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May 14, 2009
Activist Shareowners Take to the Web to Challenge ExxonMobil
    by Robert Kropp

Web site assists investors in contacting mutual funds to express support for shareowner resolutions addressing climate change and corporate governance.


During a 2008 press conference in New York City, Neva Rockefeller Goodwin, an economist and great-granddaughter of John D. Rockefeller, said of her family's relationship with the oil giant ExxonMobil, "As the oldest continuous shareholders of the Exxon Mobil corporation, we almost define the long-term investors." John D. Rockefeller founded Standard Oil, which much later became ExxonMobil, in the nineteenth century.

While Goodwin and other investors acknowledge that the management of ExxonMobil has been successful in the planning and implementation of projects that have led to conspicuous profitability, they have expressed concerns that the insular corporate culture at the company has resulted in a refusal by CEO Rex Tillerson and other management to engage with activist shareowners over such critical long-term issues as climate change and board independence.

As a result, Goodwin, along with Robert A.G. Monks, a shareowner activist and advisor on issues of corporate governance, have been instrumental in the formation of a web site named ExxonMutualFundShares.org, where investors in the 25 largest mutual fund families in the US can send messages to those mutual funds, expressing support for four shareowner proposals scheduled for votes at the company's proxy meeting on May 29th.

The mutual fund companies targeted by the web site include the three largest: the Vanguard Group, American Funds Investment, and Fidelity Investments.

One of the shareowner resolutions, written by Sister Patricia Daly of the Caldwell Dominican Sisters, asks the company to set a firm date for reporting on its progress to reduce greenhouse gas (GHG) emissions. Arguing that shareowners' "repeated request for emission reduction goals reiterates ExxonMobil’s own Environmental Business Planning process," the resolution further states that "ExxonMobil has not adequately assessed or disclosed the financial effects of climate regulation or industry-changing technologies."

ExxonMobil’s Board of Directors recommended that shareowners vote against the proposal, arguing in its proxy statement that it "does not believe that setting absolute goals to reduce emissions from operations and product use is the most effective way to manage climate risks."

A second resolution, filed by Ms. Goodwin, asks that ExxonMobil establish a task force to report on the consequences of climate change for developing nations, as well as for poor communities in both those nations and developed nations. The resolution cites studies by the Intergovernmental Panel on Climate Change (IPCC) and others, that predict severe costs to the economies of the poorest countries if climate change is not adequately addressed.

Arguing that it "does not believe an additional report is warranted," the ExxonMobil Board recommended that shareowners vote against the proposal.

A third resolution asks that ExxonMobil adopt a policy for renewable energy research, development and sourcing, and report to investors on the progress of its policy in 2010. Filed by Stephen Viederman, a writer and shareowner activist, the resolution states that "no policy statement on renewable energy research, renewable energy development, or renewable energy sourcing, can be found on ExxonMobil's web site." Instead, the company projects that the demand for oil and gas will increase until 2030.

2009 marks the second year that the renewable energy policy has been presented to shareowners for a proxy vote. In 2008, 27.5% of shareowners voted in favor of the resolution.

Again, the ExxonMobil Board argued against passage of the resolution, stating that "oil and natural gas demand is expected to grow and remain close to 60% of global energy supplies. This reflects their abundance, availability, and affordability to meet consumer needs, as well as environmental advantages versus coal, the most carbon-intensive energy source."

The fourth proxy item, sponsored by Mr. Monks, calls for the creation of an independent board chair. On a web site created by Mr. Monks to publicize the issue, he wrote, "Separating the CEO and Chairman of the Board positions will enable the CEO to focus on delivering positive results to shareholders while empowering the Chairman and the Board to objectively analyze the long term challenges and opportunities facing the Company." Currently, Mr. Tillerman occupies both positions at ExxonMobil.

The resolution calling for an independent board chair has won 40% of shareowner votes in the past two years. This year, the resolution has been changed from nonbinding to a binding by-law change proposal. Explaining the change on the ExxonMutualFundShares.org web site, Mr. Monks wrote, "Do the owners of Exxon want a real—in the sense of commitment and capacity to perform statutory duties—board of directors?"

In its response, ExxonMobil stated, "The Board believes that the most effective leadership structure for ExxonMobil at the present time is for Mr. Tillerson to serve as both Chairman and CEO."

The ExxonMutualFundShares.org web site provides check-off boxes where investors can identify the mutual funds companies in which their investments have been made. It also provides the text of a letter to be transmitted to the companies addressed by investors. The letter states in part, "We have seen all too much evidence in recent months about how even the biggest, the most powerful and the best-known banking, insurance, auto and securities firm can be brought to their knees by failing to take the steps needed to address management weaknesses and risks that they mistakenly thought that they could ignore."

The sponsors of the web site plan to issue an update in advance of the May 29th proxy vote to report on the number of investors who have used the website, as well as any public statements made about the resolutions by the targeted mutual fund companies.

 

 
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