Thoughts on Filing a Shareholder Resolution at ExxonMobil

From The Dwight Hall SRI Fund at Yale University

Last week, our shareholder engagement team at the Dwight Hall SRI Fund received some positive news. We learned that the shareholder resolution that we had co-filed at ExxonMobil was to be included in the company’s annual proxy statement and would be voted on by the company’s shareholders in May.

This is our latest milestone in an unfinished journey, which began in August of 2014. At that time, the Yale Corporation Committee on Investor Responsibility announced that the Yale Endowment would adopt a special proxy voting directive for the issue of climate change:

“Yale will generally support reasonable and well-constructed shareholder resolutions seeking company disclosure of greenhouse gas emissions, analyses of the impact of climate change on a company’s business activities, strategies designed to reduce the company’s long-term impact on the global climate, and company support of sound and effective governmental policies on climate change.”

As a student-run socially responsible investment fund, we at Dwight Hall SRI sought to file a resolution that the Yale Endowment might be able to vote for in accordance with the new directive. Moreover, Yale’s decades-old guidelines for ethical investment hold that when the exercise of shareholder voice seems unlikely to eliminate a grave social injury within a reasonable timeframe, the University should divest. So we recognized that filing a resolution would be a valuable opportunity to examine the efficacy of shareholder engagement in this context.

Pictured Above: Members of the Shareholder Engagement Team 

After some deliberation, we chose ExxonMobil over other possible companies, partly because of its status as the largest publicly traded international oil and gas company in the world. Early in December of 2014, we purchased stock in ExxonMobil. The SEC requires that shareholders must continuously hold a minimum of $2,000 in a company’s stock for at least one year in order to file a resolution.

It then fell to us to choose a climate-related issue to file a shareholder resolution on with help from the Ceres-led Exxon Working Group. An oil & gas company such as ExxonMobil faces resolutions around diverse climate-related issues, including but not limited to: GHG emissions reductions, executive compensation, board membership with independent expertise, reporting of ESG information, extractive practices, disclosure of regulatory risk and the possibility of increased dividends, and, lastly, the one we picked—public policy, political spending and disclosure thereof.

As we researched these possibilities, we looked at various criteria for our consideration, such as the broader significance of the issue to climate change mitigation, relevance of the issue to the conversation at Yale, its accordance with the University’s new proxy voting directive, the presence of other shareholder advocates previously in the space, and the likelihood of being included on the ballot. We benefited from the good advice of numerous experts, practitioners, and climate-focused shareholder advocates.

Another deciding factor was how, in the months leading up to the filing deadline, Exxon came under intense media scrutiny for having been aware of the science behind climate change as early as 1977; despite this, Exxon for many years worked to undermine public certainty about the science. As a result, a number of state attorneys are now investigating Exxon for willful deception, and the Department of Justice recently sent a request for a probe on to the FBI. Exxon’s public policy is therefore quite a topical issue.

One thing we kept coming back to was how Yale’s new proxy voting directive placed special emphasis on the critical role governments must play in efforts to reduce emissions: “[T]he formidable problem of climate change, which rightly deserves the attention and involvement of all, is heavily dependent on government policy interventions, both nationally and internationally.”

Although Exxon purports to no longer support climate denial and to support a revenue neutral carbon tax, the company continues to financially support the American Legislative Exchange Council (ALEC), one of the primary organs of obstruction to sound government policy on climate change. Yale expects “company support of sound and effective governmental policies on climate change,” but Exxon in this case is still directly contributing to efforts undermining such policies.

Ultimately, we chose public policy and political spending as our issue; we co-filed our resolution in December 2015 with the United Steel Workers, the largest labor union in North America, itself partly comprising over 5,000 Exxon workers. Other co-filers of the resolution included AP7, the Swedish national pension fund, and Walden Asset Management, the oldest institutional investment manager in the SRI industry.

Since filing the resolution, we have had the opportunity to interact with Exxon’s investor relations team on several occasions; these conversations have been highly instructive. Although our resolution will go to vote, Exxon’s company management is recommending that shareholders oppose it, which is unfortunate.

Exxon’s Annual General Meeting of the shareholders is on May 25, 2016. We firmly believe that improved transparency of Exxon’s public policy and political expenditures will help eliminate support of the climate obstructionism, which is socially injurious and imperils the world we live in.

We welcome people getting in touch with us and we can be reached at fund@dwighthallsri.org.