Climate activists up stakes at Exxon, backing calls for independent board chairman

by Reuters
Wednesday, 13 May 2020 19:24 GMT

FILE PHOTO: An airplane comes in for a landing above an Exxon sign at a gas station in the Chicago suburb of Norridge, Illinois, U.S., October 27, 2016. REUTERS/Jim Young/File Photo

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Investors are pushing the firm to change its strong stance against climate-friendly proposals

(Adds Exxon response to Glass Lewis, moves up context, adds graphic available)

By Jennifer Hiller

HOUSTON, May 13 (Reuters) - Shareholder activists prodding Exxon Mobil Corp on climate-change proposals are backing calls for an independent board chairman as the oil major steps up efforts to keep climate proposals off its ballot.

Exxon's broad rejection of climate proposals, challenging sponsors and rebuffing ballot measures as either micromanaging or unneeded, has accelerated under Chairman and Chief Executive Darren Woods. This year, it blocked six climate resolution from appearing on the proxy ballot at its May 27 shareholder meeting.

U.S. oil majors face less government pressure to curb greenhouse gas emissions and have lagged European rivals in striking deals with activists. Royal Dutch Shell Plc, Repsol SA and BP Plc have each moved to slash carbon emissions and meet global accords.

New York state's pension fund, Church Commissioners for England, and Legal & General Investment Management, which all battled Exxon over global warming and lobbying disclosures have this year taken up a call to split the CEO and chairman roles, expecting a better reception from an outsider.

"The company has been a laggard on financial performance, climate risk management and lobbying disclosure for quite some time now," said Thomas DiNapoli, New York state comptroller and head of the state's biggest pension fund. "Its peers in Europe, many of whom have independent board chairs, are outperforming Exxon on all these," he said.

California Public Employees Retirement System, which holds 9.6 million Exxon shares, just behind New York's 10.2 million shares, last week came out in favor of splitting the two roles. Proxy adviser Glass, Lewis & Co separately called for splitting the two roles.

On Tuesday, Institutional Shareholder Services urged holders to vote "against" creating an independent chairman, reversing its stance from a year ago. Exxon's naming of a lead director able to meet with shareholders changed its view, ISS wrote.

Exxon management is under scrutiny after reporting the first loss in three decades. Under CEO Woods, Exxon spent heavily in the last three years for new oil and natural gas supplies, a move that has so far backfired as prices collapsed.

In a sign of how seriously it takes the challenge, Exxon on Wednesday issued a four page rebuttal to Glass Lewis, challenging the advisory firm on the peer group used to measure executive pay, and praising CEO Woods' "in-depth knowledge of ExxonMobil and its integrated, multinational operations."

Climate measures elsewhere are gaining. Three climate proposals this year have won majority votes, including at oil firms' Phillips 66 and Ovintiv Inc. While not all results from the 15 are in yet, last year none received a majority, according to data compiled by the Sustainable Investments Institute.

Activists are smarting from a 2017 vote. That year, 62% of shareholders approved a measure led by New York state and calling for Exxon to disclose business impacts from complying with climate policies. After agreeing not to pursue the topic the following year, New York officials were disappointed by the resulting report.

An Exxon spokesman declined to comment, pointing to rebuttals that note it has increased the lead director's power. Combining the chairman and CEO roles "ensures items of greatest importance for the business" are quickly brought to the board, Exxon told shareholders in urging a vote against the measure. It also pointed to $10 billion in lower-emissions investments it has made over a decade.

The proposal for an independent board chairman would not take effect under Woods, but would be phased in for future CEOs.

As at other big companies, shareholder support for an independent chairman has never gotten far at Exxon. Last year, 40.7% of Exxon shareholders supported the measure, up from 38.7% in 2018. A measure calling for the company to report on its lobbying activities also failed.

But both were "within striking distance of getting a majority," said Edward Mason, head of responsible investment at the Church Commissioners for England. Exxon's rejection of climate proposals "is in stark contrast to all of its supermajor peers," he said.

(Reporting by Jennifer Hiller in Houston Editing by Marguerita Choy)

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