

The likelihood of a historic investor revolt at Exxon is growing after Glass Lewis recommended support for two of the four board nominees put forward by activist fund Engine No 1, which has spearheaded a campaign to overhaul the US oil giant’s board over its failure to respond to the threat posed to its business by the low-carbon transition.
The influential proxy advisor’s support comes days after its rival Institutional Shareholder Services (ISS) similarly recommended votes in favour for three of the activist’s nominees.
In its advice, Glass Lewis describes Engine No 1’s case as “compelling” – “this is not a simple ESG campaign with a myopic view on environmental or governance concerns and no regard for the economics of the business or shareholder value”, it states.
ISS, which published its recommendations on Friday, echoes Glass Lewis’s assessment, also describing Engine No 1’s argument as “compelling”. Exxon, it said, continues to base strategic decisions on “what appear to be overly optimistic demand and technology assumptions”.
Engine No 1 launched its campaign against Exxon in December, with the aim of replacing four of the company’s 12-strong board with its own nominees, which it believes are better equipped to reposition the company to succeed in a decarbonising world.
A major concern highlighted by the activist fund is Exxon’s poor decisions around capital allocation. In a recent presentation to investors, Engine No 1 highlighted how Exxon’s “irresponsible spending” has resulted in the company having “the highest oil break-even price of any of its peers, leaving it more vulnerable to drops in demand”.
Neither ISS nor Glass Lewis are supporting the activist’s nomination of Anders Runevad, the former CEO of Danish wind turbine manufacturer Vestas. ISS does not explain its rationale on Runevad, but Glass Lewis argues that the appointments of fellow nominees Alexander Karsner and Gregory Goff alone would be “sufficient”. The duo, it said, would be “valuable to the Exxon board at this juncture, complementary to the backgrounds of other directors and additive even after the Company's recent appointments”.
Karsner, who has a background in private equity investing, was an advisor to EV maker Tesla and served as US Assistant Secretary of Energy from 2005 to 2008. Goff is a well respected oil industry veteran, who stepped down from his role as CEO of Andeavor after the US petroleum refiner was sold to Marathon Petroleum in 2018.
Glass Lewis also recommended withholding support for Kaisa Hietala on the same basis as Runevad. Hietala, who ISS is supporting, was formerly Executive Vice President at Neste, overseeing the Finnish refiner’s renewables business. She is now a partner and co-owner of sustainable business consulting firm Gaia Group.
Expanding on its recommendations, Glass Lewis states that “electing even a portion of Engine 1's slate would send a clear message of shareholder dissatisfaction with Exxon's recent direction and strategy and give the newly elected and appointed directors a mandate to develop and communicate a more comprehensive plan”.
But writing in RI last week, Edward Mason, who led engagement with Exxon on behalf of the Church Commissioners while at the faith investor, urged investors against picking and choosing among Engine No 1’s candidates, such a move he said would be a “cop-out”.
“The Engine No. 1 slate is a package,” he stressed. Mason is now Director of Engagement at Generation Investment Management, which does not hold shares in ExxonMobil.
Three of the US’ largest public pension funds have already publicly thrown their support behind Engine No.1’s slate of nominees. They are CalPERS, CalSTRS and New York State Common Retirement Fund.
CalPERS, which leads on Exxon as part of investor engagement body Climate Action 100+, also notified fellow shareholders that it would support the activist’s slate of directors via a filing at the US Securities and Exchange Commission (SEC) earlier this month.
The $450bn fund said that “board refreshment is necessary due to the long-term financial underperformance at Exxon Mobil and the need for a greater depth of skill sets and experience on the board”.
Earlier this month, Britain's biggest asset manager Legal & General Investment Management also said that it will back the activist’s slate of nominees.
Exxon’s three biggest shareholders, BlackRock, State Street and Vanguard, have not revealed their voting intentions.
In response to ISS recommendation, Exxon’s CEO Darren Woods described Exxon’s board as “one of the strongest boards in corporate America” and pointed to the fact that since his appointment in 2017, six new board members have been appointed.
Exxon’s annual general meeting takes place next week (26 May). The candidates Engine No 1 is seeking to replace with its own are Steven Kandarian, Douglas Oberhelman, Samuel Palmisano and new board member, Wan Zulkiflee.