Over the past few years, activist investors have submitted a number of shareholder proposals to major fossil fuel companies concerning issues relating to climate change. Recently, two such investors submitted a proposal “that urged Exxon to accelerate its plans to reduce its carbon emissions and expand the scope of the emissions it measures to include its suppliers and customers”--in essence, Scope 3 emissions. Not only has ExxonMobil decided “to exclude the proposal from appearing on the ballet for shareholders” because it is a petition that “deal[s] with matters relating to the company's ordinary business operations,” but it has sued these two investors in the Northern District of Texas to obtain a judgment supporting its decision to exclude the proposal.
It is not altogether surprising that ExxonMobil seeks judicial imprimatur for its decision to exclude this shareholder proposal, as the Biden Administration's SEC has been more accepting of shareholder proposals concerning ESG issues, and has been less receptive to efforts by company management to block such proposals. Nonetheless, this still represents a significant escalation by the company to embrace this particular tactic.
Should ExxonMobil obtain a decision in its favor, it is probable that other companies will be likewise emboldened to peremptorily block similar shareholder proposals, especially in the absence of SEC guidance or other government intervention. Thus, this case is worthy of particular scrutiny due to the potential for widespread effects and significant impact.
Exxon Mobil is suing two activist investors to prevent their proposal calling for emissions cuts at the oil giant from going to a vote of shareholders. . . . Exxon accused the investors, Arjuna Capital and Follow This, of abusing the process for proposing shareholder votes to advance their priorities with votes “calculated to diminish the company’s existing business.” Arjuna filed a proposal in December for a nonbinding resolution that urged Exxon to accelerate its plans to reduce its carbon emissions and expand the scope of the emissions it measures to include its suppliers and customers. Follow This joined in support of the proposal shortly thereafter, according to the complaint. The proposal “does not seek to improve ExxonMobil’s economic performance or create shareholder value,” Exxon said in the complaint, but is instead “constraining and micromanaging” the company’s operations.