Exxon shareholder case dismissal's aftershocks
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The dismissal of Exxon's litigation against shareholder climate activists only ends one skirmish over investor advocacy — and bigger battles may await.
Why it matters: Activist investors use shareholder resolutions to build support for more aggressive corporate policies on climate.
- But Exxon — backed by K Street heavyweights — wants a stronger hand to exclude proposals it calls extraneous or bad for shareholder value.
Catch up quick: A Texas federal judge ended the case this week after defendant Arjuna Capital pledged not to file more climate resolutions with Exxon.
- Arjuna and activists Follow This had already withdrawn their resolution seeking much tougher emissions targets.
What we're watching: Several things, as corporations battle activists over use of the SEC process to exclude resolutions.
- One is whether more cases loom and whether activists, fearing costly litigation, are more gun-shy during next year's proxy season at Exxon and other companies.
- And watch separate litigation pending in the U.S. Court of Appeals for the 5th Circuit. The National Association of Manufacturers, in an amicus role, is challenging the SEC's ability to prevent companies from tossing shareholder proposals.
- Meanwhile, the presidential election could bring SEC leadership friendlier to companies looking to prevent resolutions from coming to a vote.
The intrigue: Axios' Kia Kokalitcheva noted the ruling is a blow to Exxon's attempt to get more company-friendly guidance on resolutions via the court.
- But Exxon, in a statement, said it "put a spotlight on the widespread abuse of the shareholder proxy submission process."
- "Making repeated proposals that garner a small minority of support doesn't serve anyone's interest except the proponent's."
- Exxon did not say whether it planned subsequent litigation.
What they're saying: Public pension giant CalPERS, which criticized Exxon's case, said the court "got it right."
- But UPenn business law professor Jill Fisch said the outcome still leaves activist investors vulnerable.
In an interview, she noted the case only ended because of a "really extreme agreement" by Arjuna not to push for climate changes at Exxon.
- "The judge should have said that if Exxon's problem is with the SEC and the SEC's policy, you don't go after individual shareholders."
- "And honestly, the institutional investor community should have worked harder to make that point as well," she said, arguing investment firms like BlackRock should have publicly opposed the case.
The bottom line: The Texas judge said this isn't the last word — even as he ruled that Arjuna's withdrawal of the resolution and pledge mooted this case.
"As Exxon and amicus note, the trend of shareholder activism in this country isn't going anywhere," Judge Mark Pittman wrote. "The SEC is behind the ball on this issue."
