There was a time not so long ago when it looked like ESG was advancing through shareholder proposals. Engine No. 1’s successes in winning two spots on Exxon’s board in 2021 generated a lot of hype around activist investing. However, in 2023 proxy advisors appeared to back off of ESG and success rates fell drastically in response to anti-ESG pressure. Recent actions from Exxon raise questions about what 2024’s proxy season holds and if companies will become increasingly hostile to shareholder proposals. According to reporting from Reuters:
“Activist shareholders said on Friday they had withdrawn a climate proposal they had intended to put for vote during Exxon Mobil’s annual meeting after the oil giant sought to block the move through a Texas court.”
It’s normal for companies to appeal to the SEC to block shareholder proposals, but the act of litigating over a shareholder proposal is unusual. Additionally, Exxon is not dropping the lawsuit against activist investor groups Arjuna Capital and Follow This, even after the activist investor groups withdrew their proposal. The suit seeks attorney’s fees and is filed in the 5th circuit where likelihood of success is high. Exxon is sending a clear message – dissidents will not only be fought, they will be punished. If the suit is successful, some worry that taking shareholders to court may become more commonplace, producing a chilling effect that would disincentivize shareholders from bringing any proposals.
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Photo credit: Robert – stock.adobe.com