Despite last minute machinations by oil giant ExxonMobil, its shareholders have voted to embrace a path to sustainability by electing at least two new board members in a contentious proxy battle that was ultimately a vote on the company’s future.
The election of two new directors proposed by Engine No. 1, a scrappy new investment firm, is one of the biggest activist upsets in recent years — and a sign of a historic shift in the energy industry.
The firm, with a tiny stake in Exxon, had waged an aggressive campaign to change the direction of the oil giant, which is widely viewed as the most intransigent fossil fuel company in acknowledging climate change and taking steps to combat it.
The victory was hard fought — up to the last minute.
Exxon announced the results of the vote about an hour after Engine No. 1’s Charlie Penner, a veteran of activist battles, went on CNBC and accused the company of trying last-minute tactics to convince shareholders to switch their votes.
“It’s called the whittle down approach,” Penner said, explaining that the process involves a company calling one investor to get it to switch its vote for one individual and another to switch for another candidate. Penner said shareholders had told Engine No. 1 that they had received such calls.
Earlier in the day, Engine No. 1 had accused Exxon of “seeking to delay the closing of the polls” to avoid losing the proxy contest. The poll closure was delayed an hour, with the meeting lasting from 10:30 a.m. until 1:10 pm, Eastern standard time.
The results are preliminary and have not yet been certified.
But at least two of the four activist candidates have won, after months of shareholders lining up behind them, in varying degrees of support. Engine No. 1’s candidates had received the endorsement of proxy advisors Institutional Shareholder Services, which backed three members of the firm’s slate, and Glass Lewis, which backed two.
Meanwhile a growing list of institutional investors were on board, including California’s public employee and teacher pension funds, the Church Commissioners for England, the New York State Common Retirement Fund, and Legal & General.
“This historic vote represents a tipping point for companies unprepared for the global energy transition,” CalSTRS said in a statement after the meeting. “While the ExxonMobil board election is the first of a large U.S. company to focus on the global energy transition, it will not be the last.”
The drama had heated up Monday, when Exxon put out a statement in which it offered to add the type of directors Engine No. 1 was proposing.
“Over the next twelve months, we will work with the Board to secure two new directors, one with energy industry experience and one with climate experience,” it said.
Engine No. 1 pushed back, calling ExxonMobil’s move “a last-minute tactic to influence” proxy voters before the annual meeting on Wednesday.
“This is a Board that continues to only be open to new directors that it approves, rather than trusting the shareholder vote,” it added, saying it was “the same Board that refused to even meet with any of our nominees.”
Then on Tuesday — one day before the crucial vote — Reuters reported that BlackRock, Exxon’s second largest investor with a 6 percent stake, planned to vote for three members of Engine No. 1’s slate.
After the voting closed on Wednesday, two preliminary winners were Gregory Goff, the former executive vice chairman of Marathon Petroleum, and Kaisa Hietala, a partner of sustainable business advisory firm Gaia Consulting.
The vote was too close to call for another Engine No. 1 candidate, Alexander Karsner, former U.S. Assistant Secretary of Energy and senior strategist at X, the innovation lab of Alphabet. The fourth activist candidate, former Vestas Wind Systems CEO Anders Runevad, was not elected, according to a press release from Exxon after the meeting Wednesday.
At least two seats were undetermined as of Wednesday afternoon.
Although the vote was seen as rebuke to the leadership of Exxon CEO Darren Woods, he was also re-elected to the board along with seven other Exxon candidates.
In its recommendation, ISS said that Exxon was vulnerable to change because of its poor operating performance in recent years. The company’s stock performance had trailed its peers, ISS said, because Exxon “invested heavily in production in a low-price environment.”
ISS had also noted that despite Exxon’s recent recognition of climate change risk, “there are lingering questions about the extent of its commitment in the area.”
Climate activists lined up to cheer Wednesday’s election results.
“The shareholder vote to shake-up Exxon’s board represents a seismic shift for the company,” said the Sierra Club’s Ben Cushing.
Andrew Behar, CEO of As You Sow, called the vote “a strong signal to Exxon and other oil majors that business as usual is not an option.”
“The fact that at least two of Engine #1’s four board candidates were elected reflects the right of shareholders to escalate the demand for transformation at companies such as Exxon,” he said in in a statement by a group known as the Coalition United for a Responsible Exxon. “The new board should act on this mandate for change and adopt Paris compliant transition plans immediately and begin the hard, but necessary work of creating the roadmap to transform the company’s core business.”