Shareholder Proposal Lawsuit – Our responsibility to fight back

Key takeaways:

  • The intent of our lawsuit is simple – we want clarity on a process that has become ripe for abuse. 
  • The current process to get proxy proposals excluded is flawed.
  • We believe activists with minimal or even no shares should not be permitted to re-submit proposals that do not grow long-term shareholder value.

ExxonMobil filed a lawsuit on Jan. 22, 2024, to exclude Arjuna Capital and Follow This’s shareholder proposal from our 2024 proxy statement. 

In each of the past two years, our shareholders overwhelmingly rejected proposals with substantially the same subject matter. This Arjuna Capital / Follow This proposal was simply another resubmission. 

Repeatedly submitting proposals that investors overwhelming reject is not in the interests of investors or a working shareholder proposal system. We have a responsibility to call attention to the misuse of proposals by professional activist groups who have publicly stated they do not care about growing shareholder value while they pursue their own agendas. We hope to continue the dialogue on these issues.

  • January 2021: Change in SEC administrations
    • Immediately after the change, the Interfaith Center of Corporate Responsibility (ICCR) and the Shareholder Rights Group, along with fellow activist groups Ceres and US SIF, submitted a letter to the SEC asking for changes to the shareholder proposal process to modify its approach to:
      1. The Ordinary Business exclusion;
      2. The Relevance exclusion;
      3. The Substantial Implementation exclusion; and
      4. To repeal Staff Legal Bulletins 14I, 14J and 14K 
    • Arjuna Capital, a member of ICCR, hires the lawyer behind the Shareholder Rights Group to represent them in no-action letters before the SEC.
    • The letter was referred to directly by the SEC in its 2022 rulemaking, see SEC records on page 13 and footnote 35
  • February 4, 2021: Arjuna Capital, together with Shareholder Rights Group, signs a letter asking the SEC to modify its approach to:
    1. The Ordinary Business exclusion;
    2. The Relevance exclusion; and 
    3. The Substantial Implementation exclusion 
  • November 3, 2021: SEC issued Staff Legal Bulletin 14L, which modified exactly the things the activists requested:
    1. The Ordinary Business exclusion; 
    2. The Relevance exclusion; 
    3. The Substantial Implementation exclusion (indirectly); and 
    4. To repeal Staff Legal Bulletins 14I, 14J and 14K

    The modified bulletin permits the SEC to deny no-action relief for companies facing activist proposals. This action immediately results in a decrease in no-action relief, while the number of proposals submitted continues to increase – SEC Commissioner Mark Uyeda has noted this action

    Staff Legal Bulletin 14L points to a Follow This proposal to ConocoPhillips seeking emission-reduction targets as the prime example of proposals that would no longer receive no-action relief on Ordinary Business. The SEC denied no-action relief to ConocoPhillips on the proposal, which is the predecessor to the proposals we received from Arjuna Capital and Follow This for the 2022, 2023 and 2024 proxy seasons. 
  • Spring 2022: The SEC begins significantly changing its decisions under the Resubmission and Duplication exclusions. Two examples: 
    • Microsoft was granted resubmission exclusion in 2021, but on a similar issue in 2022, Alphabet was denied resubmission exclusion.
    • Chevron was granted the duplication exclusion in 2021, but on a similar issue in 2022, Chubb was denied duplication exclusion.
  • September 2022: The SEC proposes new rules to make further changes to the shareholder proposal process.   
    • The proposed changes impact: 
    1. The Substantial Implementation exclusion;
    2. The Duplication exclusion; and
    3. The Resubmission exclusion.

The above examples show that before the rules came out, the standard had already been changed. 

We believe the increase in the number of proposals each year – coupled with the decrease in votes in favor of these proposals plus far fewer no-action requests being submitted in a system that no longer honors them – show a system that’s not serving the best interests of investors.

  • December 14-15, 2023: Arjuna Capital and Follow This, who do not own any direct shares, submit proposals related to Scope 3 emission-reduction targets. We have publicly provided our estimated Scope 3 emissions from the use of our oil and natural gas production for several years. We have also been very clear in our Advancing Climate Solutions report and previous proxy statements why we believe setting Scope 3 targets is a flawed approach with significant unintended consequences. 
    • The proposal addresses substantially the same subject matter as the 2022 and 2023 proposals – both of which were overwhelmingly rejected by our shareholders.
    • This proposal was designed to do one thing – put us out of business. That’s literally what the proponents said.
  • January 21, 2024: We file a complaint in U.S. district court to prevent the proposal from going to vote during our 2024 annual shareholder meeting. We believe the proposal violates the written rules, despite recent examples in Staff Legal Bulletin 14L and subsequent decisions that have allowed similar proposals in some cases.
  • February 2, 2024: Arjuna Capital and Follow This withdrew their shareholder proposal. 
  • February 5, 2024: We ask the court to continue the suit because, even though the proposal was withdrawn, the underlying issue remains and must be resolved.
  • February 28, 2024: The U.S. Chamber of Commerce, representing about 300,000 direct members, and the Business Roundtable, representing CEOs of more than 200 of America’s leading companies, filed a brief with the court in support of our position.
  • Today: The case remains ongoing.
  • Going Forward: We hope to continue the dialogue on these issues.

To be clear, we support the rights of shareholders to submit proposals, but these rights are increasingly being infringed by activists masquerading as shareholders. The SEC has rules in place to stop this approach, and our lawsuit simply calls for the proxy rules be enforced as they were written. We believe all investors have a vested interested in clear interpretations, regardless of viewpoint. 

Related articles:

  1. Exxon shareholder lawsuit marks end of ESG era
  2. U.S. oil giant Exxon Mobil sues activist investors to prevent climate proposals
  3. ExxonMobil sues activist investors in new ESG fight


Last updated February 29, 2024 – SEC link to ICCR website was updated to work

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