May 26, 2005
The Ghost of a Shareholder Resolution Haunts ExxonMobil Annual Meeting
by William Baue
Despite an unprecedented 28 percent vote for a first-year climate change resolution and strong
support for seven others, the censoring of a resolution quashes shareholder democracy.
For corporate governance guru Robert
Monks, the biggest story at yesterday's ExxonMobil (ticker: XOM) annual general meeting (
AGM) was not the presence of eight social-, environmental-, and corporate governance-related
shareholder resolutions on the proxy ballot. No, the more significant story was the absence
of his shareholder
resolution calling on the company to separate its CEO and board chair positions, a standard
resolution filed at many other companies. Following US Securities and Exchange Commission (SEC) protocol, the company filed a petition for
permission to omit the resolution from its proxy
"The SEC decided ExxonMobil did not have to include in its agenda
for this year's meeting the exact word-for-word, comma-for-comma resolution that 27 percent
of shareholders voted for last year," said Mr. Monks in his keynote address at the Green Mountain Summit on Investor Responsibility in Stowe, Vermont earlier this week.
"What the SEC has so capriciously done is to create an atmosphere where nobody can count on
anything--this is absolutely the same resolution."
After receiving the March 13, 2005
"no-action" letter from the SEC allowing ExxonMobil to omit the resolution, Mr. Monks wrote an obituary for
shareholder democracy, pointing out the irony that ExxonMobil fought so hard to omit a resolution
that is precatory. Plainly stated, shareholder resolutions are not binding, and companies are
under no obligation to implement what resolutions request even if 99.9 percent of shareholders vote
in favor of it.
"If you hear the words 'shareholder' and 'democracy' in the same sentence
as 'American corporation,' cry, because it isn't true," Mr. Monks said in response to a question
after his speech. "I'm afraid I have to say the status of the shareholder resolution process is
very frail, very frail--not in terms of the level of shareholder support, but regarding the
arbitrary policies of the SEC in permitting resolutions one year and then turning them down the
Despite imperfections in the shareowner resolution system, it is one of the primary
tools available to shareholders advocating for corporate reform at companies such as ExxonMobil,
where several resolutions received increasing support compared to previous years. The standout
vote this year was for a first-year resolution asking the company to disclose its plans for
complying with greenhouse gas (GHG--the primary culprit behind global warming) reductions targets
in countries participating in the Kyoto Protocol,
which went into effect since the last AGM.
The resolution, filed by Interfaith Center on
Corporate Responsibility (ICCR) members with
coordinating help from Ceres, garnered a
remarkable 28.4 percent of the vote. SEC regulations require first-year resolutions to receive
more than three percent of the vote to qualify for re-filing, and few first-year resolutions make
it into the double digits, much less past the quartile mark.
The Kyoto Protocol
resolution built on the success of a previous climate change resolution that received 22.2 percent
of the vote in 2003, a record for climate change resolutions at the company--until this year of
course. The fact that a "climate change resolutions" category exists at ExxonMobil bespeaks
its controversial stance, echoing the Bush Administration in calling climate change science
"inconclusive" despite consensus at the Intergovernmental Panel of Climate Change (IPCC).
One of the other climate change
resolutions, filed by socially responsible investment (SRI) firm Christian Brothers Investment
Services (CBIS), asks ExxonMobil to
document its sources for questioning climate change science. The resolution received 10.3 percent support at the meeting, up
from 8.8 percent last year. A first-year climate change resolution filed by ICCR members calling on the company to
nominate independent board candidates with expertise in the energy and oil industry necessary to
evaluate climate risk received 4.1 percent support.
Another first-year resolution asked the company to produce a report on
environmental and business-related risks of oil drilling in sensitive and protected areas
worldwide, such as the Arctic National Wildlife Refuge (ANWR). The resolution, filed by the US Public Interest Research
Group (USPIRG) and SRI firms Green Century Capital Management and Clean Yield Asset Management, received 8.1
percent of the vote.
The highest vote went to a seventh-year resolution calling for an explicit ban on sexual orientation
discrimination at ExxonMobil, the only Fortune 50 company yet to specify such protection in its
Equal Employment Opportunity (EEO) policy. The vote was 29.4 percent, a half percentage point
uptick from the vote of 28.9 percent last year for the resolution. It was filed by the New York
City Employees Retirement System (NYCERS).
NYCERS also filed a resolution asking the company to report on the financial and
reputational risks of its payments to the Indonesian military, which is notorious for its human
rights abuses. To support the resolution, NYCERS cites the fact that a class action lawsuit has
been filed against ExxonMobil on behalf of citizens of the Indonesian region of Aceh who allege
they were victimized by the military with the support of the company. The first-year resolution
received 7.6 percent of the vote, amply qualifying it for re-filing next year.
that is, the company petitions the SEC for permission to omit this and other resolutions, an act
that "reeks of censorship," according to Mr. Monks.