If you own 0.0000001 percent of a company, you probably don’t even own the proverbial toilet seat. Under normal circumstances, such a tiny share in such a huge colossus as the world’s largest oil company, Exxon Mobil, would hardly be worth mentioning. But the circumstances are not normal and Exxon is not a company like any other.
A battle for power and a say has been raging in the world’s largest oil company for months: First, two shareholder representatives submitted a proposal that the oil company should reduce its emissions more. Then Exxon responded with a lawsuit against the request of its own shareholders. It is no longer just about the climate in the narrower sense, but also about the social climate in the heartland of capitalism.
If you want to understand the shareholder dispute, you have to know Mark van Baal. Perhaps it was a bit crazy when the Amsterdam energy expert decided almost ten years ago to have a decisive influence on the fortunes of the world’s largest oil companies with just a handful of stocks. His approach: Private investors should buy stocks of the controversial oil companies and then have their voting rights represented by his organization Follow This. Investors are “Trojan horses,” as van Baal once put it himself.
Exxon’s lawsuit has become a political issue
The longer van Baal looked into the carbon footprint of oil companies, the more inconsistencies he noticed: Exxon, for example, has indeed set climate targets for its own business activities. But the majority of emissions are not generated when the oil giant pumps the raw material out of the ground or processes it in refineries, but when consumers use the raw material. Unlike other oil companies, Exxon has not set climate targets for these emissions from the consumption of its products – and that is exactly what van Baal wanted to do together with the investment manager Arjuna Capital. in a shareholder proposal to reach.
Just a few minutes after midnight on January 21st, Exxon responded to the shareholder proposal, but in a different way than many had expected. In one 26-page letter Exxon wants to have the shareholder representatives’ motion dismissed in a Texas court. Arjuna Capital and van Baal’s organization Follow This pursued an “extreme agenda” and wanted to “worsen the company’s current business,” possibly even “eliminate” certain products. The pressure from the company apparently had a quick effect, and barely a week and a half later the two investor groups withdrew their shareholder motion.
Even though the shareholders’ request will not be put to a vote at the annual general meeting next Wednesday, Exxon is sticking to its lawsuit. “We believe that the court still has important issues to clarify. Our plans have not changed, the lawsuit continues,” the Texas oil company said recently in a statement. Legally, the company is particularly bothered by the fact that the climate activists have already put their plans to a vote several times and recently received only a small amount of approval, meaning that according to the rules of the US Securities and Exchange Commission, they are not allowed to submit their application again immediately.
In the meantime, however, Exxon’s lawsuit has long since become a political issue that puts the power of ordinary investors in the spotlight. While shareholder proposals can be submitted easily, complex legal proceedings could result in unforeseeable costs for activist environmental investors. “This is a worrying development,” the head of the Norwegian sovereign wealth fund recently told the Financial Times. “We think this is very aggressive and we are concerned about the impact on investor rights.”
The head of the Californian pension fund Calpers, which is the largest of its kind in the United States with assets worth $463 billion, recently made it even clearer. With unusually sharp words The major investor now went to court with the oil giant: Exxon wanted to “set a precedent”, tried to “silence voices” and resorted to methods that were more similar to schoolyard bullying than to good corporate governance.
Next Wednesday, his representatives wanted to vote against the entire board of directors and against the CEO of Exxon at the shareholders’ meeting. Depending on your point of view, a clear vote, but perhaps also a small schoolyard tip.