Exxon’s Emerging Reckoning

The pressure has been mounting for some time, but it is finally causing needed changes. There were plenty of headlines late last week, but only today do we feel this news means something potentially lasting:

ExxonMobil loses a proxy fight with green investors

An activist hedge fund succeeds in nominating at least two climate-friendly directors to the energy giant’s board

“The stone age did not end for lack of stone, and the oil age will end long before the world runs out of petroleum.” That battle cry animates critics of Big Oil, who dream of phasing out hydrocarbons in favour of cleaner fuels and technologies. Their bête noire is ExxonMobil, long the richest and mightiest of Western oil supermajors—and the most unrepentant in its defence of crude. Lee Raymond, a formidable former boss of the Texan titan, once told your correspondent to get out of his office after being challenged over his flagrant denial of climate science.

Darren Woods, who currently does Mr Raymond’s old job, does not deny that climate change is real. And he must now contend with the biggest rebuke to the firm’s management in living memory. At his company’s shareholder meeting on May 26th a coalition of activist investors led by Engine No.1, a small hedge fund, managed to put at least two green-tinged directors on the board to promote a lower-carbon strategy of the sort espoused by European supermajors such as bp, Royal Dutch Shell and Total. As The Economist went to press the fate of a third activist nominee had yet to be determined.

Engine No.1 didn’t quite get its way: it had put forward four candidates. But as David Larcker of Stanford’s Graduate School of Business observes, it is “extremely rare” for a company the size of ExxonMobil to elect even one dissident director, let alone two or three. Even one dissenting voice can make a big difference, says Charles Elson, a corporate-governance expert at the University of Delaware who has served as a courteous rebel on various boards. The result is thus an unprecedented attack on ExxonMobil’s carbon-addiction, which is greater than any other supermajor’s (see chart 1).

Read the whole article here.

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