The Illusion of Success: A Critique of Engine No. 1’s Proxy Fight at ExxonMobil

Sharfman, Bernard S.

doi:10.2139/ssrn.3898607

Cited by 3 publications

(4 citation statements)

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“…They must vote on shareholder resolutions in a way that is consistent with those fiduciary duties. So, for example, the successful proxy fight launched by Engine Number 1 against ExxonMobil's board was successful because the claimants convinced institutional investors that a more environmentally responsible strategy was in the financial interests of shareholders (Sharfman 2021).…”

Section: For-profit Governance and Social Objectivesmentioning

confidence: 99%

The Organization of Social Enterprises

Gertner

2023

Annu. Rev. Econ.

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Growing interest in the role of business entities in addressing social problems highlights the potential of social enterprises—organizations that cover all or most of their costs through revenue-generating business and have an objective to address a societal problem. A social enterprise can be an efficient and effective way to create social value by internalizing externalities, exploiting complementarities with commercial activities, providing better prices or quality to disadvantaged customers, and reducing the need for scarce philanthropic support. The challenges of managing an organization for financial success and social impact may limit their potential. Social enterprises can be for-profit or nonprofit organizations. The legal and institutional structure of for-profit and nonprofit governance and financing makes it challenging for a social entrepreneur to find a business model and organization structure to succeed. Expected final online publication date for the Annual Review of Economics, Volume 15 is August 2023. Please see http://www.annualreviews.org/page/journal/pubdates for revised estimates.

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Section: For-profit Governance and Social Objectivesmentioning

confidence: 99%

The Organization of Social Enterprises

Gertner

2023

Annu. Rev. Econ.

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“…No.1 spending $30 million to expect better returns on its $40 million investment makes no economic sense (Sharfman 2021). It has also been argued that this could even be a form of green washing.…”

Section: Percentage Of Votes For Given Directormentioning

confidence: 99%

“…Tomar, Desai, and Rajgopal (2021) argued that the vote is unlikely to change the strategic direction of ExxonMobil while the same chief executive stays in place. Sharfman (2021) has also argued that these small wins pull the focus off governments that should take action. Others have a more positive view on the outcome, arguing that even before the proxy victory, ExxonMobil changed the course of its policy.…”

Section: Percentage Of Votes For Given Directormentioning

confidence: 99%

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Shareholder engagement for climate change: Lessons from the ExxonMobil vs Engine No.1 proxy battle

Naef¹

2022

Preprint

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This paper offers a case study of how a small shareholder managed to impose three more climate-conscious directors on the board of ExxonMobil, one of the world’s largest scope 3 CO2 emitters. This concrete approach to fossil fuel companies’ transition might prove useful for climate change mitigation. The policy has the advantage to work in a vacuum. It has positive impacts on emissions regardless of what other actors do, unlike policies such as global carbon taxes or large-scale divestment, which need more coordination. But it comes with limitations. I find that the proxy campaign led to more attention for the hedge fund running the campaign. It was used as a marketing tool. Despite the limitations, proxy battles could prove a useful approach to pragmatic climate change approaches.

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Divest or engage? Effective paths to net zero from the U.S. perspective

Buks¹,

Sobański²

2023

EBR

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The aim of this article is to critically review and evaluate two ESG-based investment strategies—divestment and engagement for alignment of investment portfolios with climate change mitigation goals of the United Nations. The article compares both approaches in terms of their effectiveness of decarbonization, using the case study method. First, the case on fossil fuels divestment by Harvard Management Company is analysed. The second case study discusses shareholder engagement endeavors by Engine No. 1 hedge fund and its investment in ExxonMobil. The findings indicate that divestment may have non-immediate impact on corporate behavior and carries political and legal retribution risks. Engagement, on the other hand, presents itself as a more plausible option as it takes less time to deploy and, therefore, can produce more immediate and impactful results. Nevertheless, both divestment and engagement can play mutually supportive roles in addressing climate change by the investment industry.

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The Illusion of Success: A Critique of Engine No. 1’s Proxy Fight at ExxonMobil

Cited by 3 publications

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The Organization of Social Enterprises

The Organization of Social Enterprises

Shareholder engagement for climate change: Lessons from the ExxonMobil vs Engine No.1 proxy battle

Divest or engage? Effective paths to net zero from the U.S. perspective

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