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Investors Pressure ExxonMobil Board on Climate; Meta Shareholders Consider Child Safety and AI

Single-use plastics also on the ballot at oil companies, in the latest from proxy-voting season.

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Chevron Corp
(CVX) Inc
Meta Platforms Inc Class A
Exxon Mobil Corp

ExxonMobil XOM is being widely watched this proxy season as the largest freely traded company in the industry that many blame for global warming. As such, Exxon frequently faces resolutions from independent shareholders wanting the oil major to grapple with the consequences of climate change. Indeed, three years ago, investor Engine No. 1 challenged Exxon on climate and won board seats for three nominees.

This year is dramatic because Exxon sued two shareholders, Arjuna Capital and Follow This, which proposed that it adopt more-aggressive emissions reduction, a fairly routine matter. Exxon pursued the suit even after the shareholders withdrew the proposal. When other investor advocacy groups such as the Interfaith Center on Corporate Responsibility criticized the suit, Exxon called their criticism “ongoing abuse” of the system.

As a result, shareholder advocacy group Majority Action urged investors to vote against Lead Independent Director Joseph Hooley, CEO Darren Woods, and the company’s entire board of directors at Exxon’s May 29 annual meeting.

Investors have lined up on both sides. Those voting against Exxon directors include Norway’s $1.5 trillion sovereign wealth fund, the $463 billion California Public Employees’ Retirement System, New York State Common Retirement Fund, and Illinois state investment pools overseen by Illinois State Treasurer Michael Frerichs, among others.

Meanwhile, officials from 19 Republican US states including Florida and Louisiana asked money managers not to vote against Exxon’s directors. In a letter to the money managers, they said Exxon’s board “deserve our thanks and support … for seeking to rein in activist shareholders.” Reuters also reported that a group of Democratic officials asked the same managers to vote against the board.

The votes may lean toward Exxon. “There’s little evidence … that Exxon is vulnerable to a similar effort [to Engine No. 1′s challenge] this time around,” Bloomberg writes. “That’s in part because the company’s stock is up almost 25% during the past year, and environmental, social and governance issues—already diminished by a sustained Republican and oil lobby attack—were pushed back even further because of concerns over energy security in the wake of Russia’s war on Ukraine.”

Nevertheless, the results will be significant, not only for Exxon’s board, but also for Exxon’s big investors. Says Lindsey Stewart, director of investment stewardship research at Morningstar Sustainalytics: “Many asset managers and asset owners have recently said that they intend to hold directors accountable for any perceived failures of governance over sustainability issues. We’re certainly seeing that play out with large shareholders like CalPERS and Norges Bank preannouncing their intentions to vote against the lead director at Exxon. With institutional investors’ opinions divided over the real impact of voting for shareholder resolutions, we’re likely to see them signal concerns in this way more often. Votes against individual directors seem to get the board’s attention in ways that advisory shareholder proposals often don’t.”

You can read the Exxon proxy here.

Plastics Demand on the Ballot

Stricter plastics regulation will also affect oil and chemicals producers. That’s the premise of proposals at Exxon and Chevron CVX, which ask the two to report on how a reduction in plastic demand would affect their finances. Single-use plastics are threats to oceans, wildlife, and public health, the proposals assert, and account for the bulk of plastics ending up in waterways. The Environmental Protection Agency is calling for voluntary cuts in plastics production, and other countries and packaging brands are starting to drive cuts in plastics use. Exxon is the largest producer of polymers for single-use plastics, Chevron the 16th largest. Chevron’s annual meeting is on May 29, and you can read Chevron’s proxy here.

Exxon’s “Advancing Climate Solutions Report” outlines myriad benefits of plastics and its own efforts to expand plastics recycling. But it fails to discuss business risks of reduced demand for virgin plastic as consumers shift away from single-use, writes Jekaterina Spiridonova of Morningstar Sustainalytics. Meanwhile, Chevron reports that it is working toward goals of reusing, recycling, or recovering 100% of plastic packaging by 2040. But Chevron doesn’t disclose targets related to virgin plastics.

Writes Spiridonova: Such reports “would help investors better understand the economic, regulatory, and reputational risks of [company] business models, including potential for stranded assets as the world transitions away from virgin and SUPs to combat plastic pollution.” Moreover, “global negotiations are progressing toward a legally binding U.N. Treaty to end plastic pollution and a growing number of national and sub-national plastics bans are coming into effect around the world.” These pose risks for business models, she writes.

At the Social Network, Child Safety and AI

Meta Platforms META faces 10 shareholder proposals, including one on its platform’s impacts on children and another on its use of artificial intelligence in its advertising policies. You can read the Meta proposals here, as well as the company’s response.

Proxy Impact, on behalf of Lisette Cooper 2015 Trust and other filers, asks Meta to report on whether it has improved performance on child safety on its platforms. Social media poses numerous risks to children and teens, including sextortion and cyberbullying. In 2022, 85% of nearly 32 million reported cases of online child sexual abuse material stemmed from Meta’s platforms. Cooper is vice chair of Fiduciary Trust International and a well-known financial advisor. Her daughter was once targeted by a predator on Facebook Messenger.

In 2023, the same proposal won 16% of the vote. That’s 54% of independent shareholders, adjusted for Meta CEO Mark Zuckerberg’s stake.

Meanwhile, Mercy Investment Services asks Meta to report on the human rights impacts of Facebook’s use of AI in advertising. Facebook’s business model relies almost entirely on ads. Its algorithms choose what users see, “resulting in and exacerbating systemic discrimination and other human rights violations.” In the US and Europe, legislation is poised to curb targeted ads, according to the proposal.

Meta has already published an independent human rights risk report, notes Morningstar Sustainalytics analyst Ignacio Garcia Giner. But it only addresses Meta’s past actions and offers no recommendations for future action. “Given that Meta’s entire business model revolves around its license to continue to serve advertisements to its platform users, we agree with the proponent that this area deserves more attention,” writes Giner.

In 2023, the same proposal won 17% of the overall vote, or 58% of independent shareholders.

At Amazon, Substantial Support for Reports on Political Spending, Pay Gaps, Plastics, Workers’ Rights

At the AMZN May 22 annual meeting, a number of shareholder proposals won substantial support.

Analysts believe proxy-voting support above 25% catches the board’s attention. Following is a list of attention-getting proxy votes at Amazon. You can read the proposals and Amazon’s recommendations here.

  • Two workers’ rights proposals. One, requesting a report on Amazon’s commitment to freedom of association and collective bargaining, won 31.8% of the vote. Another, requesting a report on working conditions and treatment at Amazon warehouses, won 31.2% of the vote. Adjusted for Amazon founder Jeff Bezos’ 10% stake, that represents 37.4% and 36.7%, respectively, of Amazon’s independent shareholders, according to Morningstar Sustainalytics.
  • A request for a report on lobbying activity won 29.7% of the overall vote, or 34.9% of adjusted support.
  • A request for a report on median pay gaps across race and gender won 29.4% of the overall vote, or 34.5% of the adjusted vote.
  • A request for a report on Amazon’s reduction of its plastics footprint won 28.6% of the overall vote, or 33.6% of the adjusted vote.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Leslie P. Norton

Editorial Director
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Leslie Norton is editorial director for sustainability at Morningstar.

Norton joined Morningstar in 2021 after a long career at Barron's Magazine and, where she managed the magazine's well-known Q&A feature and launched its sustainable investing coverage. Before that, she was Barron's Asia editor and mutual funds editor. While at Barron's, she won a SABEW "Best in Business" award for a series of stories investigating fraudulent Chinese equities, which protected the savings of investors and pensioners by warning about deceptive stocks before they crashed.

She holds a bachelor's degree from Yale College, where she majored in English, and a master's degree in journalism from Columbia University.

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