7 ms·

Exxon throws a fit over shareholders exercising their rights

48 points by botanical 3y ago

londons_explore 3y ago
Can I buy shareholder voting rights separately from the actual money value of the shares? Or do a massive leveraged buy of shares just before the vote, then sell afterwards. Obviously if I do this and force a shareholder decision not good for company profits, the share price would be lower when I sell and I'd lose a lot of money.
- meheleventyone 3y ago
  You’d also have to find enough shares to buy and it’d basically be a hostile takeover.
- deleted 3y ago
  [deleted]
- arcticbull 3y ago
  Ideally the company has a dual-class structure where one class of share has more voting rights than the other - and you find someone who will sell them to you. This will significantly reduce your capital risk. A dual-class structure is how some founders (like Zucc) retain majority control of the company despite a minority beneficial ownership stake. You could probably also talk people into nominating you as their proxy at the shareholder vote.
  - fakedang 3y ago
    It's not possible to split into that structure post-IPO though - it's illegal. Most old companies haven't got that kind of share class separation.
    - londons_explore 3y ago
      You could theoretically, with shareholder approval, take a company private, split the share classes, and then IPO again and resell the shares to the same people. In the interim while private, some bank would be the 100% owner, with some contract saying they must re-IPO within 24 hours and resell shares for 1 cent to the original list of shareholders. And I don't see any reason you couldn't do all this on one day - you just need approval of 51% of the shareholders and the board.
      - fakedang 3y ago
        > And I don't see any reason you couldn't do all this on one day - you just need approval of 51% of the shareholders and the board. Because filing for re-IPO is a very complicated affair in itself? Though the rest of it is fairly correct - it is basically the PE playbook.
- vasco 3y ago
  Easier to campaign for other shareholders to vote for your proposal in advance. It can be like a political campaign, it's just rare for people to try it, but nothing stops you from convincing other shareholders of voting for your resolutions well in advance of the meeting.
  - cm2187 3y ago
    But in this case the activism is explicitly about hurting the company financially. 1) it is unlikely that you convince other shareholders to vote against their interest 2) the board and management have a fiduciary to their shareholders, including the ones who do not vote (which is often the majority of shareholders, how often did you show up at the general assembly of a stock you own in your portfolio, or a stock held in an ETF which typically do not vote). I suspect this is what the Exxon lawsuit will argue.
- drpossum 3y ago
  The dual structure of shares was mentioned, but, let's say there's not "non voting shares". "Can I buy shareholder voting rights separately from the actual money value of the shares?": Buying shareholder voting rights is the actual money value of the shares.
  - growse 3y ago
    If that were true, non-voting shares would be worthless. The value also includes a future claim on the company's assets and cash flows.
    - cm2187 3y ago
      Also that's kind of a dodgy silicon valley corporate structure, you don't typically find that in blue chip companies.
      - dragonwriter 3y ago
        Preferred stock, usually with reduced or no voting rights, is very much older than Silicon Valley.
    - drpossum 3y ago
      Yes, it was qualified with "let's say non-voting shares don't exist" for a reason.
  - lambertsimnel 3y ago
    Don't mutual funds separate voting rights from beneficial ownership? So maybe one way to gather voting rights for other people's shares would be to run a mutual fund. Shares can also be borrowed (for a fee) for the purpose of short selling, but maybe they could also be borrowed for their voting rights.
DoingIsLearning 3y ago
I would love to see a chain reaction forming a collective of people with 'fuck you money' and just going around Oil&Gas and bully boards into basic human decency.
- g42gregory 3y ago
  I am not sure how do you bully someone into basic human decency. Isn't that a contradiction in terms?
  - happytiger 3y ago
    The end justifies the means is a paraphrase of Niccolò Machiavelli. The idea that the “desired result” is so necessary and so important that any method, even a morally “bad one,” may be used to achieve it, seems very popular. People lap up what they perceive to be justice against the machine, but it’s the system creating the problem in the first place. That is to say the focus shouldn’t be on activist investors waging a war on change from the outside, but a popular defunding of companies that can’t responsibly deliver products from the demand side, and “the system” doesn’t want you to know that’s how to change it. So we get fantasies of caped justice with appended hedge fund quality wealth and an appetite for morality and change, which of course is wishing for the very people who maintain the system to become the change: unlikely. But then again it was the very same author who wrote: > A man who is used to acting in one way never changes; he must come to ruin when the times, in changing, no longer are in harmony with his ways.
    - mock-possum 3y ago
      The doctrine of “no bad tactics, only bad targets.”
      - happytiger 3y ago
        Indeed. Exactly.
    - bartvk 3y ago
imgabe 3y ago
> The new shareholder resolution calls on the oil company to reduce its Scope 3 emissions or those that result from the use of its products Exxon is supposed to reduce emissions from their customers using their products? How? If I buy Exxon gas and take it home and light it on fire in the back yard is an Exxon employee supposed to come and stop me? There’s definitely a lot of things we can do to fight climate change but passing nonsensical shareholder resolutions demanding impossible things isn’t one them.
- HenryBemis 3y ago
  Yes, that's a sample of one. YOU can/will do that. A government buying $50m worth of oil & gas for its needs (i.e. Army vehicles) won't be doing that. So unless you are willing to buy $50m then it doesn't matter how much oil & gas you burn in your background ($100 perhaps before the neighbors call the police and the FD on you?) The fuel is meant to be consumed. Majority of the fuel purchased will end up being consumed a very certain way. Now, how do manage the cost of this handling? I recently listened to some EU minister saying that "super markets include the cost of recycling in the price of the milk carton". I didn't know that when I buy something from a super market I pre-pay for the recycling - which made me feel stupid since we pay extra in admin-costs in our building for this - anyway such is life). So back to the oil & gas. Let's assume that 99.9% of oil & gas will be consumed in the standard process. We can make an average calculation on the technology it will be consumed in (i.e. 50yo old bus vs new bus - different polluting outputs). With a certain (?) degree of confidence we can estimate the pollution that will be created. Is it absolute? No. Is it better than nothing?
  - imgabe 3y ago
    Right, I picked a deliberately silly example. I just don't understand what these activists think Exxon is going to do. Do they think Exxon can dictate to the military how the military is allowed to use the fuel they buy? Because...uh...they can't. The military will buy fuel and do whatever it wants with it and Exxon can't do a thing about it.
  - wasmitnetzen 3y ago
    > I didn't know that when I buy something from a super market I pre-pay for the recycling - which made me feel stupid since we pay extra in admin-costs in our building for this You're probably paying for trash collection, not the recycling itself, and you're paying for the disposal of the non-recyclable trash.
mariuolo 3y ago
Can't shareholders fire those execs?
- ur-whale 3y ago
  Getting corporations to do things that are your trivially obvious right usually require armies of lawyers.
rdtsc 3y ago
Huh, pretty interesting https://www.follow-this.org/how-it-works/ https://www.follow-this.org/how-it-works/ So you invest in oil companies so you can vote on their board? But it’s still investing in oil companies and giving them more money. It’s probably legit, but it does feel like a scam.
- megapolitics 3y ago
  > But it’s still investing in oil companies and giving them more money. Buying shares on the market from third parties does not give the company more money.
  - leereeves 3y ago
    Not immediately, but companies can take advantage of the higher price by issuing stock. For example, GameStop raised over a billion dollars while Redditors were trying to get rich by memeing it to the moon.
  - rdtsc 3y ago
    Not directly but it makes the price go up so the company can raise money easier, issue new shares at the higher price, etc.
- Super_Jambo 3y ago
  Buying shares in the secondary market isn't directly giving money to the oil company in question.
- bjackman 3y ago
  There are also whole ETFs that state a similar purpose: https://etf.tcw.com/ https://etf.tcw.com/ I am also unsure about how to feel about it. I actually bought a bunch of VOTE after it launched [1], I am not sure if this was a good thing to do, but that was not money I was gonna give to charity otherwise (I would have invested it via other "ESG-oriented" systems that I don't entirely trust as being good for the world). [1] https://www.cnbc.com/2021/06/22/underdog-activist-engine-no-1-is-launching-an-etf-after-big-exxon-win.html https://www.cnbc.com/2021/06/22/underdog-activist-engine-no-...
dtnewman 3y ago
Some of the comments here are missing some key information. A shareholder with $2000 in shares held for three years is entitled to propose a shareholder resolution. You don’t need huge amounts of money to do this. I’m sure that many people on HN can submit proposals if they wish. What is unique and newsworthy here is that typically companies go to the SEC to remove shareholder proposals that they think are frivolous. In this case, they sidestepped the SEC and took it straight to court, which is a very aggressive move.
- leereeves 3y ago
  > typically companies go to the SEC The SEC declared in 2021 that the current administration would no longer allow the exclusion of proposals like this. "Staff will ... instead focus on the social policy significance of the issue that is the subject of the shareholder proposal." And: "Going forward we would not concur in the exclusion of similar proposals that suggest [climate change] targets." https://www.sec.gov/corpfin/staff-legal-bulletin-14l-shareholder-proposals https://www.sec.gov/corpfin/staff-legal-bulletin-14l-shareho... So there was no reason to ask the SEC, who have already stated their position. The next recourse is to ask the courts to review SEC policy.
wakawaka28 3y ago
The trouble is, companies exist to make money. Even if you have control of a company and don't care about profits, everyone else does. That's the whole point of shareholders overruling CEOs. I don't see a difference between that and majority shareholders who want to set money on fire. If you deliberately pursue actions with little benefit that lose lots of money, any other shareholder should be able to fight it as a breach of duty. Imagine if Exxon took their massive capital and started sabotaging green tech companies by infiltrating their boards and making bad decisions. There is no difference between that and what these investors are doing. Investing in any company to sabotage them should be against the law, especially if you have competing interests.

48 points by botanical 3y ago

Can I buy shareholder voting rights separately from the actual money value of the shares? Or do a massive leveraged buy of shares just before the vote, then sell afterwards. Obviously if I do this and force a shareholder decision not good for company profits, the share price would be lower when I sell and I'd lose a lot of money.

meheleventyone 3y ago
You’d also have to find enough shares to buy and it’d basically be a hostile takeover.
deleted 3y ago
[deleted]
arcticbull 3y ago
Ideally the company has a dual-class structure where one class of share has more voting rights than the other - and you find someone who will sell them to you. This will significantly reduce your capital risk. A dual-class structure is how some founders (like Zucc) retain majority control of the company despite a minority beneficial ownership stake. You could probably also talk people into nominating you as their proxy at the shareholder vote.
- fakedang 3y ago
  It's not possible to split into that structure post-IPO though - it's illegal. Most old companies haven't got that kind of share class separation.
  - londons_explore 3y ago
    You could theoretically, with shareholder approval, take a company private, split the share classes, and then IPO again and resell the shares to the same people. In the interim while private, some bank would be the 100% owner, with some contract saying they must re-IPO within 24 hours and resell shares for 1 cent to the original list of shareholders. And I don't see any reason you couldn't do all this on one day - you just need approval of 51% of the shareholders and the board.
    - fakedang 3y ago
      > And I don't see any reason you couldn't do all this on one day - you just need approval of 51% of the shareholders and the board. Because filing for re-IPO is a very complicated affair in itself? Though the rest of it is fairly correct - it is basically the PE playbook.
vasco 3y ago
Easier to campaign for other shareholders to vote for your proposal in advance. It can be like a political campaign, it's just rare for people to try it, but nothing stops you from convincing other shareholders of voting for your resolutions well in advance of the meeting.
- cm2187 3y ago
  But in this case the activism is explicitly about hurting the company financially. 1) it is unlikely that you convince other shareholders to vote against their interest 2) the board and management have a fiduciary to their shareholders, including the ones who do not vote (which is often the majority of shareholders, how often did you show up at the general assembly of a stock you own in your portfolio, or a stock held in an ETF which typically do not vote). I suspect this is what the Exxon lawsuit will argue.
drpossum 3y ago
The dual structure of shares was mentioned, but, let's say there's not "non voting shares". "Can I buy shareholder voting rights separately from the actual money value of the shares?": Buying shareholder voting rights is the actual money value of the shares.
- growse 3y ago
  If that were true, non-voting shares would be worthless. The value also includes a future claim on the company's assets and cash flows.
  - cm2187 3y ago
    Also that's kind of a dodgy silicon valley corporate structure, you don't typically find that in blue chip companies.
    - dragonwriter 3y ago
      Preferred stock, usually with reduced or no voting rights, is very much older than Silicon Valley.
  - drpossum 3y ago
    Yes, it was qualified with "let's say non-voting shares don't exist" for a reason.
- lambertsimnel 3y ago
  Don't mutual funds separate voting rights from beneficial ownership? So maybe one way to gather voting rights for other people's shares would be to run a mutual fund. Shares can also be borrowed (for a fee) for the purpose of short selling, but maybe they could also be borrowed for their voting rights.

DoingIsLearning 3y ago

I would love to see a chain reaction forming a collective of people with 'fuck you money' and just going around Oil&Gas and bully boards into basic human decency.

g42gregory 3y ago
I am not sure how do you bully someone into basic human decency. Isn't that a contradiction in terms?
- happytiger 3y ago
  The end justifies the means is a paraphrase of Niccolò Machiavelli. The idea that the “desired result” is so necessary and so important that any method, even a morally “bad one,” may be used to achieve it, seems very popular. People lap up what they perceive to be justice against the machine, but it’s the system creating the problem in the first place. That is to say the focus shouldn’t be on activist investors waging a war on change from the outside, but a popular defunding of companies that can’t responsibly deliver products from the demand side, and “the system” doesn’t want you to know that’s how to change it. So we get fantasies of caped justice with appended hedge fund quality wealth and an appetite for morality and change, which of course is wishing for the very people who maintain the system to become the change: unlikely. But then again it was the very same author who wrote: > A man who is used to acting in one way never changes; he must come to ruin when the times, in changing, no longer are in harmony with his ways.
  - mock-possum 3y ago
    The doctrine of “no bad tactics, only bad targets.”
    - happytiger 3y ago
      Indeed. Exactly.
  - bartvk 3y ago

imgabe 3y ago

> The new shareholder resolution calls on the oil company to reduce its Scope 3 emissions or those that result from the use of its products Exxon is supposed to reduce emissions from their customers using their products? How? If I buy Exxon gas and take it home and light it on fire in the back yard is an Exxon employee supposed to come and stop me? There’s definitely a lot of things we can do to fight climate change but passing nonsensical shareholder resolutions demanding impossible things isn’t one them.

HenryBemis 3y ago
Yes, that's a sample of one. YOU can/will do that. A government buying $50m worth of oil & gas for its needs (i.e. Army vehicles) won't be doing that. So unless you are willing to buy $50m then it doesn't matter how much oil & gas you burn in your background ($100 perhaps before the neighbors call the police and the FD on you?) The fuel is meant to be consumed. Majority of the fuel purchased will end up being consumed a very certain way. Now, how do manage the cost of this handling? I recently listened to some EU minister saying that "super markets include the cost of recycling in the price of the milk carton". I didn't know that when I buy something from a super market I pre-pay for the recycling - which made me feel stupid since we pay extra in admin-costs in our building for this - anyway such is life). So back to the oil & gas. Let's assume that 99.9% of oil & gas will be consumed in the standard process. We can make an average calculation on the technology it will be consumed in (i.e. 50yo old bus vs new bus - different polluting outputs). With a certain (?) degree of confidence we can estimate the pollution that will be created. Is it absolute? No. Is it better than nothing?
- imgabe 3y ago
  Right, I picked a deliberately silly example. I just don't understand what these activists think Exxon is going to do. Do they think Exxon can dictate to the military how the military is allowed to use the fuel they buy? Because...uh...they can't. The military will buy fuel and do whatever it wants with it and Exxon can't do a thing about it.
- wasmitnetzen 3y ago
  > I didn't know that when I buy something from a super market I pre-pay for the recycling - which made me feel stupid since we pay extra in admin-costs in our building for this You're probably paying for trash collection, not the recycling itself, and you're paying for the disposal of the non-recyclable trash.

mariuolo 3y ago

Can't shareholders fire those execs?

ur-whale 3y ago
Getting corporations to do things that are your trivially obvious right usually require armies of lawyers.

rdtsc 3y ago

Huh, pretty interesting https://www.follow-this.org/how-it-works/ https://www.follow-this.org/how-it-works/ So you invest in oil companies so you can vote on their board? But it’s still investing in oil companies and giving them more money. It’s probably legit, but it does feel like a scam.

megapolitics 3y ago
> But it’s still investing in oil companies and giving them more money. Buying shares on the market from third parties does not give the company more money.
- leereeves 3y ago
  Not immediately, but companies can take advantage of the higher price by issuing stock. For example, GameStop raised over a billion dollars while Redditors were trying to get rich by memeing it to the moon.
- rdtsc 3y ago
  Not directly but it makes the price go up so the company can raise money easier, issue new shares at the higher price, etc.
Super_Jambo 3y ago
Buying shares in the secondary market isn't directly giving money to the oil company in question.
bjackman 3y ago
There are also whole ETFs that state a similar purpose: https://etf.tcw.com/ https://etf.tcw.com/ I am also unsure about how to feel about it. I actually bought a bunch of VOTE after it launched [1], I am not sure if this was a good thing to do, but that was not money I was gonna give to charity otherwise (I would have invested it via other "ESG-oriented" systems that I don't entirely trust as being good for the world). [1] https://www.cnbc.com/2021/06/22/underdog-activist-engine-no-1-is-launching-an-etf-after-big-exxon-win.html https://www.cnbc.com/2021/06/22/underdog-activist-engine-no-...

dtnewman 3y ago

Some of the comments here are missing some key information. A shareholder with $2000 in shares held for three years is entitled to propose a shareholder resolution. You don’t need huge amounts of money to do this. I’m sure that many people on HN can submit proposals if they wish. What is unique and newsworthy here is that typically companies go to the SEC to remove shareholder proposals that they think are frivolous. In this case, they sidestepped the SEC and took it straight to court, which is a very aggressive move.

leereeves 3y ago
> typically companies go to the SEC The SEC declared in 2021 that the current administration would no longer allow the exclusion of proposals like this. "Staff will ... instead focus on the social policy significance of the issue that is the subject of the shareholder proposal." And: "Going forward we would not concur in the exclusion of similar proposals that suggest [climate change] targets." https://www.sec.gov/corpfin/staff-legal-bulletin-14l-shareholder-proposals https://www.sec.gov/corpfin/staff-legal-bulletin-14l-shareho... So there was no reason to ask the SEC, who have already stated their position. The next recourse is to ask the courts to review SEC policy.

wakawaka28 3y ago

The trouble is, companies exist to make money. Even if you have control of a company and don't care about profits, everyone else does. That's the whole point of shareholders overruling CEOs. I don't see a difference between that and majority shareholders who want to set money on fire. If you deliberately pursue actions with little benefit that lose lots of money, any other shareholder should be able to fight it as a breach of duty. Imagine if Exxon took their massive capital and started sabotaging green tech companies by infiltrating their boards and making bad decisions. There is no difference between that and what these investors are doing. Investing in any company to sabotage them should be against the law, especially if you have competing interests.