Exxon Mobil is suing two activist investors to prevent their proposal calling for emissions reductions from the oil giant 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 accused investors, Arjuna Capital and Follow This, of abusing the shareholder vote proposal process to advance their priorities with votes. calculated to reduce the existing activities of the company. .”
Arjuna filed a non-binding proposed resolution in December urging Exxon to accelerate its plans to reduce its carbon emissions and expand the scope of the emissions it measures to include its suppliers and customers. Follow This joined in shortly afterward, according to the complaint.
The proposal “does not seek to improve ExxonMobil’s economic performance or create shareholder value,” Exxon said in the complaint, but rather seeks to “limit and micromanage” the company’s operations.
Exxon said it already plans to exclude the proposal from the shareholder ballot at the company’s annual meeting in May, arguing that U.S. securities law allows the company to launch petitions that “address matters relating to the ordinary business operations of the company. In an unusual twist, the company also took investors to court in an attempt to obtain a “declaration” from a judge supporting its decision to exclude the proposal.
The company said the guidance from Securities and Exchange Commission staff was informal and could be subject to interpretation. A court ruling in favor of Exxon could lead to stricter scrutiny of the types of shareholder proposals that companies will allow to be put to a vote in the future.
Under the Biden administration, the SEC has adopted a stricter standard for companies that challenge activists’ proposals, said Joshua T. White, a finance professor at Vanderbilt University.
“It’s Exxon saying, ‘If the SEC is no longer an option for us to pass on proposals that we think will destroy value, then we’re just going to go straight to the courts,'” he said. -he declares.
Exxon noted in its complaint that a large majority of shareholders had rejected similar proposals submitted by Follow This in 2022 and by Follow This and Arjuna in 2023.
Mark van Baal, founder of Follow This, said in a statement on the company’s website that the move showed Exxon “wants to prevent shareholders from exercising their rights.” Arjuna did not immediately respond to a request for comment.
Exxon’s complaint comes amid a backlash against climate and related measures, with some companies and investors beginning to distance themselves from environmental, social and governance – or ESG – initiatives.
The volume of ESG proposals at companies increased in 2023, but shareholder support declined compared to the previous year, with the largest decline recorded for environmental proposals. according to the Conference Board.
Investors have withdrawn more than $13 billion from ESG funds over the past year. according to a recent Morningstar report.
ESG issues have also become a hot political topic on Capitol Hill and on the campaign trail. Congressional Republicans have proposed measures to restrict ESG-informed investments, and some presidential candidates have vowed to crack down on the move.
Laurence D. Fink, chief executive of BlackRock and a longtime proponent of “conscious capitalism,” expressed frustration at a conference in June about how the term ESG had become politically “weaponized.”