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Exxon CEO suffers scathing setback at hands of new activist

(Bloomberg) – Exxon Mobil Corp. CEO Darren Woods suffered a staggering shareholder defeat when a tiny activist investment firm won at least two board seats and pledged to push the crude oil driller to diversify beyond oil and tackle climate change. who had aggressively opposed the insurgents, this was just the latest setback in a difficult 4.5-year tenure that saw what was once the world’s most valuable company lose more than $ 125 billion in market value. the rarefied world of Big Oil and underlines how the industry has suddenly become vulnerable as governments around the world demand an acceleration in the shift away from fossil fuels. It is also a sign that institutional investors are increasingly willing to force companies to actively participate in this transition. Small investor activist Engine # 1, with only 0.02% stake and no history of activism in oil and natural gas, won two seats on Exxon’s Council in Wednesday’s vote. A third seat can still fall into the hands of the company when the end results are counted. It would put Woods in the awkward position of running a 25% foreign-controlled board. Last-minute efforts by Woods and his team to appease climate-conscious investors and repel the onslaught of the No.1 engine were unsuccessful. “Darren Woods comes from a long line of CEOs who have been very straightforward: it’s our ball, it’s our bat and we’re going to do whatever we want,” said Mark Stoeckle, CEO of Adams Express Co., which oversees $ 2.8 billion in assets. “When you’re the biggest and the baddest, you can get away with it. But you have to change over time. The message was terrible. »Click here to view Bloomberg Intelligence’s ESG data. BlackRock Inc., the second largest holder of Exxon with a 6.6% stake, voted for three of the new directors appointed by Engine No. 1, according to a ballot vote released Wednesday. The firm said it was “concerned about the strategic direction of Exxon” and that the oil giant could benefit from the addition of new directors who “would bring new perspectives” to the board. But the investment giant also voted in favor of Frazier and Woods, according to the ballot – a move that rocked environmental groups who called on the company to vote against them. The result is one of the biggest militant upheavals in recent years and an embarrassment for Exxon. For Woods, who was 56 in the company’s March proxy filing, the loss is just the latest black mark since being elected CEO in 2017. Exxon has underperformed its peers for years and in 2020, its shares cratered 41% for the worst performance in 40 years. Under his leadership, the company also recorded its first annual loss in decades and saw oil production drop to its lowest point since the Mobil Corp merger. in 1999. Meanwhile, Exxon’s debt exploded by borrowing to pay dividends and drilling against a backdrop of declining cash flow. Wednesday’s vote was also striking because of how forcefully Exxon fought the activist, who also criticized the company’s financial performance. Exxon declined to meet with the candidates and Woods told shareholders earlier this month that voting for them “would derail our progress and jeopardize your dividend.” The company even went so far as to promise, barely 48 hours before the meeting, that it would add two new directors, one of whom had “climate experience”. READ: Exxon activists ‘battle turns climate angst into CEO referendum’ Landmark vote represents tipping point for companies unprepared for global energy transition, ‘California State Teachers’ Retirement System said, also known as CalSTRS, which had backed the No.1 engine, in a statement following the meeting. “While the election to the ExxonMobil board of directors is the first for a major US company to focus on the global energy transition, it will not be the last.” What Bloomberg Intelligence Says The election of at least two Engine 1 candidates to Exxon Mobil’s board could lead to changes in how the oil major allocates capital, constantly altering its investment proposal. – Fernando Valle and Brett Gibbs, BI analysts Read the full report here. In other corners of the commodities sector, shareholders have already this year shown their frustration with executives’ reluctance to embrace environmental goals. On the same day the Exxon investors met, the management of Chevron Corp. was reprimanded by its shareholders who voted for a proposal to reduce emissions from the company’s customers. DuPont de Nemours Inc. recently suffered an 81% vote against management on plastic pollution disclosures, while ConocoPhillips lost a contest over adopting more stringent emissions targets. A Dutch court has ordered Royal Dutch Shell Plc to cut emissions harder and faster than expected, a move that could have ramifications for the rest of the fossil fuel industry. long proxy fight. Exxon halted proceedings at one point to allow more time for the counting of the votes. The San Francisco-based No.1 engine accused the company of making a “last ditch attempt to avoid a much-needed board change.” The successful nominees for the No.1 engine were Gregory Goff, former CEO of refiner Andeavor, and environmental scientist Kaisa Hietala. Earlier this month, Exxon called the four dissenting candidates “unqualified.” Eight Exxon candidates were elected and two board seats remain undecided; One or both could potentially go to activist. Sacrosanct Dividend The result shows clear dissatisfaction with Woods’ strategy, despite the stock rebounding this year, up 43% due to soaring oil prices. With most shareholder demands focused on long-term strategy and none calling for an immediate dissolution of the business, short-term gains are likely to be mitigated. It will take at least a decade for the oil giant to transition from its sprawling global business, Stoeckle said. dividend and leaving behind the record loss of 2020. But the biggest question concerns Exxon’s energy transition strategy, seen by many shareholders as well behind that of its European peers. It remains to be seen how Exxon pivots, if at all, but the message to shareholders is clear: the status quo cannot. Exxon’s environmental record and reluctance to embrace a move away from fossil fuels quickly enough has been a key criticism of the proxy campaign. The No. 1 mover has been scathing in its assessment of Exxon’s long-term financial performance, calling it “a decade of value destruction.” (Updates with BlackRock’s vote in the sixth and seventh paragraphs.) More articles like this are available on bloomberg.com to stay ahead of the curve with the most trusted source of business news. © 2021 Bloomberg LP


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