Exxon CEO Defends Board as Activist Investor Gains Support

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Darren Woods, chairman and chief executive of Exxon Mobil.

Andrew Harrer/Bloomberg

Exxon Mobil

faces a rare proxy challenge this month, as activist shareholders at a firm called Engine No. 1 want to shake up the company’s board.

Three independent shareholder advisory firms have weighed in, each recommending to shareholders that they pick at least one of the activists’ slate of directors. And Engine No. 1 has the support of some prominent pension funds, including the California State Teachers’ Retirement System, or Calstrs.

Exxon (ticker: XOM) CEO
Darren Woods
spoke to Barron’s on Thursday ahead of the company’s May 26 annual meeting. The conversation was edited for length and clarity.

Barron’s: These independent shareholder groups have weighed in, and they’ve sided at least partially with Engine No. 1. It looks as if they think that there’s some change needed at the company. I’m curious your opinion on that.

Darren Woods: Well, we obviously disagree with the recommendations. I think, if you step back and look at our board, we’ve got one of the strongest boards in corporate America, and one that we have been fairly consistently refreshing.

Since I came into the chair, we’ve had six new directors. And so half the board has been refreshed. If you look at the experiences, the qualifications that our board of directors have — a lot of global experiences, running large, complex companies and in challenging industries. We’ve got expertise and people who are premier in their field in terms of understanding science and technology. We’ve been very focused more recently on bringing industry expertise onto the board.

Think about the size and the scope of the businesses that we engage in all around the world. There aren’t a whole lot of other industry participants who have that same kind of experience. And we were very fortunate to find a former CEO who brought that with Wan Zulkiflee [the former CEO of Malaysian oil company Petronas]. As we continue to invest in the transition, we’ve been bringing on some expertise on capital allocation that helps us evaluate the value opportunities and the transition with Mike Angelakis [CEO of investment company Atairos] and
Jeff Ubben
[a climate-focused investment manager who previously ran ValueAct]. Particularly when it comes to looking at that in conjunction with the ESG space, I think Jeff’s brought a very valuable contribution there. We brought on
Jay Hooley
[former CEO of State Street], who has an investor perspective. I think we’ve got the right qualifications on the board, and we’re going to continue to evolve the board and bring on additional qualifications that help us on that journey.

The Institutional Shareholder Services report, though, said that Petronas, for instance, has business with Exxon, so Mr. Zulkiflee is not truly independent. There are some directors who’ve come on that are more independent, but there are still some conflicts there. Do you think that there needs to be a little bit of a refresh at least as far as independence — that directors should have no financial conflicts, for instance?

Well, I take exception to that. If you want industry experience on the board, you’re not going to find a significant industry player that doesn’t have some relationship. You can look around the world, any major oil and gas player that’s participating on a global market, there’s relationships there. I would argue that at the end of the day we have joint ventures with just about every large IOC [international oil company]. We’re independent. In fact, I would say we’re fierce competitors. So I think that that’s kind of a false argument.

Frankly, if you want industry experience that understands the different aspects of our business, that’s the type of person you’re gonna find. Think about the businesses that we’re in — we’re in chemicals, we’re in lubricants, we’re in the downstream retail business, we’re in the upstream natural gas, LNG business, oil business. It is a very broad suite of businesses that span the globe. And to get somebody who can come onto the board that has an independent perspective that has competed in those markets and successfully competed in those markets, to bring that perspective in and advise the other board members, that’s what we were looking for. You’re not going to get that from somebody who is strictly independent. And on top of that, Wan Zul’s not with Petronas anymore.

You’re going to have to impress shareholders like BlackRock on this vote. It has made moves to become more of a force towards ending climate change. Do you think you’ll need to do a little bit more, or maybe be a little more flexible with your tools to combat climate change? I know you’ve put a lot of focus into carbon capture, but will you need to kind of expand that to impress shareholders like BlackRock, for instance?

We’re beginning to see more discussion that we need a broader set of tools and solutions. And that while wind and solar plays an important role, it’s necessary but not sufficient. And so who’s working on the other solution sets that are required? How are we going to fill the gaps? How are we going to solve these problems while at the same time supporting economic growth and people’s standard of living? As that conversation continues to evolve, there’s recognition that we have a role to play here.

The Biden administration has come out in support of technologies like carbon capture and storage, and hydrogen [two technologies Exxon has been working on]. I think there is a much broader acceptance that those technologies are needed. And I think that people recognize those are right in our wheelhouse. We have been working on those for decades, and we bring something to that space. And if we’re going to find a way to reduce the cost and to make those technologies more affordable, and therefore more deployable, you need a company like Exxon Mobil that has a long history in those technologies, and invests quite a bit in research and development to be successful.

How do you feel ahead of the shareholder vote? Is this a little more contentious than you might have expected a year ago? Three advisory services have said that it’s time to make more changes on the board.

We’ve just been very focused on making sure that our shareholders understand the approach that we’re taking, the work that we’ve been doing, how we think about the future, and the role that we think we can play in that future and the value proposition associated with that role. The value proposition from a shareholder standpoint and the value proposition from a societal standpoint. And so that’s been the conversations we’ve been having. And frankly, I’ve been encouraged by this conversation. So we’ll continue to have that. And we’ve been having a lot of good dialogue with a number of our shareholders.

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