As reported in our March 18th blog (The Biggest Merchant of Doubt), Exxon Mobil asked the U.S. Securities and Exchange Commission (SEC) for permission to bar a shareholder resolution sponsored by two large pension funds. The resolution would have required Exxon to set emissions targets aligned with “greenhouse gas reduction goals established by the Paris Climate Agreement.”
Exxon opposed the resolution on the ground that it was misleading, interfered with its management responsibilities and had been substantially implemented. The SEC sided with Exxon. SEC’s spokesperson asserted that the resolution amounted to”micromanagement” of the company by imposing “specific methods for implementing complex policies in place of the ongoing judgments of management!!!”
Contrast Exxon’s opposition to the adoption of targets as against the policies of its multi-national rivals Royal Dutch Shell PLC and BP Plc. In December of last year, Shell took steps to broaden disclosure on greenhouse gas emissions and tied executive pay to reducing emissions. In April 2018, BP set clear, near-term and specific targets aimed at reducing its emissions and advancing the energy transition. Neither company was concerned about micromanagement: reducing emissions was an important management goal.
What explains these policy differences? In our view Exxon – and the SEC – concluded that President Trump, who plans to take the US out of the Paris Accord, and climate change sceptics/denialists in the US Houses of Congress would be highly critical if the SEC rejected Exxon’s request to run its business at it sees fit – without being fettered by a requirement to set emission targets.