Holed up in a hotel, I’m reflecting on what has brought me to Chevron’s annual shareholder meeting in Midland, Texas.
I first learned of Texaco’s decades of oil pollution in the Ecuadoran Amazon in the early 1990s. As I was first organizing shareholders to oppose Texaco’s partnership with Burma’s military junta, other shareholders were starting to ask the company to take responsibility to clean-up its oil waste and compensate the affected campesino and indigenous communities in Ecuador.
Socially responsible investors were the first shareholders to ask Texaco – and later Chevron – to clean up its oil pollution and compensate the affected people in the Ecuadoran Amazon. In order to grow, oil companies compete against each other for the right to explore for new reserves. We argued that demonstrating responsibility for clean-up in Ecuador would make Chevron more likely to win approval for new operations in other countries.
When the Ecuadoran courts first ruled against Chevron in 2011 and awarded the affected communities a multi-billion dollar judgment, shareholders expressed concern of the impact on Chevron’s existing operations. The judgment gave the Ecuadoran plaintiffs the right for the first time to collect on the judgment by seizing Chevron’s assets around the world.
In a report, I noted that Chevron itself admitted in a sworn legal statement that the company is at risk of “irreparable injury to [its] business reputation and business relationships” that “would not be remediable by money damages” from potential enforcement of the Ecuadorian court judgment.
Moreover, I observed that the enormous breadth of Chevron’s global business operations makes the company particularly vulnerable to enforcement of such judgments. There are many jurisdictions around the world in which enforcement of a judgment could impair substantial and strategic operations of Chevron. That risk subsequently became real as the Ecuadoran plaintiffs filed suit to seize Chevron’s assets in Argentina, Brazil, and Canada.
Faced with these mounting problems, shareholders have demanded Chevron to come clean about the risks to the company and consider alternatives to its expensive but faltering legal strategy. In May, 2011, shareholders of Chevron – representing $156 billion of assets under management – called upon Chevron “to fully disclose to shareholders the risks to its operations and business from the potential enforcement of the “Aguinda verdict” and “reevaluate whether endless litigation in the Aguinda case is the best strategy for the Company and its shareholders…”
Separately, shareholders have also repeatedly requested the Securities and Exchange Commission to investigate whether Chevron has appropriately disclosed to shareholders the scope and magnitude of the risks from the judgment.
Chevron management’s mishandling of the case in Ecuador demonstrates a failure of corporate governance at the company. As a result, shareholders have proposed overhauls of the company’s corporate governance. For several years in a row, a significantly large percentage of Chevron’s shareholders supported a resolution led by theUnitarian Universalist Association calling for the appointment of a director with expertise in environmental liabilities. At Chevron’s 2012 annual meeting, 38% of shareholders voted in favor of a resolution that would have stripped CEO John Watson of his additional position as Chair of the Board. That demonstrated strong support for the view that John Watson should in effect not be his own boss.
In response, Chevron’s management has largely ignored these shareholder concerns and even retaliated against its shareholder critics. I was even subpoenaed by Chevron demanding all my documents and emails concerning my shareholder activism work. (To date, I’ve not handed over any materials.)
So I’m once again going to move a resolution at the Chevron annual shareholder meeting, this time in Midland, Texas. I keenly await the time when Chevron’s management changes its course away from endless litigation and reaches a fair and equitable settlement with the communities in Ecuador affected by the oil pollution.
Editor’s Note: Cross posted from Simon Billenness’ blog, CSR Strategy Group, with full permission from the author.