Activists Score Stunning Win in ExxonMobil Boardroom
A group of investors succeeded in displacing at least two members of ExxonMobil's board of directors early Wednesday. By Friday, vote totals on an additional seat made it too close to call, meaning a final result may not be available until next week. This revolt was led by Engine No. 1, a hedge fund backed by large institutional investors, who argued that the company is underperforming compared to competitors due to its "refusal to accept that fossil fuel demand may decline in decades to come." The Washington Post characterized their success as a "resounding defeat for chief executive Darren Woods," and chalked it up to the shareholders' dissatisfaction with "the way the company had been addressing climate change and its lagging financial performance."
Why It Matters
This election campaign was not driven by climate activists or political pressure -- instead, it focused on ExxonMobil's diminishing investment returns and long-term financial weakness. It is now clear that oil and gas companies that are not changing their business models to adapt to the new energy realities look increasingly like, well, dinosaurs. And we all know what happened to them.
Exxon's Poor Performance
ExxonMobil's fall from the ranks of the corporate elite has been a major story in itself. As highlighted on the Engine No. 1 website, the company ranked as the largest in the world by market capitalization and at #1 in the Dow Jones Industrial Average (DJIA) just eight years ago -- now, ExxonMobil is not listed on the DJIA, and has been outperformed by other oil and gas majors Chevron, BP, Shell, and Total for the last decade. According to the Washington Post, ExxonMobil is counting on future oil and gas demand remaining high, even given the knowledge that massive emissions cuts will be required to keep global warming at or below 2 degrees Celsius.
As for how ExxonMobil will address reductions -- The Post reports that on April 19th, the company released "a 'bold plan' to build a huge $100 billion carbon capture and sequestration project in Houston." Industry experts, however, have called this plan "underwhelming." Exxon is still seeking government and private backers to fund the project.
...sends an unmistakable signal that climate action is a financial imperative, and leading investors know it and are demanding change … This is a watershed moment for the oil and gas industry. It's no longer tenable for companies like ExxonMobil to defy calls to align their businesses with decarbonizing the economy.
...the fossil fuel industry is being told their era is over. The people have told them and demanded change … The completion of transitioning the country onto 100% clean energy is going to happen, and the very same corporations that drove and sought to cover-up this crisis must acknowledge reality and take action rather than greenwashing their ongoing efforts to exacerbate it.
Anne Simpson, managing investment director for board governance and sustainability at the California Public Employees' Retirement System, told the Washington Post prior to the vote that "Investors are waking up … The sleeping giant maybe is stirring."
Despite all this, Engine No. 1 leaders say they don't expect their victory to result in sudden, drastic changes in ExxonMobil's business practices, acknowledging they control only two of twelve total seats. The company's founder told the New York Times that their "overall goal is really greater transparency."