Exxon Mobil Introduces Automatic Voting Mechanism to Counter Shareholder Activism

Exxon Mobil Corporation has introduced a unique shareholder voting mechanism that allows individual investors to automatically vote in line with the board's recommendations during the annual shareholder meeting. This move is aimed at helping the largest oil producer in the United States counter shareholder activism.

The U.S. Securities and Exchange Commission (SEC) responded on Monday in a letter stating that it would not object to the plan as long as Exxon Mobil meets certain conditions, including sending annual participation reminders to investors who choose to join the mechanism. This response from the SEC could prompt other companies to follow suit.

In recent years, the oil giant has been actively countering activist shareholders, and this new mechanism could help it garner more support from individual shareholders. Exxon Mobil has an unusually large group of individual shareholders, who typically have low voting rates but mostly support the board's decisions.

Exxon Mobil stated in a release that individual investors currently "do not have access to many of the convenient and efficient voting services available to large institutional investors. Activist groups often exploit this gap to push political agendas at the expense of shareholder value."

Exxon Mobil announced that individual investors will receive notifications through their brokers in the coming weeks, allowing them to register for free for a program that aligns their votes with management recommendations. If investors change their minds, they can opt out of the program and vote manually according to the instructions in the proxy statement. Exxon Mobil claims to be the first company in the United States to offer this option.

The company stated, "From a fairness perspective, it is time to create a level playing field."

Exxon Mobil noted that nearly 40% of its shares are held by individuals, but only a quarter of these individual shareholders participate in proxy voting, although most support the board. In most large U.S. companies, individual investors hold about 30% of the shares. When companies face closely contested board elections or activist proposals with ideological overtones, the individual investor group becomes a target for both sides. Currently, only a few well-known U.S. companies, such as Apple and Tesla, have individual shareholding ratios comparable to Exxon Mobil.

In recent years, Exxon Mobil has faced several high-profile shareholder activism campaigns related to climate issues. The most notable incident occurred in 2021 when three dissenting directors were elected to the company's board.

Last year, even after activist investment firms Arjuna Capital and Follow This withdrew their proposals to reduce Exxon Mobil's greenhouse gas emissions, the company continued to sue these two firms.

In May of last year, after a judge dismissed Exxon Mobil's lawsuit against Follow This, the founder of the firm, Mark van Baal, stated in a release that Exxon Mobil's actions were infringing on the rights of all shareholders to propose measures related to climate change drivers—emissions issues.

In May of this year, Exxon Mobil held its latest annual shareholder meeting. Due to its previous strong opposition to proposal submitters, this meeting was the first since 1958 to have no qualified shareholder proposals.

Exxon Mobil pointed out in a statement that several top fund management companies have already launched similar options, allowing their investors to vote according to the company's board recommendations. However, these fund companies also allow users to choose other policies, such as supporting more climate and social initiatives.

At an energy conference held in Austin last Friday, Exxon Mobil's CEO stated that the company hopes to prevent activists from submitting the same proposals year after year.

The CEO said, "In my view, if someone wants to play that game, we can play along too."