Exxon to offer auto-voting to counter shareholder activism

Exxon has faced several high-profile activist shareholder campaigns tied to climate issues in recent years. (AP Photo/Richard Drew)

Exxon Mobil is introducing a unique shareholder voting mechanism that will allow retail investors to automatically cast ballots in step with board recommendations during annual meetings, a move that may help the top U.S. oil producer fend off activist campaigns.

On Monday, the U.S. Securities and Exchange Commission said in a letter that it would not object to the plan from Exxon as long as the company met certain conditions, including providing annual reminders to investors who opted into the mechanism about their participation. The SEC’s response could prompt other companies to follow suit. Several activists said they worry the new option could give Exxon an unfair edge in corporate elections.

The oil major has fought back aggressively against activists in recent years, and could shore up more support from its unusually large base of retail shareholders - who typically have lower turnout rates but vote overwhelmingly in support of Exxon’s board.

Individual investors currently “lack access to numerous services that make voting fast and easy for larger institutional investors. Activist groups often exploit this gap to push political goals at the expense of shareholder value,” Exxon said in a statement.

In the coming weeks, retail investors will be notified through their brokerages that they can enroll in a free program to vote their shares in line with management recommendations, Exxon said in a statement.

If investors change their minds, they can override the program and cast their votes manually according to instructions in the proxy materials. Exxon said it is the first U.S. company to offer such an option.

“As a matter of fairness, it’s time to level the playing field,” the company said.

Nearly 40 per cent of the company’s shares are held by individuals but just a quarter of them vote during proxy season, though they mostly support the board, Exxon said.

Retail investors hold about 30 per cent of most large U.S. companies. They are a sought-after pool when companies face close board elections or campaigns for ideologically charged shareholder resolutions. Only a few other iconic U.S. brands approach Exxon’s level of retail ownership including Apple and Tesla.

Fighting back against activists

Exxon has faced several high-profile activist shareholder campaigns tied to climate issues in recent years, notably in 2021 when three dissident directors were elected to its board.

Last year, it continued to pursue litigation against activist investors Arjuna Capital and Follow This, even after the groups withdrew their proposal calling on Exxon to cut its greenhouse gas emissions.

On Monday, Follow This founder Mark van Baal said via email that Exxon’s new voting mechanism “appears to be another attempt to suppress the voices of critical investors.”

He said he hopes large institutional investors would speak out against the change. “If management can auto-capture retail votes, active investors lose influence when change is needed,” van Baal said.

Representatives for BlackRock and Vanguard, among Exxon’s top investors, did not immediately respond to questions.

Tim Smith, a senior policy advisor to the Interfaith Center on Corporate Responsibility, whose members include Arjuna Capital, said Exxon’s retail-voting program stands in contrast to those from two fund firms that allow clients to vote across a range of other policies including choices that support more climate and social measures.

Exxon’s effort “seems to be an attempt to lock in support from individual shareholders rather than empower them to thoughtfully and actively join the proxy process,” Smith said.

Exxon’s most recent annual meeting in May featured no qualifying shareholder resolutions for the first time since 1958, following its aggressive campaign against resolution-filers.

During an energy conference in Austin on Friday, Exxon CEO Darren Woods said the company wanted to stop activists from submitting the same proposal year after year.

“My view is, if you’re going to play that game, we can play too,” Woods said.

(Reporting by Sheila Dang in Houston and Ross Kerber in Boston; Editing by Nathan Crooks and Lisa Shumaker)