It’s a well-known fact that everyone, including top executives, has someone to answer to. In the case of Exxon, the company is currently at odds with its shareholders over a resolution proposed by activist investors Arjuna Capital and Follow This. The resolution aims to compel Exxon to reduce its carbon emissions, particularly those resulting from the use of its products.
Key Takeaway
Exxon’s legal dispute over the shareholder resolution underscores the evolving dynamics between corporations and their shareholders, reflecting the growing influence of ethical considerations and societal expectations on corporate decision-making.
Shareholder Primacy and Changing Ethical Norms
Exxon’s decision to file a lawsuit in federal court to bypass the shareholder resolution raises questions about the traditional concept of shareholder primacy. Shareholder primacy, a concept popularized by economist Milton Friedman, emphasizes that a corporation’s primary goal is to maximize profits for its shareholders. However, with evolving ethical norms and societal expectations, the landscape is changing.
The new resolution highlights the growing concern over climate change and the role of corporations in addressing it. With a majority of Americans and international communities advocating for a shift towards alternative energy and net-zero emissions, Exxon’s stance on the issue is facing increasing scrutiny.
SEC’s Stance and Shareholder Activism
Exxon’s usual recourse would involve seeking the SEC’s intervention to exclude the shareholder resolution from the proxy statement. However, the current regulatory environment, influenced by the Biden administration, has been more inclined to support shareholders’ interests. This shift has empowered shareholders, including major asset managers like BlackRock, Vanguard, and State Street, to actively engage in steering company strategies through shareholder proposals.
