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How Exxon Misplaced a Board Battle With a Small Hedge Fund


Early final 12 months, Mr. Penner left Jana with ambitions of establishing his personal fund. However because the pandemic hit, he held talks to affix Mr. James’s nascent agency — and introduced with him an formidable concept he had been weighing for a while: Exxon.

The $250 billion behemoth was ripe for disruption, the 2 believed: Exxon was lagging rivals in pursuing methods to scale back its carbon footprint, which might ultimately price the corporate financially. Its board lacked the experience to pursue a extra aggressive plan, they thought. And the oil large had a repute for being highhanded with its shareholders.

The important thing to victory, based on two folks with data of Engine No. 1’s technique, who spoke on the situation of anonymity to debate personal talks, was successful over huge mutual-fund traders who’ve been pledging to make their portfolios greener. Exxon’s high three shareholders — Vanguard, BlackRock and State Road, which collectively personal one-fifth of the corporate’s inventory — had promised to scale back the carbon emissions of the businesses they spend money on to zero by 2050.

Engine No. 1 introduced its marketing campaign towards Exxon in December. A pension fund for lecturers in California and the endowment of the Church of England endorsed the hassle.

After a flurry of cellphone calls, Exxon’s chief government, Darren W. Woods, and lead impartial director, Kenneth Frazier, held a Zoom name with Engine No. 1 executives on Jan. 22. Throughout the assembly, based on two folks with data of the matter, who spoke on the situation of anonymity to debate personal talks, Mr. Frazier struck a conciliatory tone — at one level, he flashed a peace signal, one of many folks stated — however stated the corporate didn’t contemplate Engine No. 1’s nominees to be certified. Mr. Penner answered that the corporate ought to rethink, and insisted on all 4 of its proposed candidates taking seats on Exxon’s 12-member board.

After the decision, either side girded for battle.

Over the subsequent 5 months, a confrontation ensued, as the corporate’s administrators and activist insurgents put out assertion after assertion, both sides making its case. These efforts price Engine No. 1 over $15 million, based on an individual with data of the matter.

For Exxon, the main focus was persuading traders that it had viable plans to arrange for a lower-carbon future, whereas additionally arguing that Engine No. 1 had offered an unworkable different plan and unqualified board nominees. The corporate added new administrators to its board with out Engine No. 1’s enter, a transfer that infuriated the fund.



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