Before entering ExxonMobil’s annual meeting in Dallas last week, shareholders had to pass local activists holding a 100-foot-long banner with the message “Climate Crisis: #ExxonKnew—Make Them Pay.” I attended the meeting for the fourth year in a row and was not surprised that, once inside, shareholders wanted a voice in the company’s handling of climate change issues. ExxonMobil blocked them from voting on shareholder proposals specifically about climate change, so they used every opportunity to express their discontent with the company’s climate action. Despite the spin that shareholders “rejected” the climate-related proposals, the results are actually a vote of no-confidence in how ExxonMobil’s leadership is addressing climate change.

A barely passing grade

While shareholder proposals are framed by companies like ExxonMobil as akin to ballot initiatives (like the proposed carbon fee that Big Oil defeated in Washington state last year), a more appropriate analogy is a report card. ExxonMobil’s Board of Directors recommended that shareholders—the owners of the company—vote against all of these proposals, and yet more than one-quarter of them  rejected the recommendations of its leadership on all but one resolution.

If we look at the votes on a standard grading scale, and consider how many shareholders followed the recommendations of ExxonMobil’s Board, company leadership is barely passing. Nearly half of ExxonMobil’s shareholders want to make it easier to call special shareholder meetings and the same proportion believe that Chair and CEO Darren Woods should not continue to be his own boss.

Here’s a quick overview of how each of these proposals is climate-related.

Ability for shareholders to call special meetings

Although some of the resolutions were not obviously about climate change, all proponents made reference to the issue. Here’s a quick overview of how each of these proposals is climate-related.

This is a corporate governance issue. ExxonMobil currently retains tight control over shareholder meetings—as witnessed by its heavy-handed efforts to prevent shareholders from considering proposals about climate change. The ability to call special meetings (beyond the annual meeting) is all the more important at companies like ExxonMobil where there is not an independent chair (see below).

Separate chair from CEO

The New York State Common Retirement Fund and the Church Commissioners for England wanted shareholders to vote on whether ExxonMobil should set short-, medium- and long-term targets for reducing emissions from its operations and the use of its products, in line with the Paris climate agreement’s global temperature goals. However, ExxonMobil fought their proposal with the Securities and Exchange Commission, and blocked shareholders from voting on this question.

So New York State and the Church of England, who are the leads on engagement with ExxonMobil in the Climate Action 100+ initiative, focused instead on this governance proposal and urged other shareholders to vote in favor of it as well. An independent  chair would strengthen the Board’s oversight of company decisions regarding climate-related risks.

Report on lobbying

Support for this proposal, which called for ExxonMobil to report on direct and indirect lobbying, jumped significantly since last year. Increased transparency around climate-related advocacy by trade associations is fast becoming the norm among ExxonMobil’s competitors. BHP was the first, in 2017. In April, Shell published a review of the climate positions taken by its industry associations—and decided to leave the American Fuel and Petrochemical Manufacturers’ Association due to “material misalignment” between its positions and Shell’s. At its annual general meeting a week before ExxonMobil’s, BP pointed to a new guide to its participation in trade associations and reportedly pledged to conduct a review of its memberships. Equinor has made a similar commitment in response to demands by the Climate Action 100+.

Board matrix

Shareholders presenting this proposal linked ExxonMobil’s lagging on climate change issues with a lack of diversity on its Board. Supporters of the resolution argued that “diverse boards can better manage risk by avoiding ‘groupthink,’” and that “a Board matrix will give Exxon shareholders a ‘big-picture’ view of nominees’ attributes, both individually and collectively, and how they fit together.”

Report on political contributions

I presented this proposal as chair of the Socially Responsible Investing Committee of the Unitarian Universalist Association (UUA). Unlike some of its industry peers, ExxonMobil fails to disclose substantial amounts of its election spending—including independent expenditures, support for (or opposition to) ballot measures, and payments to trade associations and other non-profit entities. The UUA and co-filers advocated more robust disclosure to mitigate reputational risks at a time of growing shareholder concern about misalignment between companies’ stated values and positions and their political activity—particularly on climate change issues.

Report on petrochemical resiliency risk

As You Sow, a nonprofit shareholder advocacy organization, asked ExxonMobil to issue a report assessing the public health risks of expanding their petrochemical operations and investments in areas increasingly prone to climate change-induced storms, flooding, and sea level risk. Proponents noted the impacts to ExxonMobil’s operations from Hurricane Harvey as an indicator of insufficient preparedness. (See this UCS map highlighting more than 650 energy and industrial facilities that may have been exposed to Hurricane Harvey’s floodwaters).

During the question-and-answer portion of last week’s meeting, Dr. Rick Hammer of Hardin-Simmons University in Abilene, Texas, an expert in local biodiversity, pointed out that Hurricane Harvey was made worse and more likely by warming ocean waters due to rising carbon emissions—and that more extreme weather is harming plant and wildlife biodiversity. (Look out for a guest blog from Rick soon.)

Climate change board committee

In presenting this proposal, Natasha Lamb of Arjuna Capital stressed that ExxonMobil faces “an existential threat that will not be assuaged by denial or simple lip service” and that it should be the Board’s responsibility “to pivot the [business] for success in a low carbon economy. Instead, proactive climate change strategy appears divergent to board priorities.”

While this proposal was supported by less than 10% of ExxonMobil’s shareholders, the strong votes in favor of other resolutions suggest that large institutional investors focused on supporting broader corporate governance reforms.

Top leadership on the defensive

ExxonMobil Chair and CEO Woods raised the specter of intermittency of wind and solar power, then touted his company’s ability to fill the gaps. Without saying “molecules of freedom,” Woods made it clear that he was promoting natural gas. Yet Oil Change International neatly debunked concerns about variable outputs from wind and solar in this new report, and my UCS colleague Mike Jacobs has explained how energy storage can provide reliability in a 100% renewable power grid.

Woods also highlighted ExxonMobil’s spending on low-carbon research and development. But as UCS shows in the below tweet, the company’s low-carbon R&D is dwarfed by its ongoing investments in new oil and gas exploration and infrastructure. Not to mention that ExxonMobil scored “poor” in our 2018 Climate Accountability Scorecard for its failure to disclose details of specific low-carbon investments.

At 11am, as he had done each of the past two years, Woods closed the annual shareholders’ meeting. It didn’t matter how many people were still waiting to speak—including Donald Tritt, a Gwich’in leader who had traveled for 12 hours to ask ExxonMobil not to drill in the Arctic Refuge. Woods had to start spinning the news.

After the meeting, ExxonMobil shareholders received their swag: umbrellas with the ExxonMobil logo on them. Painfully ironic, as Houston continues to recover from the 33 trillion gallons of rain dumped by Hurricane Harvey. But ExxonMobil’s leadership has shown before that it lives in its own virtual reality—and that’s why investors are losing confidence in Woods and his team.

Kathy Mulvey, Climate Accountability Campaign Manager, Union of Concerned Scientists and UUA Socially Responsible Investment Committee Chair | June 4, 2019, 2:56 pm EDT