In a stunning victory and a tectonic change in the effectiveness of shareholder activism, Exxon’s shareholders elected at least two directors opposed by management.
Led by the dissident small hedge fund Engine No. 1, the election campaign produced newly elected directors who back aggressive action by big oil to reverse the dangers of climate change through the reduction of carbon dioxide emissions.
This wasn’t supposed to happen in corporate America, long the bastion of what FDR called “entrenched greed.”
Using the British policy and polite phraseology, Darren W. Woods, Exxon’s chairman and implacable opponent of the elections that owners approved should “withdraw.” There is no rational basis for retaining an executive who sustains such a defeat.
The earth-moving success of the proponents of this change bring to mind the sordid history of “corporate democracy,” the non sequitur that characterizes big business now and in the past. Shareholder proposals were laughed out of annual meetings merely because management did not like them even though many were in the interest of shareholders (while some certainly were not.)
The conduct of annual meetings reflected the disdain with which corporate honchos viewed proposals by “dissidents.” One distinguished lawyer I knew advised the board, of which I was a member, that after the official business was done and before the question period, attendees should be advised by the chairman to dig into the expensive and delicious buffet at the rear of the hall. The idea was to lower attendance for any fireworks by dissidents; it generally did.
Evelyn Y. Davis, perhaps the most active corporate gadfly of her day, dubbed herself the “queen of the corporate jungle.” In 2003, she owned stock in 86 corporations, enough in many to make shareholder proposals including annual election of directors (staggered elections were supposed to ward off corporate raiders) and prohibition of “greenmail.”
She attended numerous annual meetings where she harangued executives and board members “over company policies, exorbitant spending and allegations of impropriety” according to her 2018 obituary in The Washington Post. She told Lee Iacocca of Chrysler that he needed to lose weight and called Frank Blake of Home Depot “a phony.”
The current phenomenon at Exxon ranks as one of the most important developments of my lifetime. To make the point, Black Rock, a giant asset manager with 6.7% of Exxon’s stock, backed Engine No. 1 . The joinder of Black Rock with a small player like Engine No. 1 portends more, much more, of the same at other companies in other industries who seek to maintain an unsupportable status quo.
Head hunters seeking to find people to fill the top slots in corporate America will add a new requirement: willing to throw out the old and bring in the new even when to do so sacrifices long-held sacred cows now proven just plain wrong.