Oil’s green investors win Trojan horse victories in board access

(David Paul Morris/Bloomberg)
(David Paul Morris/Bloomberg)

Activist investors pushing for more say in how companies deal with climate change won their biggest prize yet when shareholders in the world’s second-largest oil producer agreed to make it easier to capture directorships.

Chevron Corp. investors voted 55 percent in favor of a non-binding resolution that would allow certain holders to nominate a candidate for the board. The company had opposed the measure, saying the so-called “proxy access” initiative would undermine efforts to thoroughly vet prospective directors.

Investor majorities at 21 other energy companies have embraced proxy access this year. Adding Chevron to that group is an important victory for investors such as New York City Comptroller Scott Stringer, who backed the measure as a means of infiltrating corporate boards with green activists.

“This is a sea change,” said Anne Simpson, senior portfolio manager for the California Public Employee Retirement Fund. “This is now mainstream and there will be winds of change in the boardroom. Companies that fail to adopt proxy access will find this proposal on the ballot again next year.”

Because the vote at Chevron’s annual meeting on Wednesday was advisory, the board isn’t required to adopt the resolution, which grants director nominating power to shareholders who’ve held at least a 3 percent stake for three years.

Chairman and Chief Executive Officer John Watson said the board will take the resolution under consideration. He declined to say whether he would urge adoption, or to predict what the other directors will decide to do.

“I don’t want to get out ahead of that,” Watson told reporters after the meeting in San Ramon, California.

Investment Risks

Institutional investors have backed proxy access to gain leverage after U.S. energy companies rebuffed requests in previous years to consider the effect of government climate policy on capital investments, Simpson said Wednesday in a telephone interview.

“The international community is doing its damnedest to hold global warming to 2 degrees Celsius, necessary to the functioning of society and the wider economy,” Simpson said. “That’s no small issue for us. Every single one of these companies cannot continue with business as usual.”

“Today’s historic victory at Chevron is a vote for accountable and climate-competent directors,” Stringer said today in an e-mailed statement. Stringer filed proxy access proposals at 75 companies this year, including more than 20 energy companies.

The resolution was voted down at nine companies, including Exxon Mobil Corp., where it lost by a narrow 49 percent to 51 percent vote. Whiting Petroleum Corp. avoided a vote by adopting the bylaw. Four companies adopted or promised to adopt proxy access for shareholders owning 5 percent of the company.

Chevron’s $194 billion market value makes it the most valuable non-state energy producer in the world after Exxon.