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FINANCE: ExxonMobil Faces Growing Dissent in the Ranks

Matthew Berger

NEW YORK, May 15 2009 (IPS) - After years of boycotts and protests, the pressure on the world’s largest oil company to change its practices might soon be coming from the mutual funds that invest in it, some shareholders hope.

ExxonMobil shareholders will have the opportunity to collectively pressure their mutual funds to vote for resolutions in favour of an independent board chair and a greater emphasis on renewable energy and climate issues within the company.

It is part of a broader movement where shareholders are asking companies to act on climate change and sustainability issues, with mounting success.

“Exxon is amongst a whole bunch of other companies that are getting these kinds of resolutions,” Rob Berridge of Ceres, an institutional investor that works with companies to address sustainability issues, told IPS.

The mutual funds are expected to vote on the proxy resolutions over the next five to seven days, ahead of the ExxonMobil annual meeting on May 27 in Irving, Texas.

“We believe that mutual funds hold the key to boosting the level of support for these climate, renewable energy and independent chair resolutions at ExxonMobil,” Robert A.G. Monks and Neva Rockefeller Goodwin said in a statement Tuesday where they announced the launch of a website, www.ExxonMutualFundShares.org, where investors can go to send a message to the U.S.’s largest mutual fund families.

The proxy items at issue call for the creation of an independent board chair; progress in setting greenhouse gas emissions goals at ExxonMobil; collecting information on the impact of climate change on developing countries and the future possibilities of doing business with those countries; and placing a greater emphasis on renewable energy.

Aside from ethical arguments, the cases for these resolutions arise from concern about the long-term viability of the oil giant. In particular, ExxonMobil is seen as having fallen behind its competitors in responding to climate change and preparing for the future of the energy industry.

“We believe ExxonMobil has done a poor job of articulating a cohesive business plan for dealing with climate risk and opportunity,” Sister Patricia Daly, lead filer of one proxy item, said in the same statement.

“By contrast, BP, Royal Dutch Shell, ConocoPhillips, and Chevron have made newsworthy investments in renewables and low-carbon technologies to reduce emissions, and/or have begun integrating the cost of carbon into planning and investments.”

In terms of acting on climate change, “Exxon has been a severe laggard relative to its peers and corporate America in general, even to the extent that they were funding junk science that opposed [the reality of] climate change,” said Berridge.

The company has since phased that PR effort out, he said, adding: “Perhaps past shareholder resolutions have helped, but we’re not sure and investors we work with are not satisfied.”

Likewise, Monks told IPS by phone that “virtually every company in this business has an independent board.”

Monks has been proposing resolutions calling for board independence for the past six years. He received 40 percent of the vote last year but was still unable to convince the company directors to take notice. “I figured, why waste my time?” he said, opting to pursue a binding resolution to officially change company bylaws.

It is hoped that separating these two key roles would allow the CEO to focus on maximising shareholder returns while the chairman would be able to direct the board’s attention to the company’s long-term plans.

Various past and ongoing public campaigns have called ExxonMobil to task for undermining efforts to combat climate change, lobbying for the opening of the Arctic National Wildlife Refuge to drilling, and dragging its feet in the fallout of the 1989 Exxon Valdez oil spill.

Shareholder resolutions, however, are as much concerned with improving a given company’s long-term business plan as responding to environmental concerns.

“I am concerned about both the future of the environment and the future of my retirement nest egg,” the letter to the mutual funds on www.ExxonMutualFundShares.org reads. “I want to make sure that the company takes the steps today to ensure that it will be around tomorrow when I will need it most.”

One way in which shareholders succeed in getting their proposals adopted is that the company will see the resolution on the ballot, call up the lead filers, and say, “Okay, we’ll do what you ask if you withdraw the resolution,” according to Berridge.

Twenty-eight out of roughly 68 resolutions relating just to climate change have been withdrawn at various companies in scenarios like this already this year, he said.

One such company was home-building giant Centex Corp., which saw a shareholder resolution to make homes 20 to 40 percent more energy efficient than legally required gain 26.1 percent last year. Centex agreed to adopt the measures proposed.

The role of mutual funds in influencing company policies is also, indirectly, at issue here. “Mutual funds all have really vast conflicts of interest,” Monks said.

They hold stock in firms, he explained, that might do business with other firms whose stock they also hold. He hopes people will discover this and stand up to say they want their mutual funds to vote according to their best interests, not the interests of other businesses they hold.

The SEC requires mutual funds to publicly disclose how they voted, but it is much more likely they vote in favour of management when they have conflicting interests through the other businesses they hold, he said.

“We are urging investors to let their mutual funds know how they want them to vote their shares on these proxy questions at ExxonMobil,” Monks and Rockefeller said in their statement. “We intend to watch how these mutual funds respond to this feedback from their customers and then let mutual fund investors know whether their input was heeded or ignored.”

ExxonMobil had no comment on the current initiative to contact mutual funds directly, but the board of directors has recommended voting against each of the four resolutions at issue.