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Calpers, the largest public pension plan in the US, has decided to vote against the re-election of the ExxonMobil board of directors and chief executive in a protest against the oil major’s “reckless” legal action to “silence” shareholder voices.
The announcement by the $463bn fund comes amid growing investor criticism of Exxon’s decision to sue two climate-focused investor groups to block a resolution they introduced demanding it do more to cut its greenhouse gas emissions.
In a strongly-worded statement, leaders of the fund said “decades of shareholder rights” were under threat from the lawsuit.
“The repercussions of this lawsuit could be devastating,” said Marcie Frost, Calpers’ chief executive and Theresa Taylor, president of its Board of Administration, in a joint statement. “If successful, the legal action could diminish the role — and the rights — of every investor in improving a company’s bottom line.”
“That’s why on May 29, 2024, Calpers will cast our shareholder votes in opposition to all 12 members of ExxonMobil’s board of directors and its chief executive officer.”
In January, Exxon sued Dutch shareholder group Follow This and US investment adviser Arjuna Capital to block their emissions-cutting resolution. Exxon has persisted with the lawsuit even after the duo withdrew the resolution, arguing a court ruling will clarify rules on what motions are admissible.
There has been a proliferation of shareholder resolutions on environmental, social and governance questions after the US Securities and Exchange Commission in 2021 allowed more ESG petitions to be voted on.
In a statement on Monday, Exxon said Calpers had made a “poor fiduciary decision to vote against a board that has overseen the creation of industry-leading shareholder value” and that it was “unclear why Calpers is spending their time and energy defending the abuse of a shareholder process by proponents who have publicly stated they have no interest in creating shareholder value”.
“Far from having a chilling effect on shareholder proposals, our efforts are intended to get clarity on the rules to foster an environment for open and meaningful shareholder dialogue,” the company said.
Exxon’s stance taken has triggered wider concern among investors however.
The $260bn New York State Common Retirement Fund also plans to vote against the re-election of all but two of the company’s directors, primarily on the basis of its “failure to demonstrate minimal transition readiness”. But it said the “lawsuit against shareholders for exercising their right to file a proposal is certainly another factor informing our decision”.
In the Calpers statement, Frost and Taylor said the fund had told ExxonMobil that they “strongly disagree” with its decision to pursue the “reckless” lawsuit and to keep doing so after the shareholder groups agreed to withdraw their proposals.
The fund — which has a holding of about 0.2 per cent or $1bn in the oil company — is urging other ExxonMobil shareholders to follow its position “to send a message that our voices will not be silenced”.
Glass Lewis, the proxy adviser, has called for a vote against Jay Hooley, Exxon’s lead independent director, prompting Exxon to accuse the group of a conflict of interest over its membership of the Interfaith Center on Corporate Responsibility. ISS, another major proxy adviser, has called for votes in favour of the board.
Norway’s $1.5tn sovereign wealth fund has also expressed concern about Exxon’s actions. Chief executive Nicolai Tangen told the FT in February that the lawsuit was a “worrisome development”. “We think it’s very aggressive and we are concerned about the implications for shareholders rights,” he said.
Responding to the Calpers announcement, Mark van Baal, founder of Follow This, said that Exxon had left “responsible shareholders no other choice than to vote against management to voice their concerns”.
“Investors like Calpers using their votes in an unprecedented way shows that Exxon’s lawsuit Is not against us, but against shareholder democracy at large,” he added.
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