Shareholders challenge Chevron board on investor subpoena tactic

Shareholders in Chevron, one of the world’s largest oil firms, will challenge the company’s board at its 2013 annual general meeting (AGM), to explain why it is pressuring investors to reveal confidential communications on ESG (environmental, social and governance) concerns about the company, and have accused it of using “cannon to swat a mosquito”. The Needmor Fund, a US social justice foundation, and Zevin Asset Management, a Boston-based SRI asset manager, have filed a shareholder resolution demanding that Chevron’s management review its tactic of issuing subpoenas to shareholders to procure correspondence on resolutions filed at previous AGMs regarding the 2011 $19.04bn ruling against it by an Ecuadorian court over environmental pollution in the country’s rainforest by Texaco, which Chevron bought in 2000. The investors say Chevron’s actions are putting the company at reputational risk by escalating conflict with its shareholders. Chevron has issued subpoenas to Trillium Asset Management, the Boston-based SRI firm, which has previously filed resolutions on management oversight of the Ecuador case, and Simon Billenness, a Washington-based SRI consultant, who, on behalf of the Unitarian Universalists, the US faith-based group, has urged Chevron to settle the Ecuador fine. Trillium and Mr. Billenness are contesting the validity of the subpoenas. Chevron has also referred Thomas DiNapoli, New York State Comptroller and trustee of the state’s $150.3bn (€114bn) retirement fund to the New York State Joint Commission on Public Ethics, contending that he received campaign contributions from lawyers and consultants seeking settlement in the case. The oil firm’s lawyers have issued Freedom of Information Law (FOIL) requests for Di Napoli’s correspondence with some of the leading responsibleinvestors in the US including the California Public Employees’ Retirement System (CalPERS). New York’s retirement fund has around $713m invested in Chevron. In May 2012, DiNapoli and 39 other investors representing $580bn in assets wrote to the oil giant urging it to come to an agreement with Ecuador. In February 2011, Chevron sued Steven Donziger, the New York-based lawyer and other members of the plaintiffs team that led the legal case in Ecuador, under the Racketeer Influenced and Corrupt Organizations (RICO) act, alleging that they had engaged in acts amounting to extortion. The accused deny the charges. Chevron says the Ecuadorian pollution was cleaned up following a $40m settlement by Texaco and is challenging the 2011 Ecuadorian court decision, which it says was legally flawed. In the latest resolution, Needmor and Zevin are seeking shareholder support at the 2013 AGM for a proposal that Chevron’s independent board members outline the rationale for the subpoenas, its attacks on Di Napoli and the New York State fund, and the major public relations offensive the company has launched. The board, they said, should consider the impact of the firm’s actions on long-term investor relations, reputation, and the precedent it could set for shareholder communications about key ESG issues and their impact on shareholder value. The resolution requests that a report to shareholders be made by September 2013. Sonia Kowal of Zevin Asset Management said: “We are deeply concerned about the extremely bad precedent this would set if the Courts allowed Chevron to successfully subpoena the documents of individuals or investors simply because they were critical of a company’s conduct and worked with other investors to challenge it. This is a brazen attack on shareholder rights, thus we filed this shareholder resolution urging the Chevron board to pause and consider the broader implications of allowing management and their law firm, Gibson Dunn, to pursue this strategy.”