State Treasurers’ Fight to Save Exxon

By Woody Jenkins, Editor, Central City News – Baton Rouge

In April, Louisiana’s new State Treasurer, John Fleming, M.D., was working in his office in the northwest corner of the State Capitol in Baton Rouge.  Looking west, he could see the Mighty Mississippi River rolling down to the Gulf of Mexico.  Looking north was the massive Exxon/Mobil oil refinery, one of the most important in the world with a

capacity of 540,000 barrels a day.

Without oil refineries like the one in Baton Rouge, the United States would quickly grind to a halt.

On that day in April, a representative of Exxon walked into the Treasurer’s office saying, “We need help!”  In an instant, Treasurer Fleming was thrown into a titanic struggle between the world’s largest energy company and the world’s largest private pension fund.  

The stakes for Louisiana citizens 

and especially the employees and 

retirees of Exxon/Mobil could hardly have been greater.

Years of Disrupting Shareholder Meetings.  Dr. Fleming learned that for years left-wing organizations had been filing resolutions at the annual Exxon/Mobil shareholder meeting.  Rather than being productive suggestions on how Exxon could do its job better or be more profitable for shareholders, the resolutions attacked fossil fuels and the core business of Exxon.  The goal seemed to be to put Exxon out of business or make it impossible to earn a profit.

For years, the Securities Exchange Commission had rules allowing a company to ban such resolutions but under Biden, the SEC changed the rules to facilitate the guerrilla tactics of left-wing groups.

After years of trying to placate the left, in January, Exxon decided it had had enough and filed suit against two organizations that were leading the charge — Arjuna Capital and a Dutch group called Follow This.  Both groups admit their goal is social activism, not return on investment.

Exxon’s suit was filed to challenge the SEC rules and get the court to decide whether a shareholders meeting has to be a three-ring circus.

Fire Storm on the Left. The filing of suit by Exxon/Mobil triggered a fire storm on the left.  The suit got the immediate attention of one of the most powerful forces on the left — the California Public Employees Retirement System, or CalPERS.

What might normally be considered a rather obscure group — a pension fund for state employees — CalPERS is actually a powerful force.  It controls $469 billion in investment dollars.  Moreover, it represents one of the most liberal groups (state employees) in one of the most liberal states (California).

Climate Action 100+.  CalPERS is a large investor but their influence is even larger.  In 2017, they helped found Climate Action 100+, a group of 545 investors controlling more than $50 trillion in managed assets.  This group is a major force that can twist the arms of energy companies and try to force them to follow their left-wing theories on climate change.

In February, Marci Frost, CEO of CalPERS, was saying perhaps her group would vote to unseat Exxon CEO Darren Woods and one other director at the Exxon shareholders’ meeting May 29.

However, when Exxon did not withdraw its suit, Ms. Frost carried her threats to an entirely different level.  By late April, she was talking about voting to remove all sitting Exxon directors.  

Left-Wing Pension Funds Join Together. CalPERS continued to escalate their rhetoric.  They told Exxon to drop the suit or face a shareholders revolt. Several giant pension funds joined in, including the New York State Common Retirement Fund and retirement funds from New York City, Maryland, Nevada and many others.  Sisters of Mercy of America jumped in, as did a coalition of labor unions in California and Majority Action, Inc., another left-wing group.

Democratic state treasurers joined in.  For the first time, virtually all elected Democratic treasurers united behind a common goal — the takeover of Exxon/Mobil, the world’s largest energy company.

A major victory for CalPERS was getting the support of Glass-Lewis, 

a proxy service agency that represents many states and private investors.  They lined up with those seeking to punish Exxon.

The Left’s Goal Was Stunning. 

The scope of their plan was breathtaking. Long term,  destroy America’s energy production.  Short term, replace the Board of Directors of Exxon with representatives of government employees from the most liberal states in America!  Nothing like that had ever been done in American history.

It was at this point that Exxon/Mobil reached out to Louisiana Treasurer John Fleming, M.D.

Why go to a mere state treasurer rather than the governor or other statewide officials?

The Treasurer Is the Key.  In Louisiana, the Treasurer is the chairman of LASERS, the largest pension fund for state employees, and he serves on the Board of Directors of other state employee retirement systems.

Just as important, Treasurer Fleming is an active member of the State Financial Officers Foundation (SFOF), which is composed of 20 State Treasurers from conservative states.

SFOF: Strong Track Record. SFOF plays a growing role influencing fiscal policy at the state and national levels.  Although their work often goes unnoticed by the media, they have a strong track record of victory.

Louisiana Treasurer John Schroder was president of SFOF until he left office in January.  Since then, the new Louisiana Treasurer, Dr. John Fleming, has been a strong leader in the organization.

Exxon asked Treasurer Fleming to try to rally Louisiana’s retirement systems in opposition to CalPERS efforts and asked him to encourage SFOF members to join in the effort.

Exxon: Vital to State Economy. Exxon is one of the most important forces in the Louisiana economy and the company naturally has widespread support among the general population and elected officials. Dr. Fleming worked the phone and was successful in mobilizing Louisiana’s retirement systems.  

Dr. Fleming asked for SFOF’s support. They were already aware of what was happening, and they jumped right in!  Soon almost every Republican state treasurer in the nation was onboard.

Dr. Fleming became a national spokesman on the issue, giving interviews to Fox News, the Wall Street Journal and a host of others.  Other state treasurers also made their voices heard.

Dr. John Fleming Statement. Dr. Fleming said, “Exxon is the largest manufacturing employer in Louisiana, employing over 6,000 employees and contractors statewide.  With an annual payroll of $414 million, Exxon pays state income taxes of $145 million, not counting an enormous contribution through sales and property taxes.”

“Typically, shareholders only vote against sitting directors when a company is performing poorly and investors are losing money.  However, Exxon has provided heavy returns for years and is positioned to do so for years into the future.  They are a tremendous asset for Louisiana and help make sure our state retirees are safe for years to come.”

“While shareholder activism can be a force for positive change, it must be geared towards maximizing shareholder returns, not destroying the targeted company for political purposes. If CalPERS is successful in disrupting Exxon’s shareholder meeting, it will set a dangerous precedent that will threaten financial markets and revenue that fund state government and state retirees.” 

The Wall Street Journal weigh-

ed in, saying, “Far from protecting shareholders’ rights, these agitators want to punish Exxon and its investors for refusing to surrender.”

“The resolution [by Arjuna and others] would force Exxon to change the nature of its ordinary business

or go out of business entirely.”

“The group called Follow This said their goal is to make producers stop exploring for more oil and gas.  Unless the courts weigh in, activist investors will continue, with the SEC’s approbation, to inundate public corporations with proposals designed to push an ideological agenda divorced from the success of the corporation.”

Alabama Auditor Andrew Sorrel. Dr. Fleming’s fellow member of SFOF, Andrew Sorrell, the State Auditor of Alabama, said:

“Capitalism works because companies are primarily driven by maximizing their profits, which they can do when they provide a valuable good or service to society, instead of getting bogged down in political debates. If politically-motivated entities use the process without regard to shareholder returns, all shareholders will suffer as public companies start to act like government, looking to appease various constituencies instead of maintaining a focus on increasing their profits by providing the best good or service they can.”

“As California, New York, Illinois and others use Exxon’s directors as their political football, it’s imperative that all fiduciaries and asset managers stand firm in defense of a company’s management who guided shareholders to record returns. We cannot allow political interference to destroy the integrity of shareholder votes. By doing so, we can ensure shareholder interests are protected and our markets remain free, fair and competitive for generations to come.”

At one point, CalPERS could see the possibility of as many as 38 percent of shareholders voting to oust the Exxon Board of Directors.

Hanging in the balance were three investment giants that usually swing to the left ­— Blackrock, State Street, and Vanguard.

Republican Treasurers Wrote Large Investors.  The State Financial Officers Foundation, composed of Republican state treasurers wrote to the Big Three and other large investors, saying, 

“You and Exxon are in the same boat, besieged by the same serial proponents of the same demands repackaged year after year. Ordinary shareholders do not see proxy statements as a substitute for electoral politics, as places to work out controversies such as climate politics, abortion, racial justice, the 2nd Amendment, animal rights, and the alleged misdeeds of Israel.”  

In the end, all three — Blackrock, State Street, and Vanguard — swung behind Exxon.

Despite CalPERS lofty goal of taking over the largest energy company in the world, the May 29 Exxon shareholders meeting ended up as a disaster for the left. Their efforts to take over Exxon were a complete failure.  In fact, the vote total against the Exxon Board was much smaller than anyone expected.

The Democratic Treasurers also showed their weakness.  They united with the hard left and proved impotent.

Exxon CEO Darren Woods Statement. Exxon CEO Darren Woods summarized the results of the May 29 Exxon shareholder meeting as follows:

“Three billion shares were represented at this meeting, which equates to approximately 84 percent of outstanding shares entitled to vote. On average, 95 percent of the votes cast were voted to elect, as Directors, the 12 nominees listed in the proxy statement. Director support ranged from 87 percent to 98 percent. Support last year ranged from 91 percent to 99 percent with an average support of 96 percent.”

“Our investors sent a powerful message that rules and value-creation matter.  Their vote signals a belief that we are on the right track by overwhelmingly re-electing our directors and soundly defeating all four proposals that would have hampered our ability to create long-term value by providing the world with the energy and products it needs while investing billions to reduce carbon emissions in our own business and others.”

“We expect the activist crowd will try and claim victory on today’s vote, but common sense should tell you otherwise in light of the large margin of the loss.” 

“We look forward to continuing our ongoing extensive shareholder engagement as we work to solve the ‘and’ equation – growing supplies of affordable energy and products and reducing greenhouse gas emissions.”  

In the end, Exxon worked hard, SFOF worked hard, and our own Dr. John Fleming worked hard.  And Exxon remains an independent, privately owned corporate citizen of Louisiana. The future of the Exxon refinery in Baton Rouge is secure, at least for now, and so are the businesses, jobs, families and retirees who depend on it.