Divest or Die
I used to write two hard news story a day for a county newspaper. Every story said “Things just got worse for you and the world and there is nothing you can do about it. Details below.”
It’s still true, but now and again there is a piece of news about which some of us can do something.
In this case, if you are someone with a stock portfolio, you can dump your shares of Exxon (XOM). If you have one or more of the Vanguard Group funds, they own 7.74% of Exxon as of March 2024; BlackRock Inc. owns 6.92%, and State Street Corp owns 5.34% of total Exxon shares outstanding, per Yahoo Finance.
And if you are CalPERS, which owns 0.2% of Exxon, you are on record as voting against the entire Exxon board of directors in a Quixotic shareholder uprising, which can not succeed unless asset managers like BlackRock and other pension funds join them. Exxon is facing a shareholder uprising because the company is continuing with a lawsuit against two activist investors, Arjuna Capital and Follow This.
The activists submitted a shareholder proposal around environmental disclosures and targets that Exxon sued to block. The two activist shareholder groups have withdrawn the proposal, but Exxon refuses to drop the suit.
CalPERS, a $484 billion pension fund manager, said in an open letter Monday it would vote in opposition to 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.
The two activist groups submitted a shareholder proposal that would have forced Exxon to reduce direct emissions and set a target for lowering emissions at suppliers and customers. Exxon sued the investors in Texas federal court in January, prompting them to withdraw the proposal.
Even with the activists backing off, Exxon has continued its lawsuit to prevent the activists from ever again submitting such a proposal. The company said in a statement to CNBC that Arjuna and Follow This are attempting to “silence the voices of up to 90% of our voting shareholders who have rejected the proposal twice.”
CalPERS said in its letter that Exxon’s “reckless” lawsuit threatened shareholder activism efforts on any issue.
“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. “Worker safety? Excessive executive compensation?”
CalPERS said it’s urging other shareholders to follow its lead “to send a message that our voices will not be silenced.”
An Exxon spokesperson said the company had engaged with the pension fund and did “not understand how they can make such a poor fiduciary decision,” pointing to the board’s role in creating “industry-leading shareholder value.”
Exxon could have potentially prevented the shareholder proposal from going public without a lawsuit by asking the Securities and Exchange Commission for an exclusion, which is a common practice. But Exxon went ahead with litigation, and said it’s seeking “clarity on a process that has become ripe for abuse.”
“We believe activists with minimal or even no shares should not be permitted to re-submit proposals that do not grow long-term shareholder value,” the company said in a post on its website.
CalPERS, the largest pension fund in the United States, has repeatedly turned down shareholders’ proposals to divest from all fossil fuels, including its $1 billion stake in Exxon, and opposes California Senate Bill 252, which would require it to divest from fossil fuel companies. Its stated reason is that divestment would violate its fiduciary duty to all its beneficiaries. But not, apparently, its fiduciary duty to anything that lives past 2025, or 2030, depending on how fast global warming reduces the planet’s ability to sustain life.
So what’s your move? Divest.