By Dana Drugmand
Exxon cannot block its shareholders from voting on two new shareholder proposals, one calling on the oil giant to create a new board committee to address climate change and the other calling on the company to more fully disclose political contributions to tax-exempt organizations, including trade associations and other 501(c)(4) or “dark money” organizations.
In separate responses, the Securities and Exchange Commission (SEC) Office of Chief Counsel last week denied requests by Exxon to omit the proposals. In each instance, the SEC said Exxon’s current public disclosures and its policies and procedures “do not substantially implement the proposal.”
The SEC recently allowed Exxon to block voting on a separate shareholder proposal, which, if passed, would have required the oil giant to set and disclose greenhouse gas emissions reduction targets.
The commission’s decision to reject ExxonMobil’s requests to omit the two most recent proposals means the two resolutions will likely be included in material presented to shareholders and be voted on at the company’s upcoming annual meeting.
If both pass, the proposals together could illuminate Exxon’s corporate approach to climate change-related risks and could reveal whether it is funding candidates and organizations whose stance on climate change-related issues match its own public statements.
Exxon is facing a growing number of climate change-related lawsuits and investigations by state attorneys general over its potentially deceptive climate change disclosures. It is also a defendant in more than a dozen climate liability suits brought by municipalities across the country.
One of the proposals, submitted by the Unitarian Universalist Association (UUA), would require the company to disclose Exxon’s policy for making indirect political contributions and expenditures through intermediaries like trade associations, social welfare organizations and other 501(c)(4), or “dark money” groups. It would also require Exxon to disclose those contributions.
In its request to block voting on the proposal, Exxon said it already discloses its policies and practices for political contributions on its website.
The UUA said Exxon’s current policy and disclosures cover only direct contributions.
“Exxon Mobil’s Policy does not address indirect electoral spending, nor does the Company’s website disclosure include payments to social welfare organizations or trade associations,” said the UUA in a response letter submitted to the SEC.
Ultimately, the SEC agreed, writing in its decision that Exxon’s policies and procedures “do not substantially implement the proposal.”
Exxon also tried to sidestep a proposal by Arjuna Capital on behalf of chief investment officer Adam Seitchik calling for the company to create a new board committee to “assess the company’s response to climate change-related risks and opportunities, including the potential impacts of climate change on business, strategy, financial planning, and the environment.”
In an effort to block voting on the proposal, Exxon argued that a separate committee on climate change was unnecessary because existing board committees already provide adequate oversight, including its Public Issues and Contributions Committee (PICC), which oversees the company’s safety, health and environmental performance including issues related to climate change.
ExxonMobil did not immediately respond to a request for comment, but in a letter to the SEC said, “the Company believes that including climate issues as part of the PICC’s duties is a reflection of the importance placed by the Company on the imperative to review and address those risks and matters across the Company holistically. The Company believes this review is more effectively accomplished by being part of the broader mandate of the PICC than if a stand alone climate committee were to be established that only considered climate matters.”
In response to Exxon’s attempt to block voting on the proposal, Seitchik said Exxon’s PICC has no specific mention of climate change in its charter and while it may address climate change to an extent, the wide array of issues under its jurisdiction do not provide the specialized focus necessary to address the “more strategic climate change issues concerning investors, including the emissions associated with burning the company’s product.”
Seitchik also pushed back on Exxon’s contention that the 2017 addition of climate expert Susan Avery to its board and to the PICC precludes the need for the proposed new climate committee.
Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital, said low carbon business planning needs to be a strategic focus moving forward, and necessitates a board level committee focused solely on climate change.
“As it stands, with one climate expert on the board, Exxon is not adequately preparing for the biggest threat to its business this century – simply tacking climate change onto a long list of board functions is not enough,” said Lamb, adding that the SEC’s decision to allow the proposal to move forward is in alignment with investors’ long-term interests.
“Climate change risk for companies like Exxon and Chevron has been elevated to an existential crisis.”