in Amsterdam and said it believes that “shareholders can be a force for good, as they ultimately decide on a company’s course and hold them accountable for future progress”.
However, Exxon refused to drop the lawsuit and filed a status report in the court February 5, 2024 stating that although the defendants had said they would not file the proposal in future years, the withdrawal did not provide Exxon complete relief.
“The defendants could attempt to submit, on their own or in coordination with others, future proposals that address substantially the same subject matter as the 2024 Proposal (in violation of the Resubmission Exclusion) or that relate to ExxonMobil’s ordinary business operations and micromanage the company (in violation of the Ordinary Business Exclusion)”.
The status report of Exxon stated that “year after year defendants submit shareholder proposals under the federal securities laws to advance their personal agenda at the expense of ExxonMobil’s shareholders”. The objective of these shareholders is to “constrain ExxonMobil’s ability to provide affordable, reliable energy from fossil fuels”.
Shareholders like Arjuna Capital and Follow This have a long history of coordinating with other activist organisations to pursue their anti-fossil-fuel agenda, the company alleged.
The question of whether a company can omit a shareholder proposal is determined by the Securities and Exchange Commission (SEC), which has an investor protection mandate. In appealing directly to a court, Exxon is seeking to establish a new precedent which has rarely been used.
On February 8, leading investor group, the Council of Institutional Investors, also voiced support for SEC, calling it a “fair arbiter of shareholder proposals”, as ExxonMobil approached the court.
A 2023 study in Science Assessing ExxonMobil’s global warming projections showed that not only did Exxon know that GHG emissions were harming the environment, but it was also able to predict with remarkable accuracy how devastating the damage would be.
In 2015, investigative journalists discovered internal company memos indicating that Exxon has known since the late 1970s that its fossil fuel products could lead to global warming with “dramatic environmental effects before the year 2050”.
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