Exxon CEO Warns Activist Shareholders

By Ross Kerber and Svea Herbst-Bayliss
NEW YORK (Reuters) – Exxon CEO Darren Woods issued a warning to activist shareholders considering following in the footsteps of those who filed a climate-related proposal at the company.

Exxon (NYSE:XOM) initiated legal action against the investors earlier this year, and Woods suggested they are prepared to do so again against others who might "abuse" the proxy proposal process.

> "We hope we don’t have to use that action in the future. But if we find people continue to abuse the process, we’re going to hold them to the rules," Woods stated.

Woods spoke via video link at a meeting of the Council of Institutional Investors in New York, which represents pension funds and other institutional investors.

In January, Exxon filed a lawsuit against activists Follow This and Arjuna Capital after they proposed a climate-related resolution for Exxon's annual meeting in May. Although the suit was dismissed in June, this occurred only after the activists rescinded their resolution and committed to not submit a similar one or assist others in doing so.

This lawsuit raised concerns regarding the potential reduction of shareholders' influence. Woods expressed that there remains significant room for investors to offer suggestions to corporations.

However, Woods cautioned that while the proxy system is beneficial, it can be misapplied under current regulatory guidance. He emphasized that established protocols and court involvement must be respected.

> "We are not opposed to the shareholder proposal process," Woods clarified, adding, "We will insist it is used appropriately."

Despite Woods facing skepticism from fund managers in attendance, who had voted against him and other Exxon directors at the annual meeting due to the lawsuit, he and other directors were re-elected with the backing of significant investors like BlackRock (NYSE:BLK) and Vanguard, according to recent filings.

The California Public Employees’ Retirement System (CalPERS), the largest U.S. pension fund, voiced their concerns, with CEO Marcie Frost stating via e-mail post-event that, "CalPERS believes all shareholders have the right to be heard, whether they agree or disagree with the actions of a company’s leaders."

Sanford Lewis, an attorney representing Arjuna and other shareholder activists, mentioned that Exxon's litigation could negatively affect future proxy seasons, noting that small shareholders might be hesitant to file resolutions.

Jessica Wirth Strine, managing partner of Jasper Street, a corporate governance advisory firm, remarked on Woods' tone, indicating that while he took a firm stance, it was overall more conciliatory than during Exxon's annual meeting when he criticized resolutions presented during the proxy process.

Prior to addressing the lawsuit, Woods discussed Exxon's climate outlook, emphasizing a need to balance emission concerns with the demands of a growing global population striving to eliminate poverty. He claimed that the call for the complete elimination of oil and gas ignores the fundamental issue of reducing carbon emissions and supporting a system to account for those emissions would be beneficial.

Later in the day, organizers reported that security had prevented eight protesters from entering the ballroom during Woods’ speech, and one council staff member was knocked down during the disruption but was unharmed.

Previously at the conference, climate protesters briefly interrupted remarks by New York City Comptroller Brad Lander.