Shareholders lambaste ExxonMobil for inadequate response to climate change

May 28, 2020 News

By Kiana Wilburg

ExxonMobil’s poor response to the risks of climate change was one of the top issues raised yesterday at its Annual Meeting of Shareholders. During the conference call, one of the shareholders actually deemed the company to be a slacker in this regard and moved a motion for the combined roles of Chairman of the Board and Chief Executive Officer to be separated to ensure better action is taken in the future.

Liz Gordon, Executive Director of Corporate Governance for the New York State Common Retirement Fund

Liz Gordon, Executive Director of Corporate Governance for the New York State Common Retirement Fund was the bold shareholder who confronted the company with this proposal. Gordon contended that having the two roles separated is a fundamental principle of corporate governance. She explained that a Board is led by its Chair and is responsible for protecting shareholders’ interests by providing oversight of management which is led by the CEO. She said there is an inherent conflict when a CEO is tasked with oversight of himself or herself.
Furthermore, when the CEO and Chair positions are combined, Gordon said it results in excessive influence on the Board. The shareholder also expressed the belief that the combined positions are what resulted in the company lagging behind its peers on financial performance, shareholder engagements and risk oversight, especially climate risks.In this regard, she said, “Exxon is a laggard in addressing climate risks. Our company has no enterprise-wide targets for greenhouse gas emissions reduction from its own operations, does not even disclose the greenhouse gas emissions associated with the use of its products, much less articulate any ambition to reduce those emissions and (it) invests to grow its hydrocarbons production at a rate that is clearly inconsistent with the goals of the Paris Agreement.”
By contrast, Gordon said that peers such as British Petroleum and Shell have disclosed detailed plans for managing the low carbon transition that were developed in response to engagement with their investors. She said that these plans include setting greenhouse gas reduction targets for their products and committing to become net zero emissions businesses by 2050. Significantly, the shareholder said that the boards of these companies have an independent chair.

ExxonMobil CEO and Chairman, Darren Woods

The Executive Director of the New York State Common Retirement Fund said, “It is crystal clear to us that Exxon Mobil’s inadequate response to climate change constitutes a broad failure of corporate governance, and a specific failure of independent directors to oversee management. We have no doubt that an independent chair would mean an ExxonMobil that is better equipped to address significant business risks, engage more effectively with its shareholders and post better financial performance.”
Taking this into consideration, she urged her fellow Exxon shareholders to vote for the proposal to split the Chair and CEO posts.
In response to her proposal, the current Chair and CEO of ExxonMobil, Darren Woods said that the company recognizes the importance of addressing the risk of climate change, and is focusing on developing technologies that close the gaps in the existing solution set. He did not disclose the details on this front.
With respect to the issue of a combined Chairman and CEO position, Woods said that the board carefully considered this matter and currently believes that having the roles combined results in significant benefits. Further to this, he said that the company’s governance is strengthened by the annual selection of a lead director who provides independent oversight and acts as a liaison with the Chairman. Importantly, he said that this person is selected by the independent directors.
On this note, Woods recommended that shareholders vote against the proposal, and they did.