An upstart fund that owned only a minuscule share of energy giant Exxon’s stock unseated at least two of its board members. Expect more Davids taking on Goliaths.
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On Wednesday, what was once unthinkable happened: An upstart hedge fund, Engine No. 1, was able to unseat at least two board members at Exxon Mobil despite holding only 0.02% of the shares of the $250 billion company.
“We heard from shareholders today about their desire to further” efforts to achieve low-carbon solutions and reduce costs, said Exxon (ticker: XOM) CEO Darren Woods, in a statement after the vote.
Such David-versus-Goliath wins may soon become more common. Institutional shareholders such as BlackRock (BLK) and State Street (STT)—the type that smaller activists want on their side—have updated proxy-voting guidelines to focus more on board diversity, human-capital management, and climate change, according to data compiled by proxy solicitor Okapi Partners.
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Shareholder proposals that push companies to be more eco-friendly or to focus on hiring and promoting women and minorities have rarely received enough votes to garner further discussion, let alone win.
But as retail investors have focused on environmental, social, and corporate governance issues, the big money has realized that it has to follow suit. Even Institutional Shareholder Services and Glass Lewis, which advise big investors on proxy voting, have made gender and racial diversity on boards a priority, says Okapi.
While many companies, particularly those belonging to the Business Roundtable, have started working on these issues, the pressure is on to show results before they become a proxy battle.
Write to Carleton English at [email protected]
