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Calpers, the US’s biggest public pension plan, is weighing a vote against ExxonMobil chief executive Darren Woods’ re-election to the company board as shareholder discontent brews over a lawsuit it filed against two climate-focused investors.
Exxon sued Dutch shareholder group Follow This and US investment adviser Arjuna Capital to block a resolution they introduced demanding it do more to cut its greenhouse gas emissions. The oil supermajor has persisted with the lawsuit in US federal court even after the duo withdrew their proposal.
Michael Cohen, chief operating investment officer at Calpers, said in an interview that the $463bn pension fund was “deeply concerned” about the case, warning that it appeared to be an effort to silence critical shareholders.
“Exxon has gone well beyond any other company that we’re aware of in terms of suing shareholders for trying to bring forward a proposal. And even when they drop the proposal, [Exxon is] continuing the lawsuit,” he told the Financial Times.
“There doesn’t seem to be anything other than an agenda of sending a message of shutting down shareholders’ ability to speak their mind.”
Asked if Calpers was considering voting against Woods’ re-election as board chair at the company’s annual meeting on May 29, Cohen said “correct”. He added: “There are conversations happening right now” on how the pension fund votes.
Following the Financial Times story about Calpers and Exxon, the pension fund came under pressure from the California state treasurer, who is also a board member of the fund, to vote against Woods’ re-election.
“Exxon’s actions are a serious threat to shareholder rights and require a strong response,” California treasurer Fiona Ma said. “As the largest public pension fund in the country, we have a responsibility to lead on issues that threaten to undermine shareowners.”
Calpers had a 0.2 per cent equity stake in Exxon worth about $1bn as of March 31, according to a securities filing. But it has been influential, in 2021 joining other institutional investors to back a dissident slate of board candidates proposed by activist hedge fund Engine No. 1. Three were elected and they remain on the board.
Exxon’s lawsuit followed a proliferation of shareholder resolutions on an array of environmental, social and governance matters after the US Securities and Exchange Commission in 2021 allowed more ESG petitions to be voted on.
The company has argued that activist shareholders have filed resolutions on similar issues year after year even after they repeatedly failed to receive a majority of votes.
Asked to respond to Calpers, Exxon said: “We strongly support the right of investors to submit proposals within the SEC rules that are intended to grow value. The goal of our lawsuit is simple — we seek clarity on the SEC rules to stop the continued abuse of the proposal process.”
But Exxon’s court fight has led some investors to accuse it of attempting a clampdown.
“I think this is a critical point in time where we have shareholder democracy coming up against a company that is really trying to silence debate,” said Mary Minette, senior director of shareholder advocacy at Mercy Investment Services, the investment programme of the Sisters of Mercy of the Americas.
The group of social activist investors, which manages the finances of an order of Catholic nuns and has a small shareholding in Exxon, has alongside Wespath Benefits and Investments urged fellow investors to vote against the re-election of Woods and Jay Hooley, the company’s lead independent director.
Calpers was due to meet Exxon later this month, Cohen said, and the pension fund would not be “shy about voicing our opinion”.
He argued that Exxon should have taken its concerns to the SEC, rather than sue its shareholders. But he said Exxon could “resolve the issue” by dropping the lawsuit.
“That would be the preferred way to say ‘OK, we were overzealous in trying to silence shareholders’. That would be the easiest,” Cohen said.
A coalition of labour unions representing a majority of workers invested in Calpers, alongside environmental groups in California, this week called on the pension fund as well as Calstrs, the state teachers’ retirement plan, to vote against the re-election of Woods and Hooley.
Marcie Frost, Calpers’ chief executive, also criticised Exxon’s lawsuit at the fund’s April board meeting. “The long-term repercussions of silencing shareholders really should concern everyone,” she argued.
Mark van Baal, who heads up Follow This, said in an interview that Exxon wanted to circumvent the SEC to get a court ruling to prevent any shareholder from filing a resolution asking for cuts to greenhouse gas emissions in future.
“[The lawsuit] is just setting an example: if you’re too critical, if you ask things we don’t like as a board, we sue you. So it has a chilling effect on all shareholders.”
He said that because a climate resolution was not on the ballot, investors could vote against directors to “signal that [shareholders] want Exxon to cut emissions”.
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