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Aesop’s Fables And ExxonMobil’s May 26, 2021 Annual Shareholder Meeting Weather Report

Long as I remember the rain been comin’ down

Clouds of mystery pourin’ confusion on the ground

Good men through the ages tryin’ to find the sun

And I wonder, still I wonder, who’ll stop the rain?

Creedence Clearwater Revival, 1970

Let’s start with the weather report. ExxonMobil’s annual shareholder meeting on May 26, 2021 will be a virtual one. Still, just for fun, I decided to check the Dallas weather forecast for that day. As I write on May 22, the forecast from weather.com is “Cloudy skies early, followed by partial clearing. A stray shower or thunderstorm is possible. High 86F. Winds S at 10 to 15 mph.” There is only a 22 percent chance of rain. Looks like a pleasant day for a shareholder meeting.

However, in the virtual world of the company’s shareholder meeting, when a vote will be taken to determine the company’s board of directors for next year, the chances of rain are looking rather higher. Will it be the 12 on the company’s blue proxy card or the ones on activist investor Engine No. 1’s white proxy card? Under proxy rules, investors must choose to vote only on one of the two proxy cards. I have previously written about the increasing support for the excellent four new nominees from Engine No. 1 in its “Reenergize ExxonMobil” campaign. ExxonMobil’s board and executive management must be wonderin’ “Who’ll Stop the Rain?

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On May 19, 2021 Aeisha Mastagni, Portfolio Manager at CalSTRS, filed a “Notice of Exempt Solicitation” with the SEC. This filing  allows this asset owner to talk with other shareholders about the upcoming vote and make the case for why they should support the white card. Mastagni’s filed letter notes white card support by proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis. The letter begins, “Change is coming to ExxonMobil.” Ms. Mastagni notes that “ExxonMobil’s shareholders have a first-of-its-kind opportunity to drive systemic change at the company by voting in support of the full alternate slate of directors to strengthen the board and contribute to the sustainable value of their investments.” She goes on to explain the eminent qualifications of Greg Goff, Kaisa Hietala, Alexander Karsner, and Anders Runevald and why it’s important that all four Engine No. 1 nominees are elected. At the end, Mastagni rightly states that “The links between climate change, business and financial investments are undeniable.” Since Engine No. 1 launched its campaign, the board and senior management of ExxonMobil must feel like as long as they can remember the rain been comin’ down.

On May 20, 2021 the Lex column in the Financial Times headlined “Exxon: a rebellion investors should back.” It cites Engine No. 1’s thesis “that a feckless board” has failed to position the company for the inevitable energy transition. “Exxon’s strong focus on fossil fuel extraction has become increasingly untenable.” The column states that “Shareholders should back the rebel motion.” It also importantly notes that large investors like “BlackRock and Vanguard will decide the fight.” To that I would add State Street Global Advisors. As I’ve noted previously, they are the three largest shareholders of the company’s stock with a combined holding of 18.9 percent.

At this point, I heard the singers playin’ and started cheering for more. More came on May 21, 2021 when EOS at Federated Hermes also published a “Notice of Exempt Solicitation.” EOS is one of the world’s largest investment stewardship providers with client assets under advice of approximately $1.5 trillion as of March 31, 2021. The letter was signed by Mr. Timothy Youmans, Lead-North America EOS at Federated Hermes. In his letter Mr. Youmans wrote that they “will be voting the white card and will vote FOR the slate of directors proposed by Engine No. 1,” thereby endorsing all four of Engine No. 1’s nominees. He explains that “EOS believes Engine No. 1’s slate of directors will bring experiences and skills needed to preserve long-term shareholder value through the transition to a low carbon economy.” Youmans also notes that “The concerns expressed by Engine No. 1 echo many of those expressed in EOS’ engagement with the company over the years.”

That same day, the New York City Employees’ Retirement System, the fourth largest pension fund in the U.S. with assets of $253.4 billion as of March 2021, announced its support for all four of Engine No. 1’s nominees. In doing so, it joined its peers of CalPERS, CalSTRS, and New York Statement Common Retirement Fund—the largest three, in that order. ExxonMobil might be feelin’ that still the rain kept pourin, fallin’ on its ears.

When the weather outside is bad and things are looking gloomy, we all need some form of indoor respite. One way to seek shelter from the storm is to curl up with something good to read. For example, there’s the 725 Aesop’s Fables written in the sixth century B.C. by a Greek slave. These brief little stories have endearing names like “The Town Mouse & the Country Mouse,” “The Owl & the Grasshopper,” “The Mischievous Dog,” “The Milkmaid & her Pail,” and “The Mole & his Mother.”

Methinks 725 fables are a lot to read. Instead, one could enjoy the shorter and more modern list of six entertaining little fables courtesy of ExxonMobil. They can be found in “A Message to ExxonMobil Shareholders from Engine No. 1.” I must acknowledge with admiration that the company demonstrates a captivating creative thematic motif for this fictional genre. So well done, in fact, that it is easy to get caught up in the fable and watch the tower of Five-Year Plans and New deals grow, wrapped in golden chains of obfuscation. Here they are, courtesy of Exxon Mobil!

·     Fable #1: The Endangered Cash Flows & Future Dividends of Engine No. 1’s plan

·     Fable #2: The Vaporware of Carbon Capture

·     Fable #3: The Company & The Paris Agreement

·     Fable #4: The Investment Program & “Out-of-Date” Data

·     Fable #5: The Sadly Spurned Friendly Company

·     Fable # 6: The Overtures & the Rejections

These fables are clouds of mystery pourin’ confusion on the ground. The impressive body of research and strategy formulation published by Engine No. 1 was the creative spark for these deftly done tall tales. For some of these fables, ExxonMobil demonstrated its peculiar prowess for taking Engine No. 1’s  statements and actions and spinning them into a yarn that doesn’t match reality. In other cases, the company slyly succumbs to its artistic urges and simply made up its own fables!

While perhaps neither as entertainingly fanciful nor as warmly comforting as being inside with a warm blanket and book of fables during a heavy rain, here are the Engine No.1 vignettes of veracity – facts, not fables:

·     Fact #1: The Engine No. 1 Plan for Increasing Cash Flows & Stronger Balance Sheet

·     Fact #2: The Company and Its Carbon Capture Prop

·     Fact #3: The Scope 3 Carbon Emissions and the Company’s Risk

·     Fact #4: The Short Term and the Long Term

·     Fact #5: The Company Who Would Not Talk

·     Fact #6: The Overtures to Engine No. 1 That Were Never Made

In shining the light of reality on what has really transpired since their campaign was launched, Engine No. 1 have come out as the good men through the ages tryin’ to find the sun. I’m hoping that by the time of the ExxonMobil shareholder meeting a crowd of shareholders will rush together, tryin’ to keep warm—on the way to the higher heat of long-term value creation—to support Engine No. 1’s plan to Reenergize ExxonMobil. They can do so by voting for all four alternate directors on the white proxy card. Easy to do and that’s not a fable, it’s a fact.

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