Exxon Faces Proxy Fight After Activist Nominates Directors

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Exxon Mobil Corp. is heading for a proxy showdown after activist investor Engine No. 1 formally nominated four directors to the board of the energy giant, which is facing growing calls to change its strategy.

Engine No. 1, which confirmed it nominated the slate of directors Wednesday morning, has the backing of the California State Teachers’ Retirement System.

“We believe that ExxonMobil’s board needs new members who have proven success positioning energy companies for today as well as tomorrow, and who are sufficiently independent from the current board to ensure a clean break from a strategy and mindset that have led to years of value destruction and poorly positioned the company for the future,” Engine No. 1 said in a statement.

Engine No. 1 has already called on Exxon to refresh its board, overhaul executive compensation, and invest in more profitable drilling and clean energy. The firm said in a letter to the company’s board in December that changes are needed to help Exxon avoid the fate of other once-iconic American companies and to better position for long-term, sustainable success.

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Exxon will evaluate the proposal and update shareholders in the coming weeks on its strategy to build long-term value, the driller said in a statement. Exxon will also detail “actions to address climate change, including initiatives to commercialize technologies which are key to reducing emissions.” The explorer is preparing to add one or more new directors and is in talks with another investor, D.E. Shaw & Co., the Wall Street Journal reported, citing people it didn’t identify.

The shares fell 0.7% to $45.55 as of 10:53 a.m in New York. The stock is up 11% so far this year.

D.E. Shaw has urged the company to slash capital spending and operating expenses to protect its dividend, people familiar with the matter said in December. D.E. Shaw also called on Exxon to improve its environmental reputation by taking steps such as setting clear, measurable emissions targets and incorporating them into long-term incentive plans.

Shortly after the investors’ concerns were raised, Exxon said it planned to reduce upstream emissions intensity -- those caused by pumping oil and gas from the ground -- by as much as 20% by 2025, and cut gas flaring and methane leaks. Exxon said the move would be consistent with the goals of the Paris Agreement.

Exxon’s third-largest holder, BlackRock Inc., on Tuesday called for corporate leaders to disclose how their business plans will be compatible with a net-zero economy by 2050.

“While recently ExxonMobil has taken incremental steps in the face of financial and shareholder pressure, we believe a reactive short-term approach is no substitute for a proactive long-term strategy that addresses the threats and opportunities facing the company in a changing world,” Engine No. 1 said.

It’s the first proxy fight for San Francisco-based Engine No. 1 since tech investor Chris James launched the firm in December. Engine No. 1’s previously disclosed nominees to the Exxon board comprise Gregory Goff, the former chief executive officer of oil refiner Andeavor; Kaisa Hietala, a renewable-products executive at Neste Oyj, another refiner; Alexander Karsner, a former U.S. assistant secretary of energy; and Anders Runevad, previously CEO of Vestas Wind Systems A/S.

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