Business
Column: In a major rebuke to Exxon Mobil, CalPERS will vote against its entire board
Exxon Mobil can’t say it wasn’t warned.
Having opted to continue its lawsuit against two activist investor groups even after they withdrew a shareholder proposal the company management opposed, the giant oil company had gotten flayed by shareholder advocates for its bullying.
Now the big shoe has dropped: CalPERS, the largest public pension fund in the nation, announced Monday that it will vote against all 12 Exxon Mobil board members, including CEO Darren Woods, at the May 29 annual meeting.
‘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?’
— CalPERS CEO Marcie Frost
CalPERS says it’s acting because it judges the company’s campaign against the two investor groups to be “designed to punish” investors who “dared to speak truth to power.”
The pension fund says, “the repercussions of the lawsuit could be devastating….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?”
The announcement is a major step up from the pension fund’s earlier comments about its intentions. Michael Cohen, the CalPERS chief operating investment officer, had earlier said only that the fund was considering voting against Woods.
Voting against the entire board and publicly urging other investors “to do the same,” appreciably raises the stakes for Exxon, at least theoretically. CalPERS — the California Public Employees’ Retirement System — is an institutional investor to be reckoned with. The $496-billion fund owns about $1 billion in Exxon Mobil shares.
Exxon Mobil’s lawsuit “is a real problem for us as share owners,” CalPERS CEO Marcie Frost said during a press conference Monday. “We believe that our voice matters, that we should be able to provide proxy solicitations asking the company to be more transparent in certain areas.”
Exxon called CalPERS’ action “a poor fiduciary decision.” The company said through a spokesperson, “It’s unclear why CalPERS is spending their time and energy defending the abuse of a shareholder process…Far from having a chilling effect on shareholder proposals, our efforts are intended to get clarity on the rules to foster an environment for open and meaningful shareholder dialogue. If anything, CalPERS’ vote against our entire board appears to be an attempt to ‘chill’ shareholder voices.”
As I reported last week, 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 annual meeting. The resolution was a plain-vanilla environmental proposal urging the company to work harder to reduce the greenhouse gas emissions of its products and to be more transparent about the impact of its business on the climate.
Days after the company sued, the shareholders, calculating their relative strength against the oil behemoth, withdrew the proposal and pledged not to refile it in the future. That rendered the lawsuit moot — but the company has refused to drop it.
What makes the lawsuit seem especially cynical is that the investors’ proposal, like all such proposals, are not binding on management — they’re advisory only. Moreover, as Frost pointed out, similar proposals in 2022 and 2023 failed to garner majority support from shareholders, winning only 10.5% of votes in 2022 and 27% last year.
“Exxon won,” Frost said.
It’s unlikely that CalPERS’ action will result in the board’s ouster. As CalPERS CEO Marcie Frost noted during a press conference Monday, no alternative slate of directors has been named for the upcoming annual meeting, so it would be “very difficult to say we’re turning over this board.”
But she said the fund’s vote is “more than symbolic” — it’s more about “sending the appropriate messages to this about their responsibilities in governance; if they don’t want to deal with governance they should step aside.”
Although CalPERS supported a slate of activist board members nominated in 2021— three of the four nominees won board seats — the fund said it is voting against the entire board because it is “allowing Chief Executive Officer Darren Woods to pursue a reckless and destructive effort.”
Frost said CalPERS isn’t contemplating taking a more aggressive action against Exxon Mobil, such as divesting its shares. “The problem with divestment when you’re CalPERS is that you completely lose your voice. The moment you don’t own shares, you can’t sign on to other owners’ proposals, you can’t take action to say we don’t believe that executive compensation is commensurate with the performance of the company.”
Exxon Mobil asserts in its lawsuit that the investment funds’ proposed resolution breached 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 2022 and 2023 annual meetings. Both standards allow a company to block a resolution from the meeting agenda, or proxy.
That may be so, but the conventional practice is for managements to seek approval from the SEC to exclude such resolutions by requesting what’s known as an agency “no action” letter.
CalPERS says that would have been “the better option” than a lawsuit. It’s not as though the SEC had set a high bar to issuing “no action” letters — the pension fund observes that the agency has approved two-thirds of those requests so far this year. Frost conjectured that, given the poor showing of similar proposals in the recent past, the SEC probably would have allowed the company to exclude the latest proposal from the annual meeting proxy.
Exxon Mobil’s rationale for continuing the lawsuit is that the proposal rules “must be enforced or the abuse by activists masquerading as shareholders will continue threatening the system.”
Frost questioned the company’s position. She described Exxon Mobil’s goal in the lawsuit as obtaining “clarity around the ordinary business” standard. But “to me it doesn’t feel like ‘clarity’; it feels like diminishment” of shareholder voices. As for the company’s insinuation that the system is broken, she said, “the system is working, if you use the system.”
Lululemon, the yoga pants and athletic clothing company, has hired a former executive from a rival, Nike, as its new chief executive.
Heidi O’Neill, who spent more than 25 years at Nike, will take the reins and join Lululemon’s board of directors on Sept. 8, the company announced on Wednesday.
The leadership change is happening during a tumultuous time for Lululemon, which had grown to $11 billion in revenue by persuading shoppers to ditch their jeans and slacks for stretchy leggings. But lately, sales have declined in North America amid intense competition and shifting fashion trends, with consumers favoring looser styles rather than the form-fitting silhouettes for which Lululemon is best known.
“As I step into the C.E.O. role in September, my job will be to build on that foundation — to accelerate product breakthroughs, deepen the brand’s cultural relevance, and unlock growth in markets around the world,” Ms. O’Neill, 61, said in a statement.
Lululemon, based in Vancouver, British Columbia, has also been entangled in a corporate power struggle over the company’s future. Its billionaire founder, Chip Wilson, has feuded with the board, nominated independent directors and criticized executives.
Lululemon’s previous chief executive, Calvin McDonald, stepped down at the end of January as pressure mounted from Mr. Wilson and some investors. One activist investor, Elliott Investment Management, had pushed its own chief executive candidate, who was not selected.
The interim co-chiefs, Meghan Frank and André Maestrini, will lead the company until Ms. O’Neill’s arrival, when they are expected to return to other senior roles. The pair had outlined a plan to revive sales at Lululemon, promising to invest in stores, save more money and speed up product development.
“We start the year with a real plan, with real strategies,” Mr. Maestrini said in an interview this year. “We make sure decisions are made fast.”
Lululemon said last month that it would add Chip Bergh, the former chief executive of Levi Strauss, to its board to replace David Mussafer, the chairman of the private equity firm Advent International, whom Mr. Wilson had sought to remove.
Ms. O’Neill climbed the organizational chart at Nike for decades, working across divisions including consumer sports, product innovation and brand marketing, and was most recently its president of consumer, product and brand. She left Nike last year amid a shake-up of senior management that led to the elimination of her role.
Analysts said Ms. O’Neill would be expected to find ways to energize Lululemon’s business and reset the company’s culture in order to improve performance.
“O’Neill is her own person who will come with an agenda of change,” said Neil Saunders, the managing director of GlobalData, a data analytics and consulting company. “The task ahead is a significant one, but it can be undertaken from a position of relative stability.”
Eaton wildfire survivors’ anger about Southern California Edison’s burying of electric wires in Altadena boiled over Tuesday with residents calling on government officials to temporarily halt the work.
In a letter to the Los Angeles County Board of Supervisors, more than 120 Altadena residents and the town’s council wrote that they had witnessed “manifest failures” by Edison in recent months as it has been tearing up streets and digging trenches to bury the wires.
The residents cited the unexpected financial cost of the work to homeowners and possible harm to the town’s remaining trees. They also pointed out how the work will leave telecommunication wires above ground on poles.
“The current lack of coordination is compounding the stress of a community still reeling from the Eaton Fire, and risks causing further irreparable harm,” the residents wrote.
The council voted unanimously Tuesday night to send the letter.
Scott Johnson, an Edison spokesman, said Wednesday that the company has been working to address the concerns, including by looking for other sources of funds to help pay for the homeowners’ costs.
“We recognize this community has already faced a number of challenges,” he said.
Johnson said the company will allow homeowners to keep existing overhead lines connecting their homes to the grid if they are worried about the cost.
Edison’s crews, Johnson said, have also been trained to use equipment that avoids roots and preserves the health of trees.
The utility has said that burying the wires as the town rebuilds thousands of homes destroyed in the fire will make the electrical grid safer and more reliable.
But anger has grown as work crews have shown up unexpectedly and residents learned they’re on the hook to pay tens of thousands of dollars to connect their homes to the buried lines.
Residents have also found the crews digging under the town’s oak and pine trees that survived last year’s fire. Arborists say the trenches could destroy the roots of some of the last remaining trees and kill them.
Amy Bodek, the county’s regional planning director, recently warned Edison that a government ordinance protects oak trees and that “utility trenching is not exempt from these requirements.”
Residents have also pointed out that in much of Altadena, the telecom companies, including Spectrum and AT&T, have not agreed to bury their wires in Edison’s trenches. That means the telecom wires will remain on poles above ground, which residents say is visually unappealing.
“While our community supports the long-term benefits of moving utilities underground, the current execution by SCE is placing undue financial and planning burdens on homeowners, causing irreparable harm to our heritage tree canopy, and proceeding without adequate local oversight,” the residents wrote.
They want the project halted until the problems are addressed.
Edison announced last year that it would spend as much as $925 million to underground and rebuild its grid in Altadena and Malibu, where the Palisades fire caused devastation.
The work — which costs an estimated $4 million per mile — will earn the utility millions of dollars in profits as its electric customers pay for it over the next decades.
Pedro Pizarro, chief executive of Edison International, told Gov. Gavin Newsom last year that state utility rules would require Altadena and Malibu homeowners to pay to underground the electric wire from their property line to the panel on their house. Pizarro estimated it would cost $8,000 to $10,000 for each home.
But some residents, who need to dig long trenches, say it will cost them much more.
“We are rebuilding and with the insurance shortfall, our finances are stretched already,” Marilyn Chong, an Altadena resident, wrote in a comment attached to the letter. “Incurring the additional burden of financing SCE’s infrastructure is not something we can or should have to do.”
Other fire survivors complained of Edison’s lack of planning and coordination with residents.
“I’ve started rebuilding, and apparently there won’t be underground power lines for me to connect with in time when my house will be done,” wrote Gail Murphy. “So apparently I’m supposed to be using a generator, and for how long!?”
Johnson said the company has set up a phone line for people with concerns or questions. That line — 1-800-250-7339 — is answered Monday through Saturday, he said.
Residents can also go to Edison’s office in Altadena at 2680 Fair Oaks Avenue. The office is open Monday to Friday from 8 to 4:30.
It’s unclear if the Eaton fire would have been less disastrous if Altadena’s neighborhood power lines had been buried.
The blaze ignited under Edison’s towering transmission lines that run through Eaton Canyon. Those lines carry bulk power through the company’s territory. In Altadena, Edison is burying the smaller distribution lines, which carry power to homes.
The government investigation into the cause of the fire has not yet been released. Pizarro has said that a leading theory is that a century-old transmission line, which had not carried power for 50 years, somehow re-energized to spark the blaze.
The fire killed at least 19 people and destroyed more than 9,400 homes and other structures.
Oil prices rose and stocks moved slightly higher on Wednesday as investors tried to make sense of President Trump’s decision to extend the cease-fire with Iran despite doubts about the status of another round of peace talks.
An adviser to Mohammad Bagher Ghalibaf, the influential speaker of the Iranian Parliament, dismissed the cease-fire announcement, saying that it had “no meaning.” He equated the U.S. naval blockade with bombings, with commercial vessels coming under attack near the Strait of Hormuz, the crucial shipping lane that has been at the center of a growing energy crisis.
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