A shareholder advocacy group filed papers Tuesday asking investors in the energy giant Chevron to oust the chairman and another board member because of the company’s failure to cut carbon emissions, setting off a campaign to alter significantly the strategy of the nation’s second-largest oil company.
Such shareholder efforts to oust board members are seldom successful. But a number of large investment companies and pension funds, which typically play key roles in the voting, say they are willing to use their votes to demand that companies address climate change.
Last year, widespread discontent over ExxonMobil’s climate change strategy and financial performance allowed dissident shareholders to take three seats on the 12-member board.
“More and more shareholders have been calling for transformational change from companies,” said Eli Kasargod-Staub, the director of the shareholder advocacy group Majority Action, which is organizing the campaign at Chevron. “If board members are failing to take action, we believe responsible shareholders will hold them accountable.”
The group aims to displace from the board Michael Wirth, 61, chairman and chief executive since 2018, and Ronald Sugar, 72, a board member since 2005 and the retired chairman and chief executive of the aerospace and defense company Northrop Grumman. The group is not seeking to fire Wirth as chief executive, only to remove him from the 12-member board.
In a statement to The Washington Post, the company said: “Chevron’s board of directors reviews proposals from shareholders in detail and will make recommendations to stockholders about how to vote on each request in our proxy statement, which we plan to publish next month.”
Over the past decade, more investors have begun to pressure companies in which they own stakes to reduce their carbon emissions and develop business plans adapted for climate change.
Environmental groups and scientific reports say emissions cuts are critical to thwarting climate change and to the broader health of the planet. But some shareholder groups say companies also have a narrower financial reason to move away from fossil fuels: Eventually, governments will impose stricter limits on their use, they say, and even if they do not, alternative energy sources eventually will become cheaper and shrink the demand for oil and gas.
Many investors have become impatient for change.
“There’s a lot of [investor] frustration at the slow pace of the energy transition,” said Marc Goldstein, the head of U.S. research at Institutional Shareholder Services.
He foresees more efforts to displace board members over climate issues.
“Big investors are going to be increasingly voting against directors because of climate issues,” Goldstein said. “It doesn’t mean they’re going to be voting against every director. They’re going to look at which companies are in the lead and which are laggards on disclosing current emissions as well as their transition plans.”
One of the biggest players, for example, BlackRock, the world’s largest money manager, has repeatedly warned that it will steer away from investments that carry high environmental risks.
“BlackRock believes that climate change has become a defining factor in companies’ long-term prospects,” it said in January in a document indicating how it will decide how to vote in shareholder elections this year.
BlackRock said it will ask companies for “a business plan for how they intend to deliver long-term financial performance through the transition to global net zero” carbon emissions.
This year’s bid to unseat Wirth and Sugar builds on a key event last year, when a shareholder group presented a resolution calling for Chevron “to substantially reduce the greenhouse gas (GHG) emissions of their energy products.”
“I think we needed to be very clear with Big Oil,” said Mark van Baal, the founder of Follow This, the group that submitted the resolution. “We must get substantial reductions.”
The Chevron board opposed the measure, saying that the company was supporting an approach to achieve the goals of the Paris agreement, the landmark treaty on climate change, “as efficiently and cost-effectively as possible for society.”
More than 60 percent of shareholders sided with the reformers.
Today, much of the case against Wirth and Sugar turns on that resolution and the company’s conduct since then. Van Baal said the company had ignored the will of the shareholders, calling its actions over the past year “a snub.”
Even so, the case against the directors faces some head winds. Both withstood a similar effort last year. With gas prices rising, so are Chevron share prices, and that might make some shareholders less willing to force a change on the board. Moreover, the Russian invasion of Ukraine has led to calls for companies in the West to produce more oil, not less, to reduce dependence on Russian resources.
Kasargod-Staub, the director of the advocacy group Majority Action, said a better way to become independent of Russian oil is to develop more alternative energy sources at home.
The United Nations Intergovernmental Panel on Climate Change “just a week ago reported that we are rapidly running out of time to evade the worst ravages of runaway climate change,” he said. “Responsible long-term investors know that the solution to the crisis in Ukraine cannot rest in a massive expansion of fossil fuels.”