ExxonMobil shareholders voted Wednesday to install at least two new board members nominated by activist hedge fund Engine No. 1, who would seek to push the oil and gas giant to invest in clean energy and move off fossil fuels more quickly.
Gregory Goff and Kaisa Hietala were elected, according to a preliminary vote announced by Exxon during its annual shareholder meeting.
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Votes are still being counted on two more board candidates pushed by Engine No. 1, Alexander Karsner and Anders Runevad. All have varying degrees of energy industry experience, but Exxon considered them unqualified.
Still, the early results are a huge loss for Exxon, the largest U.S. oil major, which spent $35 million to try to convince shareholders to stick with the current slate of 12 board directors. The rebuke amounts to Exxon being forced by investors to take a more aggressive stance on combating climate change and reducing emissions.
It was also a surprising show of power from Engine No. 1, which only has a 0.02% stake in Exxon.
Exxon CEO Darren Woods, in comments at the shareholder meeting, said he “welcomed” the additions of Goff and Hietala to the board, adding he “looks forward to working with them constructively and collectively on behalf of all shareholders.”
“We’ve heard from their desire to catalyze further changes at ExxonMobil, and we’re well positioned to respond,” Woods said.
Before he announced the preliminary vote results, Woods gave a presentation arguing that oil and gas will still be needed well into the next few decades, even under scenarios in which greenhouse gas emissions are reduced.
But Engine No. 1 argued that Exxon’s strategy of doubling down on investments in its core oil and gas business has not produced strong financial results.
Exxon, like other oil companies, struggled during the pandemic, posting its first-ever loss last year.
Last August, Exxon was removed from the Dow Jones Industrial Average and has posted weaker returns that many of its peers over the last decade.
“Mainstream investors voting for change at Exxon is a game changer because they sent a message that climate action is necessary for financial reasons,” Fred Krupp, president of the Environmental Defense Fund, told the Washington Examiner. “Engine No. 1 wasn’t making the eco-case. They prevailed on the financial case.”
Exxon began to pivot late last year by making new commitments with short-term targets for reducing emissions and publishing data on the use of its products. It also backtracked on a plan to increase spending on oil and gas production substantially.
But it is focusing on clean energy investments in areas supplementing its oil and gas business, such as carbon capture and hydrogen, rather than spending on renewables as European competitors such as Shell and BP are doing.
Engine No. 1 also wants Exxon to commit to lowering its emissions to net-zero by 2050, a target it has been reluctant to embrace despite backing by other big oil companies.
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The International Energy Agency, in a stark finding last week, said companies must immediately stop investing in new oil and gas development in order for the world to reach net-zero emissions.
It remains to be seen whether Exxon will further adjust its strategy after being forced to shake up its board.
“Time will tell. Ideally, the new Exxon directors and the entire board shoulder their responsibility to create this credible business strategy and it is much deeper than just cosmetic,” Krupp said.
