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ExxonMobil: Exercising shareholder rights for climate change and better performance

The financial risks of social concerns is real. Shareholders are no longer standing idly by, hoping the company they’ve invested in will do what’s best for the environment and in turn, the future of the company.

Recently, shareholders in oil company ExxonMobil pushed for changes to the Board of Directors due to the company’s inaction with regards to climate change and its lagging financial performance. These investors argued that ExxonMobil’s business model is at risk given the existential threat of climate change and that this is very much an investor issue that needs to be addressed.

While current executives at ExxonMobil, led by Chairman and CEO Darren Woods, worked to push back this narrative, at the time of writing, at least two out of the four proposed directors have been elected to the Board.

Leveraging proxy voting rights to represent our clients, create change and manage risk

What is proxy voting? A publicly traded company regularly requires its shareholders to vote on company matters (think board members, executive benefits and salaries, etc.). Proxy voting is the act of a person or company (like an investment management company) casting a vote on behalf of its shareholders (or fund shareholders). For example, MD votes on behalf of MD clients who own shares in said companies through MD Funds, Pools and Portfolios.

Through these MD products, we invest in many different companies on behalf of our clients. Effectively, our funds (and our clients) are minority owners in these businesses. This gives MD the opportunity to influence corporate managers on a variety of key issues on behalf of our clients. MD engages a third party to vote on our behalf. Using sustainability as a guideline, votes cast on our investor’s behalf are not solely concerned with returns and good corporate governance, but also corporate activities and practices that are aligned with the broader objectives of society.

In the six months leading up to the recent vote for new, climate-conscious, board members, ExxonMobil pushed to appease shareholders – it had launched a new low-carbon fuels division and made a few director changes. Ultimately, this last-ditch effort was not enough, but it is a clear demonstration of the power of proactive investors.

Leveraging their proxy voting rights, shareholders, including MD and its investors, expressed their unhappiness with the direction of ExxonMobil and successfully made changes to make climate change more of a priority and improve the company’s prospects. In today’s environment, climate change considerations have quickly become a sound management practice.

Every drop in the oil barrel counts

As of June 3, 2021, we hold ExxonMobil in the MDPIM S&P 500 Index Pool at an approximate weight of 0.73% of the Pool’s assets.

As minority shareholders, it’s important for us to cast our proxy votes on behalf of our clients, to not waste opportunities to drive positive change. A drop in the bucket may be exactly that, but enough drops will fill the bucket. With regards to ExxonMobil, we voted in favour of three out of the four alternative board members.

For more information about this, our investment strategy or your investments, please do not hesitate to contact your MD Advisor*.

* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec).

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.

 

About the Author

David Larocque, CFA, B. Comm., is an Investment Analyst with the Multi-Asset Management team at MD Financial Management. He works with the portfolio managers across all asset classes, with a specific focus on ESG and multi-asset products.

Profile Photo of David Larocque