The California Public Employees’ Retirement System (CalPERS) said on Monday it plans to vote for Engine No. 1′s four director nominees to Exxon Mobil Corp’s (XOM.N) board, throwing additional support to the activist hedge fund in its proxy fight with the company.
“CalPERS is supporting additional board refreshment due to the long-term financial underperformance at ExxonMobil and the need for a greater depth of skill sets and experience on the board to address the significant challenges the company faces,” the pension fund said on Monday.
The fund is weighing in on what promises to be this year’s most closely watched boardroom challenge where Engine No. 1, a newly launched hedge fund, is taking on one of corporate America’s most recognizable companies and pushing for improved financial performance and a greater focus on clean energy.
CalPERS, which owns about 10 million shares of Exxon valued at $418 million, and is one of the top 35 shareholders, said it would back all of Engine No. 1’s four nominees because it feels the board would “benefit from additional expertise in both its core business and in renewable energy technologies.”
Engine No. 1’s slate for the 12-member board consists of Gregory Goff and Anders Runevad, former chief executives of oil refiner Andeavor and wind-turbine manufacturer Vestas Wind Systems (VWS.CO), respectively; Kaisa Hietala, former head of renewable fuels at Finnish refiner Neste (NESTE.HE); and Alexander Karsner, the former U.S. assistant secretary of energy for efficiency and renewable energy.
Exxon, which is valued at $236 billion, has seen its share price climb 35% since January.
“We will continue to engage with our shareholders, including CalPERS, to discuss our clear strategy for succeeding in a lower-carbon future,” said company spokesman Casey Norton.
“ExxonMobil is focused on meeting energy demand while developing technologies and commercializing opportunities to tackle emissions and enhance shareholder value in an energy transition,” Norton added.
Exxon’s board currently has 13 members, but with one member’s term set to expire, it is urging shareholders to vote in favor of its 12-person slate. Hedge fund D.E. Shaw, which owns $167.7 million worth of Exxon shares, plans to vote with the company, according to people familiar with the matter.
CalPERS’ announcement came after New York state’s pension fund said on Friday it would back the hedge fund.
Pension fund California State Teachers’ Retirement System (CalSTRS) has publicly backed Engine No. 1 since it unveiled its campaign late last year. New York state owns $336 million and CalSTRS owns $324 million worth of Exxon shares.
Engine No. 1 said it welcomed the support of the pension funds and added: “Addressing the issues at ExxonMobil and positioning the company for success in a changing industry and world requires new directors with decades of experience in value-creating, transformative change in the energy sector.”
‘EXISTENTIAL BUSINESS RISK’
As each side pushes to win backing from investors in the run-up to the May 26 annual meeting, Engine No. 1 is saying Exxon faces an “existential business risk” because it “has no credible plan to protect value in an energy transition.”
Exxon has fended off attempts in the past to get it to change its policies and leadership, but pressure has mounted since the top U.S. oil producer posted a historic annual loss for 2020 after the coronavirus pandemic slashed energy demand.
To blunt investor criticism, Exxon since December has expanded its board, pledged to increase low-carbon initiatives and said it would lower the intensity of its oilfield greenhouse-gas emissions.
In March, Exxon named activist investor Jeffrey Ubben and former Comcast Corp (CMCSA.O) executive Michael Angelakis to its board.
CalPERS said it would vote against Tan Sri Wan Zulkiflee Wan Ariffin, a former chief executive of Malaysian state energy firm Petronas, whom Exxon also named to the board this year. The pension fund will also vote against former MetLife Inc (MET.N) Chief Executive Steven Kandarian, former Caterpillar Inc (CAT.N) CEO Douglas Oberhelman and former International Business Machines Corp (IBM.N) CEO Samuel Palmisano.