Exxon Activists Gear Up for Proxy Fight

Battle lines are emerging between activist investors in US major Exxon Mobil -- and those lines appear to come down to whether financial or environmental considerations are the top priority. Vocal activist investor Engine No. 1 made headlines Monday with the release of an 80-slide presentation making its case for an alternate slate of four directors at Exxon. It has produced a rival proxy card featuring its nominees for Exxon’s upcoming annual meeting on May 26 and is looking to drum up support (OD Mar.15'21). The presentation outlined many of the newly minted hedge fund’s previous talking points of how it would fix Exxon’s track record of deteriorating returns, unsustainable spending and minimal emissions reduction ambitions. But it is also increasingly clear that Engine No. 1 does not give equal weight to all its strategic demands. Since early March, Exxon has scrapped plans to grow production, pledged to reduce debt and is prioritizing the self-funding of its dividend (OD Apr.19'21). Yet Engine No. 1 still tips Exxon as a growth-minded company lacking the capital discipline of its peers. The disconnect seems rooted in the hedge fund’s ultimate desire to see Exxon embrace a strategy centered around renewables and more aggressive decarbonization, as well as address so-called Scope 3 emissions created from the end-use of its products. Engine No. 1 has been highly critical of Exxon’s recently upsized hope to build out a carbon capture-focused “Big Oil” model, and instead accused the company of having “no credible plan to protect value in an energy transition" (OD Apr.19'21). Not So Fast Not all are ready to dismiss Exxon’s blueprint for a reset just yet. Fellow activist investor D.E. Shaw, which owns a 0.10% stake in Exxon compared to Engine No. 1’s 0.02%, has applauded Exxon’s recent moves to rein in costs and embrace capital discipline as “significant positive developments” for all shareholders (EIF Mar.10'21). The investment firm took an vocal role in Exxon as the major’s financial stumbles came to a head last year, joining mounting investor calls for the company to halt its countercyclical growth strategy and eye-watering outspending. D.E. Shaw has been receptive of the changes rolled out since, with Exxon’s revised strategy seen as enhancing its financial profile and presenting opportunities to invest more over time in key emissions abatement technologies. It also expects to have continued “constructive dialogues” with Exxon’s existing management and board. D.E. Shaw has consequently signaled that it will vote in support of Exxon’s slate of board members. Exxon has added three new directors since February, including ESG-minded activist investor Jeff Ubben, in response to rising investor pressures and in an attempt to stave off Engine No. 1’s more disruptive proposals.