Long as I remember the rain been comin’ down

Clouds of mystery pourin’ confusion on the ground

Good men through the ages tryin’ to find the sun

And I wonder, still I wonder, who’ll stop the rain?

Creedence Clearwater Revival, 1970

Let’s start with the weather report. ExxonMobil’s annual shareholder meeting on May 26, 2021 will be a virtual one. Still, just for fun, I decided to check the Dallas weather forecast for that day. As I write on May 22, the forecast from weather.com is “Cloudy skies early, followed by partial clearing. A stray shower or thunderstorm is possible. High 86F. Winds S at 10 to 15 mph.” There is only a 22 percent chance of rain. Looks like a pleasant day for a shareholder meeting.

However, in the virtual world of the company’s shareholder meeting, when a vote will be taken to determine the company’s board of directors for next year, the chances of rain are looking rather higher. Will it be the 12 on the company’s blue proxy card or the ones on activist investor Engine No. 1’s white proxy card? Under proxy rules, investors must choose to vote only on one of the two proxy cards. I have previously written about the increasing support for the excellent four new nominees from Engine No. 1 in its “Reenergize ExxonMobil” campaign. ExxonMobil’s board and executive management must be wonderin’ “Who’ll Stop the Rain?”

On May 19, 2021 Aeisha Mastagni, Portfolio Manager at CalSTRS, filed a “Notice of Exempt Solicitation” with the SEC. This filing  allows this asset owner to talk with other shareholders about the upcoming vote and make the case for why they should support the white card. Mastagni’s filed letter notes white card support by proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis. The letter begins, “Change is coming to ExxonMobil.” Ms. Mastagni notes that “ExxonMobil’s shareholders have a first-of-its-kind opportunity to drive systemic change at the company by voting in support of the full alternate slate of directors to strengthen the board and contribute to the sustainable value of their investments.” She goes on to explain the eminent qualifications of Greg Goff, Kaisa Hietala, Alexander Karsner, and Anders Runevald and why it’s important that all four Engine No. 1 nominees are elected. At the end, Mastagni rightly states that “The links between climate change, business and financial investments are undeniable.” Since Engine No. 1 launched its campaign, the board and senior management of ExxonMobil must feel like as long as they can remember the rain been comin’ down.

Aesop’s Fables illustration – Cassell Petter and Galpin – 1868 | GETTY

On May 20, 2021 the Lex column in the Financial Times headlined “Exxon: a rebellion investors should back.” It cites Engine No. 1’s thesis “that a feckless board” has failed to position the company for the inevitable energy transition. “Exxon’s strong focus on fossil fuel extraction has become increasingly untenable.” The column states that “Shareholders should back the rebel motion.” It also importantly notes that large investors like “BlackRock and Vanguard will decide the fight.” To that I would add State Street Global Advisors. As I’ve noted previously, they are the three largest shareholders of the company’s stock with a combined holding of 18.9 percent.

At this point, I heard the singers playin’ and started cheering for more. More came on May 21, 2021 when EOS at Federated Hermes also published a “Notice of Exempt Solicitation.” EOS is one of the world’s largest investment stewardship providers with client assets under advice of approximately $1.5 trillion as of March 31, 2021. The letter was signed by Mr. Timothy Youmans, Lead-North America EOS at Federated Hermes. In his letter Mr. Youmans wrote that they “will be voting the white card and will vote FOR the slate of directors proposed by Engine No. 1,” thereby endorsing all four of Engine No. 1’s nominees. He explains that “EOS believes Engine No. 1’s slate of directors will bring experiences and skills needed to preserve long-term shareholder value through the transition to a low carbon economy.” Youmans also notes that “The concerns expressed by Engine No. 1 echo many of those expressed in EOS’ engagement with the company over the years.”

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