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Column: Exxon Mobil is suing its shareholders to silence them about global warming

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Column: Exxon Mobil is suing its shareholders to silence them about global warming

You wouldn’t think that Exxon Mobil has to worry much about being harried by a couple of shareholder groups owning a few thousand dollars worth of shares between them — not with its $529-billion market value and its stature as the world’s biggest oil company.

But then you might not have factored in the company’s stature as the world’s biggest corporate bully.

In February, Exxon Mobil sued the U.S. investment firm Arjuna Capital and Netherlands-based green shareholder firm Follow This to keep a shareholder resolution they sponsored from appearing on the agenda of its May 29 annual meeting. The resolution urged Exxon Mobil to work harder to reduce the greenhouse gas emissions of its products.

Exxon has more resources than just about anybody; ‘overkill’ doesn’t begin to describe the imbalance of power.

— Shareholder advocate Nell Minow

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The company’s legal threat worked: Days after the lawsuit was filed, the shareholder groups, weighing their relative strength against an oil behemoth, withdrew the proposal and pledged not to refile it in the future.

Yet even though the proposal no longer exists, the company is still pursuing the lawsuit, running up its own and its adversaries’ legal bills. Its goal isn’t hard to fathom.

“What purpose does this have other than sending a chill down the spines of other investors to keep them from speaking up and filing resolutions?” asks Illinois State Treasurer Michael W. Frerichs, who oversees public investment portfolios, including the state’s retirement and college savings funds, worth more than $35 billion.

In response to the lawsuit, Frerichs has urged Exxon Mobil shareholders to vote against the reelection to the board of Chairman and Chief Executive Darren W. Woods and lead independent director Joseph L. Hooley at the annual meeting.

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He’s not alone. The $496-billion California Public Employees’ Retirement System, or CalPERS, the nation’s largest public pension fund, is considering a vote against Woods, according to the fund’s chief operating investment officer, Michael Cohen.

“Exxon has gone well beyond any other company that we’re aware of in terms of suing shareholders for trying to bring forward a proposal,” Cohen told the Financial Times. “There doesn’t seem to be anything other than an agenda of sending a message of shutting down shareholders’ ability to speak their mind.”

California Treasurer Fiona Ma, a CalPERS board member, backs a vote against Woods. “As the largest public pension fund in the country, we have a responsibility to lead on issues that threaten to undermine shareowners,” she says.

The proxy advisory firm Glass Lewis & Co., which helps institutional investors decide how to vote on shareholder proposals and board elections, has counseled a vote against Hooley, citing Exxon Mobil’s “unusual and aggressive tactics” in fighting activist investors.

Exxon Mobil’s action against Arjuna and Follow This opens a new chapter in the long battle between corporate managements and shareholder gadflies.

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Fossil fuel companies have been especially touchy about shareholder resolutions calling on them to take firmer action on global warming and to be more transparent about the effects their products have on climate.

In part that may be the result of some significant victories by activist shareholders. In 2021, nearly 61% of Chevron shareholders voted for the company to “substantially” reduce its greenhouse gas emissions — a shockingly large majority for a shareholder vote on any issue. That same year, the activist hedge fund Engine No. 1 led a campaign that unseated three Exxon Mobil board members and replaced them with directors more sensitive to climate risk.

Exxon Mobil also subjected the San Diego County community of Imperial Beach to a campaign of legal harassment over the city’s participation in a lawsuit aimed at forcing the company and others in the oil industry to pay compensation for the cost of global warming, which stems from the burning of the companies’ products.

Even in that context, Exxon Mobil’s campaign against Arjuna and Follow This represents a high-water mark in corporate cynicism.

The lawsuit asserts that the investment funds’ proposed resolution violated standards set forth by the Securities and Exchange Commission governing the propriety of such resolutions — it was related to “the company’s ordinary business operations” and closely resembled resolutions on similar topics that had failed to exceed threshold votes at the company’s 2022 and 2023 annual meetings. Both standards allow a company to block a resolution from the meeting agenda, or proxy.

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That may be so, but the conventional practice is for managements to seek approval from the SEC to exclude such resolutions through the issuance of what’s known as an agency “no action” letter.

Exxon Mobil hasn’t taken that step. Instead, it filed its lawsuit in federal court in Forth Worth, where the case was certain to be heard by one of the only two judges in that courthouse, both conservatives appointed by Republican presidents — a crystalline example of partisan “judge shopping.” The case came before Trump appointee Mark T. Pittman, who has allowed it to proceed.

The company hasn’t said why it followed that course. “The U.S. system for shareholder access is the best in the world,” company spokeswoman Elise Otten told me by email. “To make sure it stays that way, the rules must be enforced or the abuse by activists masquerading as shareholders will continue threatening the system.”

In practice, however, the SEC has been quite strict about requiring that shareholder proposals meet its standards. “There can only be one reason” for the lawsuit, says shareholder advocate Nell Minow — “it’s to crush the shareholder. Exxon has more resources than just about anybody; ‘overkill’ doesn’t begin to describe the imbalance of power.”

The company accused Arjuna and Follow This of aiming not “to improve ExxonMobil’s business performance or increase shareholder value,” but of pursuing the goal of “disrupting ExxonMobil’s investments and development of fossil fuel assets and causing ExxonMobil to change its business model, regardless of the benefits, costs, or the world’s needs.”

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The company maintained that the shareholder groups aimed to “force ExxonMobil to change the nature of its ordinary business or to go out of business entirely.”

That’s flatly untrue. The resolution observed that the company’s “cost of capital may substantially increase if it fails to control transition risks by significantly reducing absolute emissions.”

That judgment is shared by many institutional investors and government regulators, and points to a path for preserving Exxon Mobil’s business prospects, not destroying them.

In any case, what Exxon Mobil failed to note is that shareholder resolutions are always advisory — they can’t require management to do anything.

In its lawsuit, the company whined about the sheer burden of handling an increase in shareholder resolutions, especially those on fraught topics such as the environment and social issues. Using what it described as an SEC estimate that it costs corporations $150,000 to deal with every submitted resolution, its annual meeting statement calculated that it has spent $21 million to manage 140 submitted resolutions.

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A couple of points about that. First, the SEC didn’t estimate that every resolution costs $150,000 to manage. The SEC actually cites a range of $20,000 to $150,000 each.

Second, a quick look at the company’s financial statements gives the lie to its claim that shareholder resolutions are some sort of cataclysmic burden. Its statistics applied to the entire 10-year period from 2014 through 2023, not just a single year.

Over that decade, Exxon Mobil reported total profits of $204.3 billion. In other words, processing those 140 proposals — using the SEC’s highest estimate to arrive at $21 million — cost Exxon Mobil one one-hundredth of a percent of its profits, at most, to deal with shareholder proposals.

And it’s not as if those proposals clog up the annual meeting proxy — for this year’s meeting, only four proposals will be submitted to shareholder votes. Management opposes all four, big surprise.

As for whether companies such as Exxon Mobil have better uses for their money, the proxy statement doesn’t make a great case for every expenditure.

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Last year, for instance, the company paid nearly $1.5 million in relocation expenses for its top executives, including about $500,000 for Woods, in connection with the move of its headquarters from the Dallas suburbs to the Houston suburbs, about a three-hour drive away. Over the last three years, Woods collected more than $81 million in compensation, so one can see why moving house would leave him strapped.

“As a shareholder, the one thing you ask for is to look at every expenditure in terms of its return on investment,” Minow told me. “It’s unfathomable that the return on investment of this lawsuit is in any way beneficial to the company.” She’s right: It’s certain that Exxon’s legal fees on this case already exceed the putative $150,000 expense it incurred dealing with the withdrawn proposal.

Exxon Mobil’s punitive lawsuit only hints at the lengths that the fossil fuel industry will go to preserve a business model facing an inexorable decline. The companies haven’t been shy about enlisting politicians to rid them of their turbulent shareholders (to paraphrase the medieval King Henry II).

In February, Sen. Bill Hagerty (R-Tenn.) introduced a measure dubbed the “Rejecting Extremist Shareholder Proposals that Inhibit and Thwart Enterprise for Businesses Act, or “RESPITE.” The act would overturn an SEC rule stating that resolutions dealing with “significant social policy issues” can’t be excluded from the annual proxy under the traditional “ordinary business” limitation.

Don’t expect them to be shy about demanding more latitude from a reelected President Trump. The Washington Post reported last week that Trump pledged to roll back Biden administration environmental policies if the oil executives meeting with him at Mar-a-Lago would raise $1 billion for his campaign. An Exxon Mobil executive was present, the Post reported.

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Jury rejects Elon Musk’s lawsuit, sides with OpenAI in bitter feud over AI future

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Jury rejects Elon Musk’s lawsuit, sides with OpenAI in bitter feud over AI future

A federal jury sided with OpenAI and its top executives on Monday in a feud with Elon Musk, who accused them of betraying a shared vision for it to guide artificial intelligence’s development as a nonprofit.

The nine-person jury unanimously found that Musk waited too long to file his lawsuit and missed the deadline for the statute of limitations.

Musk, the world’s richest man, was a co-founder of OpenAI, the company that launched in 2015 and went on to create ChatGPT. After investing $38 million in its first years, Musk accused OpenAI CEO Sam Altman and his top deputy of shifting into a moneymaking mode behind his back.

The jury served in an advisory role, but Judge Yvonne Gonzalez Rogers accepted the verdict Monday as the court’s own and dismissed Musk’s claims.

The trial that began on April 27 in Oakland shed light on the bitter falling-out between the two Silicon Valley titans and the origins of OpenAI, now a company valued at $852 billion and poised to become one of the largest initial public offerings in history.

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The high-profile high-stakes showdown between two of the most powerful companies and leaders in technology was billed as a battle that could change the trajectory of AI.

There were two weeks of testimony from the dueling entrepreneurs and other key players in OpenAI’s history, providing a rare inside glimpse into the company, which evolved from a startup to one of the world’s most influential companies.

Musk had fallen out with his fellow co-founders, then, after OpenAI became arguably the most important company in AI, he decided he was not happy with how the trailblazer was managed after he left.

Musk claimed Altman, the startup’s chief executive officer, and OpenAI President Greg Brockman “stole a charity” by exploiting his early support for an altruistic research project so that they could later get rich by turning into a regular for-profit company.

OpenAI and its leaders said Musk was suing them to gain a competitive advantage for his own startup, xAI.

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Musk was seeking more than $100 billion in damages — to be awarded to OpenAI’s nonprofit arm instead of to himself — as well as the removal of Altman and Brockman.

The case was seen as an existential threat to OpenAI. If the decision had gone the other way, it would have sparked a shakeup that would have destabilized the company just as it is working to ensure the U.S. takes the lead in AI and prepares for a public offering with a valuation approaching $1 trillion.

Associated Press and Bloomberg contributed to this article.

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Why this Hollywood director thinks AI can save L.A. film jobs

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Why this Hollywood director thinks AI can save L.A. film jobs

In 1926, director Cecil B. DeMille hired hundreds of workers to build a set of Jerusalem inside the DeMille Studios in Culver City for the classic silent film “The King of Kings.”

A century later, Jon Erwin filmed his biblical epic ‘The Old Stories: Moses,’ starring Ben Kingsley, on the same studio lot now owned by Amazon MGM Studios.

Except now, much of the architecture, desert location, and supernatural parts of the three-episode miniseries were generated through artificial intelligence. The prequel to ‘The House of David’ series debuts on Amazon Prime on Thursday.

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A production that traditionally would have taken months to shoot and require multiple locations was filmed entirely in one week with a crew of just 100 people — who never left Los Angeles.

“We did this massive sword-and-sandal epic, and we never left a soundstage, very similar to how James Cameron does Avatar or how Jon Favreau does ‘The Mandalorian,’” said Erwin, the director of the series. “When you preserve the performance and the work of the crews and the department heads, then you can do things that are incredibly cost-effective for studios.”

As Hollywood grapples with rapid technological change, a growing number of filmmakers and companies in Southern California are using AI tools to radically rethink how films and TV shows are made.

“Some are still resisting, but many are recognizing that, for better or worse, AI is here and not going anywhere and it is important to reimagine what film creation can look like in light of the new possibilities AI creates,” said Victoria Schwartz, director of the entertainment, media, and sports law program at Pepperdine Caruso School of Law.

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A curved screen with a man standing in the middle.

A screen of LED panels called “the Volume” is used to film scenes for director Jon Erwin’s series “The Old Stories: Moses.”

(Genaro Molina / Los Angeles Times)

Erwin is among the first working directors at a major streaming platform to fully integrate AI into a commercial production.

Last month, he launched Innovative Dream, a Manhattan Beach production services company backed by Amazon. The company will rent its virtual production facilities to other studios and develop training programs for emerging filmmakers.

Although much of Hollywood is bracing for AI to hollow out jobs, Erwin argues the opposite: that AI, applied ethically around human performances, can return at least some production jobs that have been outsourced even as other positions are eliminated.

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“I think the greater threat of job loss in our industry is actually just how expensive things have gotten and how long they take to make,” Erwin said. “If you can make things quicker, and you can make things at a price point that studios will say ‘yes,’ you can employ more people in aggregate and create jobs.”

Although computer graphics have been essential to Hollywood since the 1990s, they traditionally required hundreds of artists and months of post-production work to place actors or crowds in digital worlds. Much of the labor-intensive visual effects work known as rotoscoping was outsourced to shops in India and other countries with much lower labor costs than in California.

By 2019, productions such as Disney’s “The Mandalorian” series advanced this further by using massive LED screens to project images of photorealistic digital worlds — “Star Wars” ships, forests, or deserts — as actors’ performed in costume in front of them. A virtual art department spent months designing the digital environments, and then loading them onto the large screen on the day of the shoot.

AI takes the process a step further.

Through “Moses,” Erwin is championing what he calls “hybrid” filmmaking: a workflow that marries live-action with AI-enhanced workflows in virtual production. The process combines what used to be separate phases — filming with actors and visual effects — to occur almost simultaneously. Scenes shot on set is made available to multiple editors and AI artists within minutes on the production floor, as they show near-finished sequences back to the cast and director.

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“You can create assets in three or four days, not 10 weeks. And that means you can actually kind of generate the environment while you’re shooting,” he said.

Erwin, 43, grew up in Alabama and built his career around faith-based films such as ‘I Still Believe’ and ‘Jesus Revolution.’ He had spent years trying to tell biblical stories at the scale portrayed in the source material.

When he pitched “House of David,” a drama about the life of King David, studio executives were initially skeptical. “I was told to just come up with a smaller idea,” he said.

To portray Goliath’s origin story, actors were filmed on green screens and AI was used to generate a mythical sequence involving dark sky, rain, mountains and angels with wings.

It marked one of the first integrations of generative AI in a major commercial production. The series, which premiered last year was viewed by 44 million viewers worldwide and reached No. 1 on Prime Video in the U.S.

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By Season 2, the team used 30 different tools, both traditional and AI, to generate images, sounds and video. They pivoted from shooting solely on location in Greece to filming some parts in L. A. in front of an LED wall.

AI was used to generate battle scenes and expand the background crowd size to thousands of people in a fraction of the time traditional CGI required. The use of AI-generated scenes jumped from 70 in Season 1 to 400 shots in the second season.

Jeff Thomas, a generative AI filmmaker who directed two episodes of Season 2, said each episode was made for less than $5 million, defying studio consensus that the show required a “Game of Thrones”-level budget of $12 million to $15 million per episode. Erwin declined to disclose the budgets for the “House of David” series or the “Moses” prequel..

“The Bible describes that battle as there was 100,000 people on each side. Well, it’s never been portrayed like that because we’ve never had the resources,” Erwin said. “We’re finally able to show that scope and scale.”

Erwin conceived of the idea of “Moses” over Christmas, wrote the script in January and created a four-minute trailer entirely created by AI. Amazon greenlighted the series later that month.

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Kingsley had a short window before his next commitment, so Erwin prepared and shot all three episodes on a soundstage in a week — a project that would have previously taken six months to prepare.

For the pivotal Red Sea scene, Erwin generated the water volumes and tidal waves in less than hour using AI models from Chinese company Kling AI and Palo Alto-based Luma AI, which would have taken weeks in the traditional process. They wrote text prompts that explored 18 different variations of the sea parting and discarded the ones that didn’t work, enabling Kingsley to react to a tidal wave projected onto a 360-degree LED wall screen.

“‘Moses’ really represented a whole new method of filmmaking for me,” Erwin said.

Jon Erwin stands in front of a screen of LED panels he used to film "The Old Stories: Moses"

For “The Old Stories: Moses,” director Jon Erwin used AI for wide shots, stunt-heavy battle sequences and to generate large crowds to showcase the grand scope of biblical stories. The red line he said he wouldn’t cross is using it in place of actors.

(Genaro Molina / Los Angeles Times)

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For crucial scenes portraying the palace hallway in Egypt, where Moses talks to the Pharaoh, they built cardboard boxes as the columns in the palace, and “reskinned” them with intricate carvings using AI. Although the set could accommodate only 20 extras, they used AI to create hundreds of background actors.

Erwin also used generative AI to synthetically expand partially built sets featuring sand and rocks and to “de-age” Kingsely to appear as a young Moses.

But some things were off limits for AI, including Kingsley’s performance.

“I just think our faces are so intricate and the micro expressions are so intricate, so that’s always real,” he said.

Instead, AI was used to co-design the character: Erwin originally imagined a bald Moses, but based on Kingsley’s feedback, they fine-tuned the look with weathered hair and mustache.

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“The line in the sand for me is replacing an actor,” Erwin said. “I don’t want to be in the industry if I can’t work with actors.”

The "hybrid" production creates AI-generated environments such as forests, deserts and battle sequences.

Jon Erwin’s “hybrid” production involves generating a variety of environments such as forests, deserts, or battle sequences using AI, and projecting them on the LED screen.

(Genaro Molina / Los Angeles Times)

When asked about the background extras displaced by AI crowd generation, Erwin said that’s the wrong way to think about it.

“It’s not a comparison of what would “Moses” have cost otherwise. It’s a comparison of “Moses” would have never been made otherwise, and that’s the way you have to think about it,” he said.

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Overall contraction in Hollywood has led to fewer films being shot on location in Los Angeles, and a 30% drop in entertainment industry jobs since its 2022 peak.

“I think you can do those things three to five times faster, at less than 30% the cost,” he said. “I actually see this tool set as an antidote to the job loss problem in our industry.”

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Waymo recalls thousands of its driverless cars after some failed to avoid flooded roads

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Waymo recalls thousands of its driverless cars after some failed to avoid flooded roads

Waymo is recalling 3,791 autonomous taxis after a software defect caused some vehicles to drive into flooded roadways, according to a recall report from the National Highway Traffic Safety Association.

The voluntary recall filed April 30 affects Waymo vehicles operating on the company’s fifth and sixth generation Automated Driving System. The software “may allow the vehicle to slow and then drive into standing water on higher speed roadways,” a NHTSA report said.

“Entering a flooded roadway can cause a loss of vehicle control, increasing the risk of a crash or injury,” NHTSA said.

The recall followed severe weather in San Antonio, during which a Waymo entered a flooded and impassable road, the company said.

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In response, Waymo has increased weather-related constraints on its vehicles and says it is working on additional software safeguards.

“We have identified an area of improvement regarding untraversable flooded lanes specific to higher-speed roadways, and have made the decision to file a voluntary software recall with NHTSA related to this scenario,” a Waymo spokesperson said. “Waymo provides over half a million trips every week in some of the most challenging driving environments across the U.S., and safety is our primary priority.”

Waymo operates in 10 major cities and has issued prior safety-related recalls. Last year, the company recalled more than 1,200 autonomous vehicles after minor crashes involving obstacles in the road.

The Alphabet-owned company has also come under fire for safety incidents, including striking a child outside a school in Santa Monica earlier this year and fatally running over a neighborhood cat in San Francisco.

According to data collected by Waymo over 170 million fully autonomous miles driven, Waymo is 13 times safer than human drivers in crashes involving pedestrians.

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The Mountain View-based company is currently ahead in the race to scale robotaxis across the country, with thousands of vehicles transporting paying customers in cities including Los Angeles, Miami and Phoenix.

Competitors Zoox and Tesla are trying to catch up with their own self-driving technology, but have yet to match Waymo’s scale and reach.

According to NHSTA, all affected Waymo vehicles received an interim software update to mitigate the issue, but a full remedy for the recall is still under development.

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