Just a few short weeks after returning home from General Conference, the governing convention and legislative body of The United Methodist Church (UMC), I’m still filled with excitement about Wespath’s support of a renewed, aligned and inclusive Church.

As I’ve written before, one of the most rewarding things about working at Wespath is our unique ability to align our investments with UMC values. This is a “Yes and” situation. We align with the UMC’s Social Principles and John Wesley’s admonition that there is no holiness without social holiness. We focus on our fiduciary obligations to our participants and investors to maximize returns. And we try to tackle systemic risks within financial markets that impact market-wide returns, like human rights and environmental issues.

At Wespath, we’ve set clear expectations for our asset manager partners and the companies in which we invest, and we use these relationships to advocate for change through shareholder engagement.

You may have seen headlines recently about a major energy company, ExxonMobil. Earlier this year, two organizations that are Exxon investors filed a shareholder resolution—a formal proposal submitted by a company’s shareholders—asking Exxon to curb its greenhouse gas emissions more quickly than its current plans indicate. Exxon responded by suing these shareholders.

For Wespath, an investor which employs shareholder engagement techniques like filing resolutions, Exxon’s decision to sue its own shareholders was a bridge too far. Even prior to this action, we had concerns related to Exxon’s management of climate risks. And just a few years ago, shareholders were so dissatisfied with the company’s climate strategy that they elected several of their own board director nominees rather than Exxon’s recommended nominees.

Today, Exxon’s resistance to change has taken on a new tone: picking on its own investors.

To be clear: Wespath believes shareholder democracy is essential. The U.S. Supreme Court holds that corporations have first amendment speech and religious rights as associations of people, so owners of these companies (aka investors or shareholders) must have a voice in corporate behavior. That’s true regardless of the investor’s size and whether the company’s management agrees with them!

The filers of the original resolution—and the subjects of Exxon’s lawsuit—are two relatively small investors, Arjuna Capital and Follow This. These shareholders followed procedures outlined by the U.S. Securities and Exchange Commission (SEC) to submit their resolution.

Exxon claims that resolutions similar to the one submitted by Arjuna Capital and Follow This were already considered and rejected by shareholders. Companies can object to shareholder resolutions through the SEC if they think shareholder proposals are inappropriate or redundant. Instead of taking this typical route, Exxon got litigious. In my eyes, that’s a form of corporate bullying and intimidation. And no one likes a bully.

Exxon’s complaint is with the SEC’s interpretation and application of the rules allowing shareholder resolutions, not with these owners who followed the established rules—nonetheless, Exxon chose to take negative action against these owners. To use a sports analogy, suing Arjuna Capital and Follow This is like blaming the other team when you’re upset with the rules of the game or the referees.

To make matters worse, Exxon has exhibited a complete lack of grace throughout this saga. Exxon initially engaged in dialogue with Arjuna Capital and Follow This. After Exxon took the unprecedented step of filing a lawsuit, Arjuna Capital and Follow This withdrew their resolution and agreed not to submit it again. Still, Exxon refused to drop the case!

Exxon is, in essence, trying to get the federal courts to change regulatory policy, i.e., the SEC’s rules for all shareholder proposals, by means of litigation against its owners—who followed the SEC process and ultimately agreed to withdraw their resolution. Exxon’s management is wasting not just the time and resources of its owners, but is actively undermining a critical tool of shareholder democracy. 

As if that weren’t enough, the icing on the cake is that Exxon’s complaint seeks to have Arjuna Capital and Follow This pay for Exxon’s costs to sue them! My English wife would call that “cheeky.”

I mentioned our desire to align Wespath’s investment actions with UMC values. I think Exxon’s lack of grace in this circumstance is something that would disappoint any Methodist or faith-based shareholder like Wespath.

This lack of grace starts to feel desperate. It’s almost as though the “low fuel” warning just pinged, and Exxon’s management has run out of creativity, transparency and interest in engaging in good faith with shareholders. We believe it’s time for change before the company is truly running on empty.

Wespath filed a notification with the SEC that we intend to vote against two director nominees (Darren W. Woods, Executive Chair and CEO, and Joseph L. Hooley, Lead Independent Director) at ExxonMobil's annual meeting of shareholders on May 29, 2024, due to their oversight of the company’s lawsuit against shareholders, among other things. Mercy Investment Services co-filed the notification with Wespath.
 
Compared to historical results from last year’s proxy season, Director Hooley’s support ranked in the bottom 10% of all director candidates from S&P 500 companies, based on data published by shareholder engagement consultant Georgeson. More information can be found here.

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