Which is the greater threat to oil and gas industry shareholders — anti-fossil fuel activists dressed in shareholders’ clothing or oil and gas industry corporate management? It’s a question that Exxon Mobil shareholders now have the opportunity to ponder before the oil giant’s May 31 annual shareholder meeting.
Shareholders will vote on the proposal I submitted titled, “Nuisance Shareholders,” which might more descriptively be called the “shareholder proposal to end all political activist shareholder proposals.”
As described in George Washington University professor Jarol B. Manheim’s 2004 book “Biz-War and the Out-of-Power Elite: The Progressive Attack on the Corporation,” left-wing political activists met and decided after the election of Ronald Reagan in 1980 that one way back to political power was to become activist shareholders in publicly owned corporations.
That is, they would exercise the rights and status of shareholders to pressure, if not, capture corporate managements so as to use corporate resources and influence to help achieve their political agenda.
It has been an enormously successful strategy for the activists, especially when it comes to the controversy over climate change. Not only do many of the largest and best-known publicly-owned corporations now openly advocate for climate policies, even oil and gas companies have been pressured into pursuing policies that militate against their own products.
After years of its annual meeting being turned into a circus by fossil fuel-opposing climate activist shareholders and other activist pressure, Exxon Mobil is perhaps foremost among U.S. oil and gas companies that now advocate for government action on climate, and against its own products and the best interests of its own shareholders.
Despite the November 2016 election of a presidential candidate who promised to withdraw the U.S. from the Paris climate treaty, called climate change hysteria a “hoax” and who promised to unleash the U.S. energy industry after eight years of anti-fossil fuel policies, Exxon Mobil management not only openly supports the Paris climate treaty but also supports a “carbon tax.” Both policies are intended to dramatically reduce if not eliminate fossil fuel use.
Some may imagine that Exxon Mobil’s announced climate policy is mere “greenwashing” — i.e., insincere posturing as eco-friendly for public relations purposes. But I take Exxon Mobil management at its word as expressed in deed and to me in negotiations over my proposal. Management believes that the climate is at risk from greenhouse gas emissions and that something needs to be done about it. While that is a perfectly reasonable position to take if you are a climate activist — it is not so reasonable for oil company management.
As Milton Friedman famously wrote in 1970: “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
So businesses serve as society’s wealth generators. They are not governments, charities, or activist groups. When it comes to climate, Exxon Mobil’s job is to create wealth via production and sale of oil and gas — not to participate in the dubious pursuit of returning the atmosphere to pre-Industrial Revolution conditions.
The consequences to investors of oil and gas corporate management’s failing to seriously and effectively fight climate activists is best demonstrated by the recent experience of the coal industry in which I worked for years.
Although climate activists frequently demonize Republican politicians and climate skeptics as being in the pockets of the coal industry, the reality is somewhat different. The coal industry was never a major financial supporter of climate skeptics and generally refused to openly challenge climate science or counterattack climate activists.
The effect of coal industry political contributions was essentially nullified after the 2009-2010 failure of cap-and-trade legislation and President Obama’s subsequent resort to his regulatory agencies. Political contributions produced little in the way of return as Congress could only pass ill-fated bills that President Obama would never sign.
And it is a fact that much of the coal industry actually supported the anti-coal Waxman-Markey cap-and-trade bill in the vain and naive hope that peace could be negotiated with politically-driven coal industry opponents.
The result to shareholders of the coal industry management’s failure to combat its opponents was dramatic. The market value of coal companies declined from $69 billion in 2011 to $4.8 billion in 2016 — a 93% drop in five years. Many large publicly-owned coal companies filed for bankruptcy. When the largest, Peabody Energy, emerged from bankruptcy in April 2017, shareholders had their stock zeroed out.
Exxon Mobil shareholders ought to consider than when they vote on my proposal. Here’s why:
First, Exxon Mobil’s attempted appeasement of climate activists, from its supporting climate policies to refusing to fund climate skeptics, has gotten the company nothing — except an activist-inspired RICO criminal investigation by state attorneys general led by New York’s Eric Schneiderman.
Next, while the world can’t function without oil and gas, the world can function without Exxon Mobil shareholders. Even though coal companies went bankrupt and shareholders were zeroed out, the coal companies nevertheless provided fuel for about one-third of our electricity needs during 2011-2016.
I submitted the shareholder-proposal-to-end-all-proposals once before in 2008. Although the proposal failed, my presentation at the annual meeting was received with thunderous applause. At that meeting, my message was directed at the poseur activist shareholders: “If you don’t like the oil and gas business, get out,” I urged.
It hadn’t quite dawned on me at the time that the message might have been better directed at Exxon Mobil’s management.
- Milloy is a senior fellow at the Energy & Environment Legal Institute and the author of “Scare Pollution: Why and How to Fix the EPA.”