“(Reuters) -A new investment firm is taking aim at one of corporate America’s most iconic brands, pressing energy giant Exxon Mobil Corp to overhaul itself by focusing more on clean energy to improve its financial performance.
Engine No. 1 is being supported by pension fund California State Teachers’ Retirement System (CalSTRS) as it pushes the battered energy company, valued at $176 billion, to spend its cash better, preserve its dividend, and refresh its board.
“The industry and the world it operates in are changing and … Exxon Mobil must change as well,” Engine No. 1 wrote to Exxon’s board, adding “given the company’s long-running underperformance and the challenges it faces, it is time for shareholders to weigh in.”
Exxon is reviewing the hedge fund’s letter, an Exxon spokesman said.
The U.S. oil company this year reversed course on a massive oil and gas expansion program, cutting 30% from its spending plan and proposing a budget next year that is $4 billion to $7 billion below its outlays this year. It also plans to reduce its workforce by 14,000 people over the next two years as losses this year reached $2.37 billion.
Engine No. 1 faces a tough road. Exxon has beaten back past activist efforts to change its climate stance and to split the roles of chairman and chief executive.
But industry analysts also said the time may be right for traditional activists’ interest to overlap with climate activists’ interest and force Exxon to act. “There is a need for a fairly active reset right now,” said Andrew Logan, senior director of oil and gas at Ceres, a non profit organization that works with institutional investors and companies. “Everyone starts at the bottom of the hill with Exxon but Engine No. 1’s director nominees is not a list of flaky people.”
The activist investment firm, launched last week by two hedge fund industry veterans, said it plans to nominate four directors to Exxon’s 10-person board who have expertise in clean technology and running energy companies: Gregory Goff, Kaisa Hietala, Alexander Karsner, and Anders Runevad.
“Exxon’s refusal to adequately address climate risk is of serious concern to many shareholders and is a sign of significant governance issues. The company’s board needs overhauling. We’re looking forward to reviewing the slate of new directors,” said New York State Comptroller Thomas P. DiNapoli, whose fund owns a roughly $300 million stake, according to Refinitiv data.” . . .