Investor advocates are calling on the U.S. Securities and Exchange Commission (SEC) to reverse its decision allowing energy giant ExxonMobil to introduce a program that automates retail shareholder voting in favour of management.
Earlier this month, the SEC approved the company’s proposed “retail voting program,” which allows investors to opt into a proxy voting initiative that would collect retail votes for management’s recommendations on shareholder proposals.
On Tuesday, two U.S. investor advocacy groups, As You Sow and the Interfaith Center for Corporate Responsibility (ICCR), filed a request with the SEC asking it to reconsider. They argue that the program violates the SEC’s rules on proxy voting, which restrict shareholders from delegating voting authority beyond a single annual meeting.
“Exxon’s violation of current SEC proxy rules is not a technical footnote,” said Danielle Fugere, president and chief counsel of As You Sow, in a release.
“The securities laws are clear — proxies must be given annually, after investors receive the meeting-specific issues on which they will be voting. Exxon’s retail voter program blatantly ignores those requirements. Allowing this program to proceed would set a dangerous precedent that undermines the integrity of our markets,” she added.
The group argued that enabling a company to establish a program that recruits retail shareholder votes would also allow management to entrench itself.
“Currently retail voters hold roughly 40% of Exxon shares, and nearly 75% of those shareholders do not currently vote. A standing proxy in favour of management therefore significantly increases the odds of a perpetual management advantage,” said Andrew Behar, CEO of As You Sow, who called the program “… a direct attack on shareholder rights.”
“Under Exxon’s proposed program, retail investors would relinquish their rights to evaluate company performance annually and cast their votes accordingly, thereby potentially granting management carte blanche on critical governance issues such as contested board contests, CEO pay votes and other matters,” said Josh Zinner, CEO of ICCR.