It was a stunning moment for Exxon Mobil Corp and the wider corporate world: a tiny activist fund had succeeded in changing the company\u2019s board.
\nBut in the hours leading up to this week\u2019s annual shareholders meeting, Exxon went to extraordinary lengths to head off the threat from a campaign about which it had been largely dismissive months earlier.
\nExxon telephoned investors the morning of the ballot \u2013 and even during an unscheduled, hour-long pause during the virtual meeting \u2013 asking them to reconsider their votes, according to several of those who received calls.
\nSome said they found the last-ditch outreach and halt to the meeting unorthodox and troubling.
\n\u201cIt was a very unusual annual general meeting,\u201d said Aeisha Mastagni, a fund manager at the California State Teachers\u2019 Retirement System, a major Exxon investor that backed the activist campaign from the beginning. \u201cIt didn\u2019t feel good as an investor.\u201d
\nThe May 26 meeting concluded with Exxon stating that two of the dissident\u2019s four director nominees had been elected, a coup for Engine No 1, a little-known investment firm calling for the company overhaul its strategy, cut costs and come up with a plan to address climate change.
\nIts victory is widely seen as a warning to the rest of the industry that investors will now hold energy companies to account for environmental concerns.
\nThe full results of the vote still haven\u2019t been disclosed; a third Engine No 1 nominee is still in the running to fill one of the two remaining board seats.
\nWhile there\u2019s no suggestion Exxon broke any rules during Wednesday\u2019s meeting, such tactics are unusual for a blue-chip company.
\nIn response to questions about the meeting, the company said it\u2019s been \u201cactively engaged\u201d with investors and welcomes the newly elected directors.
\nNet Zero Exxon opposed Engine No 1 from the outset.
\nThe fund holds a stake in Exxon of just 0.02%, valued at about $54mn.
\nThe oil company described the fund\u2019s four candidates as unqualified and said its proposals would imperil Exxon\u2019s dividend.
\nStill, the company made a concession in March to another investor, D.E. Shaw & Co, appointing two new directors, including activist investor Jeff Ubben.
\nBut Exxon still refused to meet with the Engine No 1 candidates.
\nA significant hurdle faced by the company was winning support of large institutions including its top three investors, Vanguard Group Inc, BlackRock Inc
\nand State Street Corp, which collectively hold a stake of more than 21%. BlackRock has been vocal about its voting guidelines on climate change.
\nDiscussions with many large investors in the run-up to the vote were primarily focused on Exxon\u2019s strategy to get to net zero emissions by 2050, and not the company\u2019s financial performance, according to people familiar with the talks.
\nChief Executive Officer Darren Woods got down in the trenches during the proxy fight and made commitments to keeping the dialog going after the meeting, the people said.
\nBut Vanguard, BlackRock and State Street ultimately supported a partial slate of nominees from Engine No 1. An indication the fight might be tilting in Engine No 1\u2019s favour came mid-May with the partial backing from two leading proxy advisory firms.
\nTwo days before the vote, Exxon said it would appoint two new directors, one with \u201cclimate experience\u201d and another with industry expertise.
\nOn the morning of the meeting, Engine No 1 issued a statement alerting shareholders that Exxon may try, \u201cin a targeted manner,\u201d to persuade them to change their vote.
\nSure enough, by the time the virtual meeting began at 9:30am.
\nDallas time, Exxon representatives were ringing investors. In some cases, those calls entailed cajoling holders to at least reduce their support to one or two dissident nominees rather than all four, according to people familiar with the conversations, who asked not to be identified because the discussions were private.
\nAt about 10:15 a.m., investor relations head Stephen Littleton announced proceedings would be paused for 60 minutes, citing the volume of votes still coming in.
\nAs classical music played on the webcast, emails started flying between investors left bewildered by the halt.
\nOne executive at a major Exxon shareholder said they were contacted during this hiatus and pushed to change their vote.
\nThe person, who has decades of experience dealing with boardroom elections, said that while such appeals a day before a vote are commonplace, it was the first time they\u2019d fielded such a request during a meeting.
\nMeanwhile, Engine No.1 released another statement saying shareholders should \u201cnot be fooled by ExxonMobil\u2019s last-ditch attempt to stave off much-needed board change.\u201d Charlie Penner, head of active engagement at Engine No 1, went on television to complain. \u201cThey\u2019re doing a tactic called the whittle-down, where they tell a shareholder to draw down your votes for this person, they tell another shareholder they\u2019ll draw down their votes for this person, and they gradually try to whittle people down,\u201d he told CNBC. \u201cIt has a very banana-republic feel.\u201d
\nThe pause was something that Anne Simpson \u2013 the California Public Employees\u2019 Retirement System\u2019s managing investment director for board governance and sustainability \u2013 had never seen before in her three-decade career.
\nSimpson didn\u2019t get a call from Exxon about altering her votes.
\nBut the practice still disturbed her. \u201cIf the comments are true, this raises the question about the sanctity of the ballot box and whether companies should have privileged access,\u201d she said.
\nThe meeting didn\u2019t conclude until almost three hours after it first began, with Littleton reading out a summary of the preliminary tally of votes.
\n\u201cWe welcome the new directors Gregory Goff and Kaisa Hietala to the board,\u201d Woods said in his concluding remarks, \u201cand look forward to working with them constructively and collectively on behalf of all shareholders.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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