LGIM to vote against ExxonMobil’s executive chair over climate stance and independence

Governance issues like chair independence and director overboarding highlighted by pandemic

Legal & General Investment Management (LGIM), the UK’s largest asset manager, managing £1.2trn (€1.4trn) in assets, has said it intends to oppose the re-election of Exxon’s chair – a position currently held by the US oil giant’s CEO, Darren Woods – over “significant concerns” about the company’s approach to “climate change, political lobbying and board independence”. 

Last month, New York State Common Retirement Fund and the Church Commissioners wrote an open letter to Exxon’s shareholders urging them to “implement a strong voting stance on director election” in response to what they describe as the board’s “inadequate” response to climate change.

Both asset owners, which lead on Exxon as part of Climate Action 100+ (CA100+), the multi-trillion investor engagement initiative targeting the world’s dirtiest companies, revealed in that SEC filing their intention to vote against Exxon’s entire board. 

LGIM, itself a member of CA100+, today publicly expressed its concern that the company is failing behind its European peers, noting Exxon’s “persistent refusal” to disclose its full carbon footprint and set emission targets.

“We remain concerned by Exxon’s lack of strategic ambition around climate change”, said Meryam Omi, Head of Sustainability and Responsible Investment Strategy at LGIM.

“To remain successful in a low-carbon world, companies must act today, aligning their capital decision with the goals of the Paris Agreement, and setting stretching targets.”

LGIM revealed that it will also support a shareholder proposal calling for an independent chair and another calling for increased transparency on political lobbying.

In January, LGIM announced a revised voting policy that would see it oppose combined CEO and chair roles at companies globally. 

Earlier this week, LGIM’s Global ESG Manager, Maria Larsson Ortino highlighted how the current pandemic is underlining the importance of “core tenets of corporate governance” like board independence and the monitoring of director overboarding.

Speaking on a webinar hosted by the PRI on Coronavirus and the 2020 AGM season, Ortino questioned: “How would it have been possible for directors with six or seven positions to attend and, more importantly, be critically involved in meetings when they would have been called more or less at the same time with very short notice?”

The same, she added, can be said for combined positions of chair and CEO, and asked, “how are they able to both run the company on a daily basis and the board in a time of crisis?”.

Given the chance, Ortino said she would ask board members and combined Chair-CEOs at AGMs to explain how they were able to discharge their various responsibilities effectively during the pandemic. 

Last year, LGIM voted against 750 directors due to overboarding, Ortino said, adding that “those 750 directors are now making decisions around the world”.

Next year, she stressed, is when investors need to be ready to hold companies to account on what they are doing right now.

Exxon’s annual meeting takes place on 27 May.

Staying with stewardship, The Pensions and Lifetime Savings Association (PLSA), the main UK pensions industry body, has set up an industry group to produce guidance for members on how to meet new regulatory requirements and deadlines on ESG recently brought in by the UK Government. The group will be chaired by PLSA Policy Board member Laura Myers and will receive input from a stakeholder group, including “key industry organisations, government departments and regulators will also be supporting the work”.