PROXY PROBLEMS — ExxonMobil has gotten the annual battle over corporate shareholder proposals off to an early and explosive start by suing a pair of sustainable investment firms over a resolution calling on the company to accelerate reduction of greenhouse-gas emissions. The energy giant's move was significant and surprising, and it promises to raise the temperature leading into the height of proxy season. For one, it bypasses the usual path of companies to petition the Securities and Exchange Commission to omit certain proposals from the shareholder ballot. And resolutions like these usually fail to gain majority support at shareholder meetings -- a trend that only accelerated last year. They're also nonbinding, so companies don't have to act on them even if they are approved. So why did ExxonMobil choose to ignore those factors and file suit in a likely friendly Texas-based federal court? It might have something to with the company's thinking about its chances at winning at the SEC, said Danielle Fugere, president and chief counsel at As You Sow, a shareholder advocacy nonprofit. The agency’s 2021 decision to allow more proxy proposals dealing with social issues to appear on the ballot — and make it harder to get those proposals omitted — has spurred a surge in climate-linked resolutions as investors seek to obtain more climate information from companies and encourage emissions reductions and transition plans. “The SEC has very clearly said that investors think that climate change is important, and whether companies are addressing climate risk and reducing their emissions is an important financial factor to shareholders,” Fugere said. “So what Exxon is doing is going to a very conservative court, forum shopping, in effect, to attempt to say that all greenhouse gas emission issues are part of the company's ordinary business.” Exxon said in its court filing that the climate proposal presented by the two groups closely resembled resolutions that were rejected by shareholders in 2022 and 2023, Niina H. Farah reports for POLITICO’s E&E News. "Defendants should not be permitted to continue to misuse the shareholder proposal rules to submit a proposal that interferes with ExxonMobil’s ordinary business operations and when close to 90 percent of voting shareholders rejected the 2023 Proposal," Exxon told the court. Though the proposals don’t guarantee or require satisfactory company action, a majority vote does put pressure on a company to change or respond to the resolution and are a good way of measuring what’s on investors’ minds. Exxon asked for a court ruling by March 19 prior to its annual shareholder meeting in late May. While Fugere thinks the investor-company relationship is still important and doesn’t expect a flurry of similar lawsuits, the litigation is likely to be closely watched on both sides within the context of a broader anti-ESG onslaught.
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