Exxon Determined to Crush Activist Investors, Even Over Opposition from Its Largest Shareholders


Two small activist investors tried in three successive years to pass climate-related proposals in Exxon’s annual proxy statements. Exxon decided to take them to court over it. Vociferous opposition from some of Exxon’s largest shareholders has not deterred Exxon, despite their claim to be motivated by shareholder interests.


Shareholders meeting certain minimum thresholds of ownership can request that a company include proposals to be voted on by other shareholders in the company’s annual proxy statements.

Typically, when a company does not want to include a shareholder proposal in its annual proxy statement, it applies to the U.S. Securities and Exchange Commission (“SEC”) for a “no-action” letter. The company can seek to exclude the proposal pursuant to certain grounds enumerated in the relevant rule, Rule 14a-8 of the Securities Exchange Act of 1934. For example, pursuant to the “ordinary business” exemption, proposals that relate to “the company’s ordinary business operations” need not be included in a company’s annual proxy statements. The rationale is that the day-to-day management of the company should be left to management, and shareholders should not be able to effectively micromanage the company on matters where shareholders would not be in a position to make informed decisions. If the SEC agrees that an exemption applies, it will grant the no-action letter, which is a statement that the SEC’s Division of Corporate Finance will not recommend an enforcement action against the company for excluding the proposal from its annual proxy statement.[1]

However, in 2021, the SEC adopted new guidelines for when to grant no-action letters that were more favorable to activist investors and made it more difficult for companies to exclude socially or ethically motivated shareholder proposals from their annual proxy statements under the ordinary business exemption or other exemptions.[2]

Arjuna Capital, LLC (“Arjuna”), a registered investment advisor, and Follow This, a Dutch company, are climate-focused activist investors. Each has long held (directly or indirectly) a minimal number of shares of Exxon Mobil Corporation’s (“Exxon”) stock in order to be able to submit proposals to be voted on by shareholders in Exxon’s annual proxy statements. And Arjuna and Follow This have, in fact, used their status as shareholders over the last several years to submit climate-related proposals for inclusion in Exxon’s annual proxy statements. Their proposals were overwhelmingly voted against in each of 2022 and 2023.

Consistent with their past practice, in mid-December of 2023, Arjuna and Follow This submitted a proposal for inclusion in Exxon’s 2024 annual meeting proxy statement. In essence, the proposal asked Exxon to accelerate its planned reduction in greenhouse gas emissions.

We need a change
Out of frustration with the SEC’s updated approach to no-action letters, in response to Arjuna and Follow This’s proposal for inclusion in its 2024 annual proxy statement, Exxon did not seek a no-action letter from the SEC. Instead, in January of 2024, Exxon filed a complaint in the United States District Court for the Northern District of Texas. The complaint named Arjuna and Follow This as defendants and sought a declaratory judgment that it could exclude their proposal. The complaint further decried the activist investors’ motivations as antagonistic to the company and the interests of other shareholders and similarly decried the SEC’s updated approach to no-action letters in strident terms.[3]

Apparently not anticipating the possibility of court litigation and perhaps not liking their odds against an oil company in a Texas courthouse, in February 2024, Arjuna and Follow This withdrew their shareholder proposal. The costs of federal litigation can be much higher than the costs of opposing a no-action letter application to the SEC.

Exxon, however, did not abandon their litigation. Citing Arjuna and Follow This’s history of submitting shareholder proposals, Exxon provided a status update to the court indicating that they believed there remained a controversy to be adjudicated by the court, even if the defendants had withdrawn their immediately pending requested proposal. Arjuna and Follow This followed up with a motion to dismiss based primarily on an argument that the matter was now moot. Later that month, the US Chamber of Commerce and the Business Roundtable filed amicus motions supporting Exxon’s ongoing pursuit of resolution of the matter.

But while the US Chamber of Commerce and Business Roundtable supported Exxon’s actions, several other important parties came out vociferously against Exxon. Major proxy adviser Glass Lewis recommended against re-electing Exxon’s lead independent director, who chairs its governance committee, to signal to the company strong dissatisfaction with its approach to Arjuna and Follow This’s activist campaign. Glass Lewis stated, “The Company's unusual and aggressive tactics in this matter could threaten to deter both investors' willingness to submit and ability to vote on materially relevant issues.” Large Exxon shareholders California Public Employees' Retirement System (“CalSTRS”) and California Public Employees’ Retirement System (“CalPERS”) each expressed disappointment and opposition to Exxon’s lawsuit. A CalPERS representative further published a statement that,

Now, decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful U.S. corporation, designed to punish two small groups that dared to speak truth to power. If successful, the legal action could diminish the role—and the rights—of every investor in improving a company’s bottom line. That’s why on May 29, 2024, CalPERS will cast our shareholder votes in opposition to all 12 members of ExxonMobil’s board of directors and its chief executive officer… But let’s be clear: This is not about climate change. The company’s decision to seek new, broad corporate power puts every issue on the table. If ExxonMobil succeeds in silencing voices and upending the rules of shareholder democracy, what other subjects will the leaders of any company make off limits? Worker safety? Excessive executive compensation? Might future shareholders who seek answers from a company’s leaders be ignored because of the legal precedent now sought by ExxonMobil?

Illinois Treasurer Michael Frerichs called Exxon's lawsuit a hostile move that “undermines the time-honored system of accountability between shareholders and corporate boards” and urged votes against certain directors’ reelection. Norway’s USD 1.6 trillion sovereign wealth fund, one of Exxon’s largest shareholders, stated that it would vote against the election of one Exxon director.

Later in May of 2024, the Court substantively denied the defendants’ motion to dismiss, ruling that their withdrawal of the proposal and even their promise not to simply refile did not make it “absolutely clear” the proposal would not be refiled in some form in the future. The case was dismissed against Follow This as lacking personal jurisdiction but not dismissed against Arjuna.

Court letter

Following the issuance of the Court’s opinion, Arjuna published a letter to Exxon. In the letter, Arjuna maintained that Exxon’s lawsuit,

represents an assault on the system of shareholder democracy which has served both investors and companies well for decades. Exxon’s insistence on continuing the lawsuit even after Arjuna withdrew the proposal and promised not to refile it is consistent with a strategy to silence all shareholders who may attempt to raise similar concerns.

Arjuna continued that it,

cannot alone bear the brunt of Exxon’s war on shareholder rights. For that reason, Arjuna is accepting the Court’s invitation, made in its recent ruling, to provide clarity through a ‘broader stipulation’ that Arjuna will not submit the proposal, or anything similar to the proposal, for consideration by Exxon shareholders in the future. Thus, Arjuna hereby unconditionally and irrevocably covenants to refrain henceforth from submitting any proposal for consideration by Exxon shareholders relating to GHG or climate change.

Following Arjuna’s letter, the Court ordered Exxon to submit a brief explaining any remaining contentions they may have.[4] In mid-June of 2024, Exxon submitted its brief, still arguing that Arjuna’s covenant had not gone far enough because Arjuna might “behind the scenes” support other organizations’ efforts to impact Exxon’s operations.[5]

It is not clear whether Exxon will ultimately let this litigation go or what its longer-term ramifications on how activist investors pursue their goals will be.

One thing that is clear is that Exxon is determined to limit the inclusion of socially or ethically motivated shareholder proposals in their annual proxies. And while they claim to be motivated by a desire to defend their shareholders’ interests, many of their largest shareholders clearly want the ability to vote on proposals like Arjuna and Follow This’s, even if they mostly do not pass them.  This has not seemed to diminish Exxon’s determined attack on these activist investors and their proposals. 


[1] See, 14_shareholder-proposals-under-exchange-act-rule.pdf (debevoise.com)

[2] Ibid.

[3] See, Exxon employs “direct-to-court” strategy for shareholder proposal. Will others do the same? – Cooley PubCo

[4] See, Exxon court challenge to Arjuna shareholder proposal survives dismissal [updated] – Cooley PubCo

[5] Exxon Says Activist Investor Could Still Target Core Business - Law360 (paywall))


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