The Strange Invasion Of Activist Investors

Todd Moses
May 22, 2024

In February, Exxon Mobil sued the U.S. investment firm Arjuna Capital and Netherlands-based green shareholder firm Follow This to keep a shareholder resolution they sponsored from appearing on its May 29 annual meeting agenda.

Inputs that matter: The company's legal threat worked: Days after the lawsuit was filed, the shareholder groups, weighing their relative strength against an oil behemoth, withdrew the proposal and pledged not to refile it.

  • Yet even though the proposal no longer exists, the company is still pursuing the lawsuit, running up its and its adversaries' legal bills.
  • "What purpose does this have other than sending a chill down the spines of other investors to keep them from speaking up and filing resolutions?" asks Illinois State Treasurer Michael W. Frerichs, who oversees public investment portfolios.
  • In response to the lawsuit, Frerichs has urged Exxon Mobil shareholders to vote against the reelection to the board of Chairman and Chief Executive Darren W. Woods and lead independent director Joseph L. Hooley at the annual meeting.

The opportunity: The $496-billion California Public Employees' Retirement System, or CalPERS, the nation's largest public pension fund, is considering a vote against Woods, according to the fund's chief operating investment officer, Michael Cohen.

  • The proxy advisory firm Glass Lewis & Co., which helps institutional investors decide how to vote on shareholder proposals and board elections, has counseled a vote against Hooley, citing Exxon Mobil's "unusual and aggressive tactics" in fighting activist investors.

Zoom in: The lawsuit asserts that the investment funds' proposed resolution violated standards set forth by the Securities and Exchange Commission governing the propriety of such resolutions and closely resembled resolutions on similar topics that had failed to exceed threshold votes at the company's 2022 and 2023 annual meetings.

  • Both standards allow a company to block a resolution from the meeting agenda or proxy.

Between the lines: Meanwhile, a Tesla shareholder group yesterday urged other shareholders to vote against Elon Musk's $46 billion pay package, saying the Tesla board is dysfunctional and "overly beholden to CEO Musk."

  • The group's letter also urged shareholders to vote against the reelection of board members Kimbal Musk and James Murdoch.
  • The letter said, "Tesla is suffering from a material governance failure that requires our urgent attention and action," and its board "is stacked with directors that have close personal ties to CEO Elon Musk."
  • "There are multiple indications that these ties, coupled with excessive director compensation, prevent the level of critical and independent thinking required for effective governance."

Follow the money: CalPERS said in an open letter Monday it would oppose all of Exxon's 12 director nominees and its CEO, Darren Woods, at the shareholder meeting next week as a result of the company's potentially "devastating" effort to quash the two activists, Arjuna Capital and Follow This.

  • CalPERS has a $1 billion stake in Exxon.
  • "If ExxonMobil succeeds in silencing voices and upending the rules of shareholder democracy, what other subjects will the leaders of any company make off limits?" CalPERS CEO Marcie Frost and board President Theresa Taylor said in the letter.

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