As Chief Executive Officer Marcie Frost and Board of Administration President Theresa Taylor recently wrote, a lawsuit filed by ExxonMobil against two shareholder groups prompted CalPERS to announce a vote against all 12 members of the company’s board of directors and its CEO at ExxonMobil’s May 29 annual shareholder meeting.
Once again, for the record: CalPERS’ action isn’t about climate change. It’s about company executives seeking to silence shareholder speech that they don’t like. No matter the company or the issue, shareholders should not be silenced.
1. ExxonMobil is pursuing a precedent-setting lawsuit — ExxonMobil is suing Arjuna Capital for putting forward a non-binding proposal — a long-established shareholder right (a judge removed a second shareholder group, Follow This, from the case on May 22). Putting a proposal forward doesn’t mean it will be adopted — it only means it will be considered by the shareholders and voted upon. CalPERS frequently votes against proposals that aren’t in our members’ or fund’s best interests, and we haven’t always supported proposals brought by Arjuna Capital. But the anti-shareholder lawsuit is shocking.
2. A system is already in place for disagreements — If companies and shareholders have disagreements, the U.S. Securities and Exchange Commission (SEC) acts as the impartial referee. However, ExxonMobil chose to seek a legal judgment rather than go through the SEC process, and they are still suing Arjuna Capital, even though the group has withdrawn its proposal.
3. A dangerous precedent could be established — The U.S. Chamber of Commerce and the Business Roundtable have filed court documents supporting ExxonMobil’s lawsuit. Their members could follow ExxonMobil’s lead if the lawsuit is successful, empowering more companies to take similar silencing actions against shareholders.
4. The anti-shareholder lawsuit creates a chilling effect — If this lawsuit goes in ExxonMobil’s favor, it could spark a flurry of similar lawsuits from other companies against their shareholders. With that costly and concerning legal threat in play, shareholders may be afraid to voice, propose, vote upon, and implement the kinds of innovations that have improved companies in the past.
5. Boards work for shareholders, not the other way around — Boards answer to their shareholders, who are literally invested in the company’s success. If board members and company leaders do not want to listen to their shareholders — or if, in this case, they seek to bully, punish, and silence their own investors — they should be held accountable.
Thanks to our efforts, and the work of those who joined us, we were able to shine a spotlight on this important issue. CalPERS will actively monitor this litigation and explore all of our options as we determine the next steps to protect shareholder rights.