Activist Likely to Gain Third Seat on Exxon Board

Activist Likely to Gain Third Seat on Exxon Board

An activist investor is likely to pick up a third seat on the board of

Exxon


XOM 0.79%

Mobil Corp., giving it additional leverage to press the oil giant to address investor discontent about diminished profits and its fossil-fuel focused strategy amid concerns about climate change.

Exxon said Wednesday that an updated vote count showed shareholders backed a third nominee of Engine No. 1, an upstart hedge fund that had already won two board seats at Exxon’s annual shareholder meeting last week. The final vote hasn’t been certified, Exxon said, and could take days or weeks to be finalized, according to people familiar with the matter.

Engine No. 1, which owns a tiny fraction of Exxon’s stock, had sought four seats on the board and argued the Texas oil giant should commit to carbon neutrality, effectively bringing its emissions to zero—both from the company and its products—by 2050, as some peers have. If the preliminary voting results hold, it will control a quarter of Exxon’s 12-person board.

The vote culminated one of the most expensive proxy fights ever. It puts new pressure on Exxon Chief Executive Darren Woods, who personally campaigned against Engine No. 1 and could complicate his plans to maintain Exxon as the largest Western oil producer. Mr. Woods was re-elected to the board along with eight of Exxon’s candidates.

The result of the shareholder vote puts pressure on Exxon Chief Executive Darren Woods, shown in New York in March 2017.



Photo:

brendan mcdermid/Reuters

“We look forward to working with all of our directors to build on the progress we’ve made to grow long-term shareholder value and succeed in a lower-carbon future,” Mr. Woods said in a statement. “We thank all shareholders for their engagement and participation, and their ongoing support for our company.”

Though Engine No. 1 only owned 0.02% of Exxon’s stock, it was able to capitalize on investors’ concerns about Exxon’s recent performance and climate change strategy. Exxon posted a $22 billion loss last year, its largest on record, after the pandemic crushed fuel demand and upended what turned out to be an ill-timed plan by Mr. Woods to substantially increase spending to boost oil and gas production.

Many of the world’s biggest investment firms helped elect the fund’s directors, including BlackRock Inc., State Street Corp. and Vanguard Group, who said publicly they wielded votes for investors in favor of at least two dissident directors.

BlackRock voted for three directors proposed by Engine No. 1 and said last week it believes Exxon and its board need to further assess the possibility that demand for fossil fuels may decline rapidly in the coming decades.

Vanguard voted for two directors proposed by the activist and said it had expressed concerns to Exxon for years about the independence of Exxon’s board and its directors’ lack of energy sector expertise.

“And for years, we did not witness sufficient progress on either front,” Vanguard said last week.

In an interview with WSJ’s Timothy Puko, U.S. special climate envoy John Kerry explains the roles he’d like to see the private sector and countries play in fighting climate change. Photo: Rob Alcaraz/The Wall Street Journal

Engine No. 1 has called for Exxon to gradually diversify its investments to be ready for a world that will need fewer fossil fuels in coming decades. It criticized Exxon’s board for presiding over years of poor financial returns and for its unwillingness to reconsider the company’s long-held view that oil and gas demand will remain robust for decades.

“We are grateful for shareholders’ careful consideration of our nominees and are excited that these three individuals will be working with the full board to help better position ExxonMobil for the long-term benefit of all shareholders,” an Engine No. 1 spokeswoman said.

The hedge fund’s third successful nominee is Alexander Karsner, a former U.S. assistant secretary for energy efficiency and renewable energy and a current senior strategist at X, formerly known as Google X, a subsidiary of tech giant

Alphabet Inc.

Mr. Karsner joins Engine No. 1’s two other successful candidates, Gregory Goff and Kaisa Hietala. Mr. Goff is the former chief executive of Andeavor, which was one the largest U.S. refiners before being purchased for more than $20 billion by

Marathon Petroleum Corp.

in 2018, while Ms. Hietala is a former executive vice president of renewable products at Finnish refiner

Neste Oyj.

Engine No. 1’s fourth candidate, Anders Runevad, the former chief executive of Vestas Wind Systems, appeared to come up short, according to the preliminary vote count.

Exxon said in a regulatory filing Wednesday that about 67.1% of the vote from its more than 4.2 million shares had been counted. According to the preliminary count, Exxon also lost on two shareholders proposals it had asked investors to vote against but were supported by institutional investors.

Voters controlling nearly 56% of eligible shares supported a proposal calling for Exxon to disclose more about direct and indirect lobbying spending and policies, while voters controlling roughly 64% of eligible shares voted for Exxon to release a report on how its lobbying aligns with the Paris climate accord. Exxon has expressed public support for the Paris agreement and had pledged to further reduce emissions from its operations.

THE BATTLE OVER EXXON’S BOARD

More on the company’s board, selected by the editors.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source: WSJ – US News

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