6 ms·
Exxon Lost a Board Battle with a Small Hedge Fund
- fennecfoxen 5y agoIt’s important to realize a major reason they won is because existing shareholders were kind of miffed at the board for a while. The board didn’t really engage with shareholders very much if they could help it, and there weren’t actually any energy industry experts on it, shocking for a company named Exxon. Even Vanguard, hardly a hotbed of investment-as-activism, voted for two of the Engine candidates: > “Over the years, we have shared with Exxon our concerns about the lack of energy sector expertise in its boardroom and questions about board independence. And for years, we did not witness sufficient progress on either front.” (Source: the WSJ write up at https://www.wsj.com/articles/investors-give-exxon-payback-for-frustrations-on-strategy-and-climate-11622227480 https://www.wsj.com/articles/investors-give-exxon-payback-fo... )
- dragontamer 5y agoBecause the balance of power was thought to be against the shareholders and for the Exxon board. Before this moment, how could Vanguard / Blackrock convince Exxon Board members to invest into renewable technologies? 1. No "activist investor" has ever done something like this before. So the status-quo is very much a surprise to pretty much everyone involved. Before these two new board members were elected, it was more or less considered impossible for them to be elected. 2. Vanguard / Blackrock cannot sell their shares, because they're index fund companies. So the #1 way of exerting control over the board (aka: "leaving" as an investor) is gone. These large companies are basically "permanent" shareholders, because they are primarily holding retirement money. 3. Board members typically run unopposed. So there's no other person to vote against. ---------------- Ultimately, it goes to show that becoming an "activist investor", even with very very small amounts of money, can become very powerful if you convince Vanguard / Blackrock that you're doing the right thing. It shows that large ETF companies can in fact, exert control over the board. They are no longer "passive" investors, but active ones who think about the betterment of... something? Its not quite clear what Vanguard / Blackrock is thinking (The concepts of "ESG" investing are only beginning)
- z3ncyberpunk 5y agoIs this supposed to be what trust fund brats think is drama?
- miohtama 5y agoWhat are the rules of choosing board members in US publicly listed companies? Why board members typically run unopposed?
- corford 5y agoMatt Levine (of Money Stuff) wrote a nice piece on this recently: https://www.bloomberg.com/opinion/articles/2021-05-27/exxon-lost-a-climate-proxy-fight https://www.bloomberg.com/opinion/articles/2021-05-27/exxon-...
- dstick 5y agoHere's a non-paywalled link: https://www.hebergementwebs.com/energy-and-environment/how-exxon-lost-a-board-battle-with-a-small-hedge-fund https://www.hebergementwebs.com/energy-and-environment/how-e...
- whatever1 5y agoThe amazing fact is that Engine No1’s pitch, while very accurate at depicting the current bad positioning of the company for a future with less oil, had exactly 0 proposals of what Exxon should look like in a decade. In addition, both of the new directors that they managed to install are people with purely oil refining background. Still not clear to me what the intentions of Engine No.1 are.
- lumost 5y agoPossibly to maximize oil profits while shrinking the company by cutting R&D, marketing, and exploration.
- thefounder 5y agoExactly! Cash out and die fast! Hopefully we won't see a come back like we see with tabacco/vapping now.
- whatever1 5y agoYes and biofuels will refine themselves. Plastics will be recycled themselves. Chemicals will be produced from software. And ships will be sailing powered by pure love. This notion of comparing chemical manufacturing to an addiction is insane. Don't know who came up with this idea, but it is not good even as a joke.
- mschuster91 5y ago> This notion of comparing chemical manufacturing to an addiction is insane. Humanity managed to survive for thousands of years without mineral oil. The problem with our current economic system that depends on infinite growth is that, similar to a pyramid scheme, the growth will end at some point in time - when all resources are exhausted. And that will be the equivalent of going cold turkey. The better solution is to, indeed, wean off humanity of its dependence on way too cheap oil and its byproducts before the pain of doing so gets too high and no action will be taken at all, which will turn into a disaster. And yes that includes eliminating certain classes of product entirely (e.g. plastic bags, single use bottles), switching vehicles of all kind to electric where possible, mandating longer product life times and repairability and a lot of other things. > biofuels will refine themselves. Just a sidenote, biofuels are about the worst thing that humanity can offer. Climate change already causes massive food insecurity with droughts and floods, we can't really afford it as a species to use arable land for growing fuel instead of food for billions of people.
- teknopaul 5y agonytimes articles costs to view it. below paid by ads. https://www.thestreet.com/phildavis/news/engine-no-1-s-big-win-over-exxon-shows-activist-hedge-funds-joining-fight-against-climate-change https://www.thestreet.com/phildavis/news/engine-no-1-s-big-w...
- pedrocr 5y agoIt's really odd that it takes "activist" investors just to elect some board members. It seems shareholders should have a much easier time just proposing a few names to the board and have everyone vote on them. It's so odd that management, that in theory serves at the pleasure of the shareholders, can influence this process quite so much.
- alisonkisk 5y agoYour solution is... activist investors, opposite of passive investors who don't propose names.
- pedrocr 5y agoActive investing and activist investors are not the same thing. And passive fund managers do vote their shares as has happened here. There's nothing stopping them from proposing board names as well.
- kevinthew 5y agoThe 2 who were elected were a former Tesoro executive (oil refiner) and a Neste (another oil refiner) busdev person who helped develop their industry leading biofuels business. You can see why a vanguard or Blackrock would sign up for that as they actually make sense for an oil company. Really, we should be asking who the heck the other, existing board members are and why were either of these picks were controversial to management?