Chevron gets SEC clearance to omit resolution on litigation against shareholders

Smith, Kowal warn of precedent for resisting collaborative engagement

The Securities and Exchange Commission, the US regulator, has said it will take no action against oil major Chevron if it omits a shareholder resolution relating to its controversial litigation against some of its own investors.

The motion, tabled by Zevin Asset Management and the Needmor Fund on behalf of the Frank H. Joyce Trust, sought a review of Chevron’s actions, which included subpoenas for emails between investors relating to its $19bn Ecuador settlement (RI coverage).

But the SEC this week said Chevron doesn’t have to include the resolution at its forthcoming annual meeting because proposals that affect ongoing litigation are “generally excludable”.

The SEC was warned that the litigation could set a precedent for companies resisting collaborative shareholder engagement, in a letter from two of the leading figures in the US responsible investment sector, Timothy Smith, Senior Vice President at Walden Asset Management and Sonia Kowal, Director of Socially Responsible Investing at Zevin.

Writing in support of the motion, Smith and Kowal argue Chevron sees a “conspiracy of investors and NGOs” – but go on to explain how long-term investors increasingly collaborate to engage with companies.They referenced the role the PRI Initiative (the Principles for Responsible Investment) has in this process.

“We are deeply concerned that Chevron’s unprecedented intrusion into investor communications in this case could stifle just this sort of mutually beneficial engagement.”

“A potential flood of subpoenas on collaborative investor engagement”

The motion’s omission from the proxy ballot “could be seen as opening a door to a potential flood of subpoenas by companies that disagree strongly with collaborative investor engagement”.

The SEC has also said Chevron can omit a proposal calling for an independent chairman that was put forward by the Unitarian Universalist Association of Congregations and co-filers Zevin and Folksam, the Sweden-based insurer.

As reported earlier this month, Investor Voice, the Seattle-based shareholder advocacy group linked to socially responsible investment house Newground has won SEC approval for a proposal calling on Chevron to amend its bylaws to give shareholders with a 10% stake the power to call special shareholder meetings.