The WSJ reports:
Exxon Mobil is suing two sustainable investment firms in a bid to block them from putting forward a shareholder proposal that would commit the oil company to further curb its greenhouse-gas emissions and target its customers’ emissions. ...
“Defendants are asking Exxon Mobil to change its day-to-day business by altering the mix of—or even eliminating—certain of the products that it sells,” the oil company said in the lawsuit. Their goal, it alleged, is “to force Exxon Mobil to change the nature of its ordinary business or to go out of business entirely.”
The problem Exxon is facing is one about which I have frequently blogged; namely, that Gary Gensler's SEC is now full of ESG activists who he has authorized to allow shareholders to micromanage corporate business operations via Rule 14a-8 shareholder proposals. In July of last year, for example, I noted that:
As I detailed at some length in my article, Revitalizing SEC Rule 14a-8’s Ordinary Business Exclusion: Preventing Shareholder Micromanagement by Proposal, 85 Fordham L. Rev. 705 (2016), the SEC shareholder proposal was never intended to allow shareholders to manage--let alone micro-manage--the corporations in which they invest. Yet, in recent decades, the SEC staff has basically eviscerated those safeguards.
Back in November 2021, I had predicted that Gensler approved changes to how the SEC staff interprets Rule 14 a-8 would lead to that result:
In effect, the SEC is saying that corporate proxy statements can be conscripted by somebody owning a trivial amount of stock to solve "societal problems" that may have virtually no nexus to the company.
In addition, the SEC is encouraging shareholders to micromanage the company when it comes to woke issues:
For example, a proposal requesting a company set greenhouse gas emission targets, but providing the company with discretion on a method for its implementation, will no longer meet the threshold for exclusion based on micromanagement.
How is deciding corporate environmental policy not micromanagement?
Wachtell concludes:
it is not clear which social issues the Staff will deem broad enough to “transcend the ordinary business,” beyond the Staff’s examples of proposals relating to human capital management with a broad social impact or to greenhouse gas emissions targets without specific methodologies.
Piffle. It is perfectly obvious that the SEC has become a tool of the Warren/Sanders/AOC wing of the Democratic Party and is now leading the charge towards woke capitalism. I feel confident in predicting that woke shareholder proposals will breeze through the process. In the unlikely event that conservatives emulated progressives and started using the shareholder proposals to effect their policy goals, however, I'd bet the SEC allows their exclusion.
The message seems to finally be reaching a wider audience. The WSJ report continues:
Under normal circumstances, companies that want to exclude shareholder proposals from their proxy statements submit a request to the SEC. Exxon’s move is an unusual attempt to bypass that process as the SEC during the Biden administration has become less inclined to let companies block proposals.
In the lawsuit, Exxon said the shareholder proposal and proxy voting process has become “ripe for abuse by activists.”
In 2021, the SEC reversed a Trump-era policy that made it easier for public companies to reject shareholder proposals, which—though typically nonbinding—have long been a thorn in the side of executives. The guidance indicated that SEC staff would be more receptive to shareholder proposals regarding issues that have “a broad societal impact” and focus less on an issue’s relevance to a particular company.
It seems woke capitalism remains Gary Gensler's main policy goal.
