In blow to Exxon management, climate activists install two new board members

Exxon shareholders, bucking company management, voted to install at least two new members to the oil giant's board in a push to make Exxon more aggressive on addressing climate change and more disciplined in its oil investments.

Why it matters: Exxon management campaigned strongly against the entire slate of four people nominated by Engine No. 1, the activist investment group whose campaign was backed by several major pension funds.

• The election of two of the four would avoid what could have been a categorical rebuke of the oil giant's strategy, but it still represents significant investor dissent.
• The vote in favor of the two new board members shows that many investors see Exxon, which has had a rocky financial performance in recent years, as poorly positioned for the future.

Driving the news: Shareholders voted to add Gregory Goff and Kaisa Hietala at the oil giant's annual meeting Wednesday, Exxon said at the conclusion of voting. Tabulations on other candidates are still pending, though one of the Engine No. 1 candidates was voted down, Exxon stated in a press release. It's possible that one other activist candidate will still prevail.

• Hietala is a a former renewables executive with the refining company Neste and Goff is the former CEO of the refiner Andeavor.

What they're saying: Charlie Penner, one of Engine No. 1's leaders, told shareholders at the meeting that Exxon management is "determined to fight off the future for as long as possible," but added: "change is coming."

The big picture: The battle over replacing members of Exxon's 13-person board comes amid increasing pressure on oil majors to do more on climate change.

• European-based multinational giants are diversifying more widely and vowing long-term transformations to "net-zero" emissions companies by 2050.
• Engine No. 1 also says Exxon lacks "any serious diversification efforts" that will prepare it to thrive in a low-carbon world. The group says Exxon needs a more cautious investment approach around oil and gas.
• Engine No. 1's candidates won the backing of some of the company's largest shareholders, including BlackRock, Vanguard, and State Street.

Yes, but: Exxon says it's in step with the evolving energy mix, citing growing emphasis on carbon capture and large market opportunities there, and efforts on hydrogen and biofuels.

• Exxon also argues its adjusted capital strategy will deliver strong returns in oil and gas, which it notes will remain huge markets for decades despite low-carbon energy growth.
• The company recently set new near- and medium-term targets to cut emissions intensity (that is, emissions per unit of output), but has eschewed the long-term carbon neutrality vows of its European peers.
• “ExxonMobil is in a strong position to create differentiating value throughout the energy transition,” CEO Darren Woods said, touting Exxon's oil-and-gas portfolio and its investment in climate technologies.
• "We welcome the new directors Gregory Goff in Kaisha Hietala to the board and look forward to working with them constructively and collectively on behalf of all shareholders," Woods said.

Go deeper: The intensifying battle for Exxon's future