When thinking of the leading proponents of democracy, ExxonMobil is not a name that comes to mind. Yet the oil giant is using the rhetoric of democracy to promote a plan that will actually consolidate power in the hands of Exxon’s management.
The plan involves automatic voting by retail investors, a practice that was recently given a green light by the Trump Administration’s corporate-friendly Securities and Exchange Commission. It would work as follows: a company could ask individual investors to opt into a system by which their shares would be voted in support of management’s position on issues that come up at annual meetings.
Shareholders who do not wish to cast a vote can already assign that power to management through the proxy card they are sent in advance of each annual meeting. Many, however, neither vote nor send in the proxy. Exxon is apparently assuming that a significant number of investors would be willing to give management full control of their rights indefinitely.
Exxon leaves little doubt that its aim is to weaken shareholder activist groups, which have their own methods of collecting proxies to vote on policy issues that they themselves frequently submit for consideration at annual meetings. On its webpage about automatic voting, Exxon mentions by name a leading progressive shareholder group, As You Sow, complaining that it has a service that allows investors who support its principles turn over their votes. The company writes: “Our retail shareholders, who overwhelmingly support our board, have not had the benefit of such a service and, as a result, have for far too long been underrepresented at shareholder meetings.”
After taking another potshot at the activist groups, Exxon states: “Retail investors deserve to be heard. They didn’t buy our stock to sit on the sidelines. They bought it because they want strong shareholder returns, and they deserve a say in the company they own and the future they are funding.”
This is some shameless doubletalk. Exxon first makes a sweeping assumption about the opinions of shareholders who do not submit proxies. Then it tries to depict an arrangement in which people essentially give up their voting rights as a form of empowerment.
Exxon’s suggestion that it simply wants to do what the likes of As You Sow are doing ignores a fundamental difference. The activist groups are trying to hold the company accountable through votes on resolutions which are not binding and mainly serve to shine a light on retrograde corporate practices. Management, with its vast resources, wants to exploit the fact that many individual shareholders are not focused on the issues that come up in proxy resolutions. It seeks to take advantage of that indifference to make it easier for the company to defeat resolutions and to go on employing practices that harm workers, consumers, and communities.
It is also worth noting that shareholder activism is under attack. Earlier this year, Texas passed legislation that would effectively ban voting services such as the one used by As You Sow. A federal judge has issued a temporary injunction blocking enforcement of the law while the matter proceeds to trial.
At the same time, Texas Attorney General Ken Paxton announced that his office has launched an investigation of the two leading proxy advisory services that advise institutional investors about shareholder resolutions.
Rightwing politicians and corporate executives are both seeking to restrain the efforts of activists to make companies more accountable. There is nothing democratic about that.