Engine No. 1, an investment firm purpose-made to create long-standing value by harnessing the power of capitalism, won the election of at least two board seats at Exxon following a historic battle over the gas giant’s 12-member board, signaling the support of investors for greater disclosure from the business as the world moves away from fossil fuels.
On Wednesday, the CEO of ExxonMobil, Darren Woods, said on CNBC’s Closing Bell that they’re looking forward to welcoming the new Board directors, He looks forward to helping them understand their plans and then hear their perceptions.
Engine No. 1 has a 0.02 percent stake in ExxonMobil and has been targeting the firm since December 2020, pushing it to review its part in a zero-carbon world.
ExxonMobil said the voting on Engine No. 1’s other two candidates hadn’t yet been fully tallied as of the early afternoon, and the final composition of the board remained uncertain.
The two Engine No. 1 candidates who won Board seats are a former Chief Executive of the refiner, Andeavor Gregory Goff, and a former Executive at a Finnish renewable energy firm, Neste, Kaisa Hietala.
An energy analyst at Raymond James, Pavel Molchanov, told Forbes just after the vote It could encourage more proxy fights by activist investors against oil giants, but he thinks ExxonMobil would be slow to make any critical changes in its energy production mix.
Exxon’s Historic Annual Loss in 2020
On Monday, ExxonMobil said it would add two new directors, one with climate experience and the other with energy industry experience over the coming twelve months but Engine No. 1 stated that would be unsatisfactory, arguing the Board needs directors who have experience in running profitable energy businesses and are committed to speaking the risks of climate change into a long-lasting business plan.
Chief Advocacy Officer Jonas Kron, and portfolio manager at Trillium Asset Management Elizabeth Levy, wrote by email to Forbes that ExxonMobil’s Board and Management has simply run out of time after years of trying to stave off the inevitable. Moreover, climate-focused investors have told ExxonMobil for years to ponder honestly about climate change risk management. They think fresh, outside perspectives and proficiency on the Board would be a welcome modification.
Engine No. 1 also pointed to ExxonMobil’s under-performance in past years, including the firm’s historic net annual loss of 22.4 Bn dollars last year. However, the business waved to a profit in 2021’s first quarter due to aggressive cost-cutting. And while ExxonMobil stock has surged 42.3 percent year to date, shares are still down over forty percent from their all-time closing high of 104.38 dollars in June 2014.
Pavel Molchanov stated that ExxonMobil is not the kind of firm where a change in the Board would rapidly lead to a vital transformation of the underlying business. He said that other big oil companies like BP, Total, and Royal Dutch Shell had revealed ambitious energy transition plans; it would be 2030 or later before renewables and low-carbon energy become an important portion of their revenue.