Exxon Sues Left-Wing Shareholders Who Oppose Hydrocarbons

Exxon Mobil is suing two left-wing shareholder activists to remove their proposal from its 2024 proxy materials. According to the Wall Street Journal:

In a federal lawsuit filed in Texas on Sunday, the Houston-based oil giant said investment firms Arjuna Capital and Follow This became Exxon shareholders only to put forward proposals that would “diminish the company’s existing business.”

 

Arjuna submitted a proposal in December asking shareholders to pass resolutions committing Exxon “to go beyond current plans, further accelerating the pace of emission reductions in the medium-term.” Follow This joined the proposal the following day, Exxon said. In a departure from Exxon’s current policy, they advise the oil company to target the emissions of its suppliers and customers in addition to its own.

There are two reasons why Exxon’s opposition is noteworthy. First, Arjuna Capital and Follow This are two prolific shareholder activists on the political left, and climate alarmism is one of their key issues. In recent years, major corporations have caved to these pressure groups who push an anti-fossil fuel agenda. For Exxon to call out their malicious intentions in a court case stands out. According to the WSJ:

“Defendants are asking Exxon Mobil to change its day-to-day business by altering the mix of—or even eliminating—certain of the products that it sells,” the oil company said in the lawsuit. Their goal, it alleged, is “to force Exxon Mobil to change the nature of its ordinary business or to go out of business entirely.”

It’s also unusual for a company to litigate in the courts in order to exclude a shareholder proponent’s resolution from consideration at its annual meeting. Usually the company pleads in a formal filing with the Securities and Exchange Commission, asking to be allowed to omit such proposals under Rule 14a-8, which provides the guardrails for the shareholder proposal process.

Exxon’s federal lawsuit was filed in Texas, where the company is headquartered, attempting to take advantage of the conservative-leaning court system in the state. The outcome of the lawsuit could alter the traditional process and challenge the SEC’s position as sole arbiter of shareholder proposals.

The multinational drilling and refinery icon, which has been targeted by anti-hydrocarbons shareholder activists for decades, actually fired its first aggressive response against Follow This in its proxy statement last year (see page 77):

Unfortunately, there are some anti-oil and natural gas activists who use the SEC’s shareholder proposal process to further their own interests, which are often in conflict with the interests of many of the Company’s other shareholders. These activist firms, by their own admission, prefer not to own fossil fuels stocks yet acquire a minimal ownership stake in the Company with the sole purpose of targeting campaigns and pressuring investors to support resolutions ultimately designed to eliminate oil and gas investments necessary to meet society’s needs. These campaigns can create a burden on our long-term shareholders, and undermine the advancement of constructive Environment, Social, and Governance (ESG) objectives. For instance, the founder of Follow This has previously stated, “We buy shares in order to work on our mission to stop climate change, not to make a financial profit.” He has also stated that his Scope 3 proposals are a “Trojan horse,” designed to eliminate fossil fuel investments and production.

Comments of this nature are almost never seen in proxy statements, which companies utilize to present a polished image and to portray competent control of management and governance.