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A few weeks ago over on the Proxy Season Blog, Liz blogged about Exxon’s decision to take two shareholder proposal proponents to court over a “Scope 3” proposal and request a declaratory judgment that it could exclude the proposal from its proxy statement. Liz noted how unusual this “direct-to-court” strategy is — since shareholder proposals are non-binding, often don’t pass and there’s the option of seeking an SEC no-action letter. But she gave this background:

Back in 2017, one of the first climate proposals to receive majority shareholder approval was a request for a “2-degree scenario” analysis, which passed at ExxonMobil with 62% support. This emboldened proponents and gave credibility to the notion that investors want climate information. Looking back, it was one of the developments that launched the “E&S” tsunami. Over the ensuing 7 years, the volume of shareholder proposals increased to record numbers. Companies have been spending time, money, and energy on responding to proposals, negotiating with proponents, discussing the issues with institutional holders, and requesting no-action relief from the SEC.

The complaint, excerpted below, cites the difficulty in obtaining SEC no-action relief under current guidance:

The plain language of Rule 14a-8 supports excluding the 2024 Proposal, but current guidance by SEC staff about how to apply the rule can be at odds with the rule itself. Even though that guidance has no legal force or effect, Defendants and other similar activist organizations rely on it to pursue their personal preferences at the expense of shareholders. ExxonMobil seeks declaratory relief from this Court to stop this misuse of the current system.

On Monday, Liz shared that the proponents have now backed off by withdrawing their proposal (and promising not to refile it). But Exxon has not done the same. Here’s an excerpt from this Reuters article:

Exxon said it would continue with the suit, which questions the motivations of the investors and notes the rising number of resolutions being filed for corporate ballots.

“We believe there are still important issues for the court to resolve. There is no change to our plans, the suit is continuing,” Exxon said in an emailed statement.

In addition to seeking approval to skip a vote on the resolution, Exxon had sought attorneys’ fees and expenses and that the court enter “other and further relief as the Court may deem just and proper.”

This will be closely watched litigation that we’ll generally cover on our Proxy Season Blog where we continue to regularly post new items for TheCorporateCounsel.net members. Members can sign up to get that blog pushed via email whenever there is a new post. If you do not have access to the Proxy Season Blog or all the other great resources on TheCorporateCounsel.net, sign up today.

– Meredith Ervine