ExxonMobil Corporation is dragging two small shareholder groups to court as part of a new and aggressive strategy to stave off activist investors calling on the global oil giant to reduce its carbon emissions.
In January, ExxonMobil launched a lawsuit against U.S.-based Arjuna Capital and Netherlands-based Follow This. The shareholder advocacy groups had filed a proposal calling on ExxonMobil to set targets and to reduce its Scope 3, or end-use, carbon dioxide emissions. The two organizations represent small shareholders in the company.
In response to the suit, the shareholder groups withdrew the proposal, but ExxonMobil continued its action.
“Exxon is sending a clear message – dissidents will not only be fought, they will be punished,” legal blogger Zachary Barlow writes.
The lawsuit is unusual because companies ordinarily appeal to the U.S. Securities and Exchange Commission (SEC) for rulings on the permissibility of shareholder resolutions. In this case, which is a first for ExxonMobil, the company asked the U.S. District Court rather than the SEC to rule that the Arjuna and Follow This proposal falls outside of normal shareholder proposals, which can be disallowed if they deal with day-to-day company business.
In recent years, the Biden administration has loosened Trump-era regulations that made it easier for companies to ask the SEC for permission to exclude shareholder proposals. There has been an increase in proposals on climate change and other environmental, social and governance issues as a result of the Biden reforms.
In a media statement, ExxonMobil characterized this increase as a “breakdown of the shareholder proposal process, one that allows proponents to advance their agendas through a flood of proposals.” In its lawsuit, the company also asked the court to direct the shareholder groups to cover legal costs for both sides, a burden that could amount to hundreds of thousands of dollars.
The request for fees and costs “exacerbates the perception that Exxon’s intention is to utterly silence dissenting investors,” said Christina Herman, program director for the Interfaith Center on Corporate Responsibility (ICCR), a U.S. coalition of faith-based investors that file shareholder proposals and engage with corporations on social and environmental issues.
Growing numbers of multinational corporations are taking advocacy groups to court in so-called strategic lawsuits against public participation, or SLAPP suits. The London-based Business and Human Rights Resource Centre identified 437 SLAPP suits brought or initiated by 144 companies or business organizations between 2015 and 2023.
Exxon is sending a clear message – dissidents will not only be fought, they will be punished.
- Zachary Barlow, legal blogger
“This aggressive action is nothing less than a SLAPP suit intended to intimidate perceived opponents,” said Josh Zinner, CEO of ICCR, in regard to the ExxonMobil lawsuit.
Nicolai Tangen, CEO of Norway’s US$1.5 trillion national oil fund, the world’s largest sovereign wealth fund and one of the world’s largest stock market investors, said ExxonMobil’s action is a worrisome development. “We think it’s very aggressive and we are concerned about the implications for shareholders rights,” he told the Financial Times.
ExxonMobil filed the lawsuit in a U.S. District Court in the Northern District of Texas, which has a reputation for conservative legal rulings. Judge Mark Pittman was assigned to hear the case. Pittman, appointed to the court by former president Donald Trump, has made notable rulings against student debt relief and restrictions on the rights of 18- to 20-year-olds to carry handguns.
ExxonMobil has faced a number of investor actions in recent years, including a Follow This proposal voted down by investors at last year’s annual meeting to adopt a medium-term greenhouse-gas-reduction plan. Three years ago, ExxonMobil suffered a historic defeat on a proposal from hedge fund Engine No. 1, which was successful in ousting three of its directors on a demand for more stringent climate change action.
