Wednesday, May 26, 2021

Exxon shareholders elect two outsiders to board; shake up insular culture
By Jennifer Hiller and Jessica Resnick-Ault 
© Reuters/Jim Young FILE PHOTO: An Exxon sign is seen at a gas station in the Chicago suburb of Norridge

HOUSTON/NEW YORK (Reuters) - The first Exxon Mobil directors not appointed by the company include an executive versed in renewable fuels and a "prudent" risk taker and disrupter poised to challenge the oil company's ways, said people familiar with his career.

Activists pressing Exxon to cut spending, boost returns and prepare for a lower-carbon future got a victory on Wednesday when shareholders elected Gregory Goff, a 64-year-old former top executive at Marathon Petroleum and Andeavor, and former Neste Oyj executive Kaisa Hietala. The vote followed a bruising battle led by a hedge fund.

The two face an insular corporate culture renowned for slow-to-change ways. Goff and Hietala will be two voices among a 12-person board that has had six directors handpicked by Exxon's current chief executive Darren Woods.

Goff was unavailable to comment according to spokeswoman for hedge fund Engine No. 1. Hietala could not be immediately reached.

Both have extensive backgrounds in oil refining, a business where Exxon posted a $1.1 billion loss last year. Hietala got Finish refiner Neste into renewables and has been on the boards of investment giant Carlyle Group and paper and packaging firm Smurfit Kappa Group.

Goff in 2010 took over the predecessor to U.S. oil refiner Andeavor, built it through deals and expanded the business internationally. He later sold it to Marathon, giving investors a 1,200% return during his 8-year tenure.

Goff "understands the business very well, both the operational side and the commercial side, said John Auers of refining consultants Turner, Mason & Co. "He's a very sharp, astute guy who takes prudent risks," he said.

In 2013, Goff bought a BP refinery in Carson, California, integrating it with a nearby refinery his company previously purchased from Royal Dutch Shell. Both happened as competitors were exiting the West Coast.

Four years later, he jumped into Mexico's fuel market through terminals, storage, and a retail network fed by its U.S. production. It was a bet that was rivaled that year by BP, Chevron and Exxon.

"His reputation is exceptionally high among investors," said analyst Paul Sankey of Sankey Research. Goff will be "far more concerned with Exxon Mobil’s management structure and lack of entrepreneurship than some misguided attempt to target net-zero," he wrote.

Goff also can succeed as an outsider at Exxon, said a person who has known him for many years but declined to be named for business reasons.

"He is disruptive in a pragmatic and constructive way," this person said. "He's not stuck in the status quo."

(Reporting by Jennifer Hiller in Houston and Jessica Resnick-Ault in New York; editing by Gary McWilliams and David Gregorio)


An activist investor with a 0.02% stake in Exxon ousted 2 of the oil giant's board members in a historic win

mfox@businessinsider.com (Matthew Fox) 2 hrs ago
©Mark Schiefelbein/Getty; Skye Gould/Business Insider

Activist investor Engine No. 1 was victorious in winning at least two board seats on Exxon Mobil's board of directors.

The win was historic given that the first time activist investor built a tiny 0.02% stake in the company.

The proxy fight between the activist investor and Exxon Mobil signals the increased investor attention towards green energy initiatives.

Activist investor Engine No. 1 scored a historic win on Wednesday after it won two board seats on Exxon Mobil's board of directors.

A bitter proxy fight between the major oil company and the small activist investor circled around green energy initiatives, executive pay, and the diversification of Exxon's fossil fuel business.

The win took many by surprise given that Engine No. 1 is a first time activist investor with just a 0.02% stake in Exxon. Typical activist investor campaigns have been led by well-known Wall Street figures who buy a position upwards 10% in the targeted company.

The win by Engine No. 1 highlighted the growing appetite among investors for corporations to tackle climate change and green energy initiatives head-on. Many top institutional investors view addressing the climate as essential for a successful long-term business, including BlackRock founder and CEO Larry Fink.

Exxon was staunchly against Engine No. 1's two board nominees, Gregory Goff and Kaisa Hietala. Exxon CEO Darren Woods refused to meet with the nominees and told shareholders that voting for them would "derail our progress and jeopardize your dividend," according to Bloomberg.

Just two-days before today's annual shareholder meeting, the company pledged that it would add two new directors to its board to counter-balance the potential addition of Goff and Hietala.

Other fossil-fuel companies have seen a revolt among shareholders in vote proposals. Chevron, DuPont de Nemours, and ConocoPhillips have all seen their shareholders issue rebukes to management by voting in favor of various proposals centered on climate change, Bloomberg highlighted.

Two board seats on Exxon remain undecided, and one or both of them could still potentially be awarded to Engine No. 1. Whether Woods will take the advice of the new board members and pivot towards a greener future remains to be seen.


Climate advocates win seats on Exxon's board
BY RACHEL FRAZIN -THE HILL- 05/26/21 


© iStock

Climate advocates gained influence at oil giant ExxonMobil after two candidates nominated by an activist firm won seats on the company’s board on Wednesday.

Preliminary votes showed two of Engine No. 1's candidates winning seats after being elected by company shareholders, Exxon said in a statement.

Those two, Gregory Goff and Kaisa Hietala, could be joined by a third, as vote results for Engine No. 1 nominee Alexander Karsner were among those that were too close to call.


Engine No. 1 has called for the company to make more significant investments in clean energy, using stricter approval criteria for new expenditures and an “overhaul” of management compensation.

In a presentation outlining its case, the firm argued that Exxon did not position itself for creating long-term value and that its rhetoric doesn’t address long-term business risks from emissions.

The small firm’s victories come after it was reported that their bid would have support from larger firms like BlackRock, the company’s second-biggest shareholder.

The election serves as a blow to the company’s leadership, who have opposed their campaign.

“To put it bluntly, we have a plan that will grow earnings and cash flow, pay and grow the dividend, fund future growth and position the company to have a meaningful role in the energy transition. Engine No. 1 does not,” CEO Darren Woods and lead director Kenneth Frazier wrote in a letter to shareholders earlier this year.

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The Exxon statement also said that the board will reconsider proposals from shareholders that got approval of the majority, including one requesting a report on lobbying and another requesting a report on climate lobbying.

In the statement, Woods welcomed all of the board members who were either elected or reelected, and said the company has "been actively engaging with shareholders and received positive feedback and support, particularly for our announcements relating to low-carbon solutions."

—Updated at 4:14 p.m


New hedge funds bask in Exxon's climate spotlight

By Ross Kerber and Svea Herbst-Bayliss 
© Reuters/Brendan McDermid 
 Darren Woods, Chairman & CEO, Exxon Mobil Corporation attends
 a news conference at the NYSE

(Reuters) - The successful board challenge against Exxon Mobil Corp casts a spotlight on two recently launched sustainability-focused investment firms that took opposite sides in the high-stakes battle: Engine No. 1 and Inclusive Capital Partners.

Engine No. 1 set the spark in January by formally nominating four directors to Exxon's board, accusing it of not moving fast enough to diversify away from fossil fuels. Inclusive Capital Partners sided with Exxon after its founder Jeffrey Ubben joined the energy giant's board in March, and argued it was already working with the company to improve its technology in areas such as carbon capture.

Both funds were launched less than a year ago. Their quick ascendance to Exxon's board underscores how Wall Street's new focus on environmental, social and corporate governance (ESG) is opening doors for activist hedge funds at some of the world's largest companies.

Engine No. 1 was launched by hedge fund veterans Charles Penner and Chris James in December 2020. Penner spent much of his career at activist hedge fund Jana Partners, where he quarterbacked a campaign to get iPhone maker Apple Inc to create tools for parents to track and limit the use of children's' smartphones.

Engine No. 1 reported as of the end of March owning 917,400 Exxon shares valued at $51 million - a sum that traditionally would barely get a phone call returned from a company like Exxon, whose current market capitalization stands around $250 billion. Yet thanks to the backing of some of the biggest Wall Street fund managers such as BlackRock, it has won at least two seats on Exxon's board.

Lawyers and industry analysts who worked with Penner said he had immersed himself for years in researching how to take on the oil giant and speaking to other Exxon shareholders.

Engine No. 1 "did an effective job of making their case, and it appears that investors are saying that with their votes," said Tim Youmans, engagement leader for EOS at Federated Hermes, which advises clients how to vote.

Ubben founded Inclusive Capital in June of last year after leaving ValueAct Capital, the activist hedge fund he launched in 2000. He had a built a reputation for pushing for change outside the limelight and working more collaboratively with management than many other activists.

He has described Inclusive Capital as a return-driven environmental and social activist firm and raised concerns about the sustainable products being sold by big index funds. In a recent regulatory filing the firm said it owned 1.6 million share of Exxon, valued at $93.6 million.

Ubben defended Exxon against Engine No. 1's criticism, and as of Wednesday morning Ubben was still calling top Exxon investors to make the company's case, according to people familiar with the matter. While the result is a setback for Ubben, he gets to keep a board seat at Exxon he may not have gained if the oil major was not seeking to defend itself against Engine No. 1 in the first place.

Representatives for Ubben did not immediately comment for this article.

A spokesman for Penner referred to his statement at Wednesday's annual meeting in which he said the firm has "learned that change can happen anywhere. It will always be a long shot, but it will always be worth it."

In a statement on its website on Wednesday a top Exxon investor BlackRock Inc said it backed three of the four dissident nominees.

Those directors, "together with Mr. Ubben, bring the fresh perspectives and relevant transformative energy experience to the Board that will help the company position itself competitively in addressing the risks and opportunities presented by the energy transition," BlackRock said.

(Reporting by Ross Kerber in Boston; Additional reporting by Svea Herbst-Bayliss in Boston; editing by Edward Tobin)

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