Setbacks for Shareholder Activists

Big oil company profits trumped governance reform at Exxon Mobil Corp.'s annual meeting. A proposal to separate the Chairman and CEO jobs garnered an anemic 39.5 percent of votes cast, edging down slightly from last year despite support from members of the Rockefeller family, who supported shareholder activists in the belief that an independent chairman could help steer company thinking beyond fossil fuels -- an important sustainability issue that's gained momentum at energy companies and businesses in other industries in recent years.

The lack of support for this governance reform isn't really surprising. When companies split the Chairman/CEO title, it's usually in response to a financial performance problem or faulty business strategy. Under the leadership of Chairman and CEO Rex Tillerson, Exxon posted a record $40.61 billion profit last year, so financial performance is very impressive. And while some Exxon shareholders fear that its continued emphasis on fossil fuels at what they deem to be the expense of development of alternative energy is shortsighted, the company maintains that society will continue to rely on oil and natural gas for decades to come -- and that the company intends to be in a strong position to meet those needs.

Several other proposals at Exxon drew unimpressive support: one asking Exxon to set goals for reducing emissions (30.9 percent); another requesting the company issue a report on the impact of climate change on poor communities (10.4 percent); and another that would require the company to develop a renewable energy policy (27.4 percent).

Exxon's business strategy reflects an anticipated Congressional stall on a bill to cut emissions drastically by 2050. Achieving the bill's goal of a 66 percent reduction would be very costly; it would ultimately be paid by consumers who are struggling now with $4 a gallon gasoline. The massive bill includes creation of a complex cap-and-trade system to curb greenhouse gas emissions under which U.S. companies could offset their emissions by purchasing permits related to green programs in other countries. According to The Wall Street Journal, New England Energy Finance, an industry consultant, reported that the United States could buy so many of these permits abroad that it would not have to reduce emissions domestically until at least 2030.

Although the votes will keep dissident shareholders at bay for a time, governance experts point out that Exxon doesn't have a green light to maintain the status quo indefinitely. Reuters reported that Rockefeller family representatives said that the vote "makes it clear that Exxon Mobil must respect the views of the shareholders and take account of the changing world outside the doors of its executive suite."