Investors intend to change ExxonMobil’s board of directors
For decades, ExxonMobil has been the main engine and envy of the oil industry. Now the situation has changed and critics have lashed out at the commodity giant.
For the first time in modern history Exxon faced a major challenge from disaffected investors looking to radically change the composition of its board of directors.
These efforts, led by a new active investor – by a company called Engine No.1, aim to urge Exxon to rein in its huge spending ambitions, index executive salaries and move towards clean energy.. Engine No.1 Receives Backing From One of America’s Most Powerful Pension Funds – Retirement fund of teachers state California (California State Teachers&# 39; Retirement System, CalSTRS).
Hedge fund D. E. Shaw, Exxon Owner, Pushes Oil Company to Cut Costs to Maintain Dividends and Improve Statistics.
All this demonstrates the depressing position of the giant. Exxon Market Value, once the most valuable public company in the world, has collapsed by a staggering $ 266 billion since mid-2014. She was dropped from the Dow Jones Industrial Average after 92 years of its membership.
«Historically Exxon hasn’t cared too much about shareholders. Now they will have to reconsider their position», – said Peter McNally (Peter McNally), analyst Third bridge group.
In recent years, the company has seen shareholder dissatisfaction, especially in the climate arena, as activists put forward proposals aimed at ensuring that force Exxon to disclose emission targets, test climate risk and share the roles of CEO and chairman of the board.
In addition, Exxon faced a campaign to seize control of board seats.. Engine No.1 has found four people with strong powers in the energy industry who have agreed to be appointed, «if necessary», to the Exxon board of directors.
Engine No.1, which includes a former JANA partner Charlie Penner (Charlie Penner) and ex-CEO of BlackRock Jennifer Grancio (Jennifer Grancio), dissatisfied with the work of Exxon and suggested that the company is facing an existential crisis.
«We believe that in order for ExxonMobil to escape the fate of other once iconic American companies, it must better position itself for long-term, sustainable asset creation.», – stated Engine No.1.
Exxon has long prided itself on its reasonable spending despite the state of the oil market. However, a series of recent mistakes have severely shaken this argument. and now threatens the company’s dividends.
Switching Seats: From Investor Advocate to Board Member
In the past decade, the company was very late with the shale oil boom in the United States.. Instead, she decided to invest in complex overseas projects, some of which, including a joint venture with «Rosneft», failed.
Looking back, Exxon’s 2009 takeover of natural gas giant XTO Energy was seen as «great failure». Natural gas prices are trading less than half their levels since the $ 41 billion acquisition. Exxon recently announced it would cut the value of its gas assets by about $ 17 billion..
Engine No.1 criticized Exxon for its «poor long-term capital allocation strategy» and urged the company to cut costs.
Exxon previously announced that it was scrapping its aggressive spending plans, albeit not to the extent that activists are demanding..
D. E. Shaw is pushing the company to improve its environmental reputation, set clear and measurable emission targets and incorporate them into its offset plans, Istchonikov said..
Engine No.1 said Exxon should «fully explore» ways to leverage your scale and expertise while exploring areas of growth, including «greater investment in clean, zero-emission energy sources and clean energy infrastructure».
Unlike European oil companies such as Royal Dutch Shell and BP, Exxon and rival Chevron have not made large investments in renewable energy sources.
Under pressure from the public Exxon announced that it will eliminate methane flaring by 2030 and reduce «intensity» emissions from its oil and gas production up to 20% by 2025.
«We respect and support the community’s commitment to achieving net zero emissions by 2050», – said the CEO of Exxon Darren Woods (Darren Woods).
Even with the support of the pension fund CalSTRS and the Church of England shareholders own only a small portion of the $ 180 billion company. The fate of this standoff will depend on Vanguard, State Street and BlackRock. Asset manager «big three» owns almost a fifth of Exxon shares outstanding.
But activist investors have one big advantage – a base of highly disgruntled shareholders. And if these disaffected shareholders team up with environmental groups and socially conscious investors, Exxon could be in serious trouble..