Exxon’s proxy battle could end on Wednesday

By: Ajay Pal Singh
Ajay Pal Singh
Ajay worked at Tata Motors in project planning before discovering his passion for stocks. Today, he lives in Canada… read more.
on May 26, 2021
  • Engine No. 1 has put forward a list of four nominees for Exxon’s board.
  • Major proxy advisory firms and investment managers have thrown their weight behind the nominees.
  • Shareholders will vote on the activist proposals at the company's annual meeting today.

The activist investment firm, Engine No. 1, has been piling pressure on Exxon Mobil Corporation for the past few months to embrace a transition to a low-carbon world and accept its demand for four board seats.

The ongoing proxy battle could come to a close today when the shareholders of the oil giant vote on the proposals at the company’s annual meeting, according to the Wall Street Journal.

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Shares of Exxon are up 40% year-to-date and 27% for the trailing one-year period. The company’s stock price has gradually recovered since March last year when the pandemic induced lockdowns shut down the economies globally and oil demand plunged. The oil prices are also recovering with wider vaccination rollout and lifting of lockdown restrictions.

What Engine No. 1 is demanding?

Engine No. 1 has consistently questioned the sustainability track record of Exxon and said that Exxon’s low-carbon unit has merely been established for public relations and is an attempt at greenwashing with no clear plans to transition to a greener future. The firm further said:

“Exxon Mobil has gone backwards and aims to do worse in 2025 than 2010. Upstream emission intensity has worsened over the last decade, increasing 26% in 2019 vs. 2009”

The activist firm is pressing the firm to commit to achieving carbon neutrality by 2050.

In addition to that, Engine No. 1 has put forward a list of four nominees on Exxon’s board.

Support for the board nominees of Engine No. 1

Institutional Shareholder Services (ISS), a leading independent proxy advisory firm, announced in mid-May that it favors three of the four directors put forward by Engine No. 1. Earlier, Pensions & Investment Research Consultants (PIRC) published its view, backing all four proposed candidates.

Investment management firm Blackrock Inc. (NYSE: BLK), the largest shareholder of Exxon, has also thrown its weight behind the three of the four nominees.

State Street and Vanguard are also expected to vote alongside Blackrock on the proposed nominees. These three money managers collectively own around 20% of Exxon’s shares and have pledged to achieve net-zero carbon emissions by 2050 and also face pressure to push their portfolio companies to commit to that goal.

Legal & General, Britain’s biggest asset manager, will also be voting for Engine No. 1’s candidates for the board seats.

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