A third climate activist is expected to be elected to Exxon’s board

ExxonMobil said it expects a third activist shareholder will be elected to its board of directors, following a contentious vote.

Votes are still being tallied, and the results remain preliminary. But Exxon acknowledged after its shareholder meeting last week that two of its board seats went to climate activist hedge fund Engine No. 1. On Wednesday, the oil company said a third Engine No. 1 nominee beat out one of Exxon’s preferred directors.

Exxon said nine of its slate of nominees won election to the board, which consists of 12 directors.

“We look forward to working with all of our directors to build on the progress we’ve made to grow long-term shareholder value and succeed in a lower-carbon future,” said Darren Woods, chairman and CEO of ExxonMobil. “We thank all shareholders for their engagement and participation, and their ongoing support for our company.”

Engine No. 1 has sharply criticized ExxonMobil’s climate strategy. Upset with Exxon’s financial performance and its foot-dragging on climate, the hedge fund sought to oust four directors at the company’s annual shareholder meeting.

The vote served as a major milestone in the battle against climate change. It was the first proxy campaign at a major US company in which the case for change was built around the shift away from fossil fuels.

“We are grateful for shareholders’ careful consideration of our nominees and are excited that these three individuals will be working with the full board to help better position ExxonMobil for the long-term benefit of all shareholders,” Engine No. 1 said in a statement Wednesday.

Engine No. 1 argued the climate crisis poses an existential threat to Exxon — one the company hasn’t taken seriously enough. Unlike BP, Royal Dutch Shell and other European oil majors, Exxon has doubled down on oil and gas despite growing concern about the climate crisis.

That strategy hasn’t paid off: The world’s most valuable company as recently as 2013, Exxon has lost nearly $200 billion in market capitalization since its peak. It had enjoyed an unbroken run as a member of the Dow Jones Industrial Average from 1928 until it was kicked out of the exclusive index last summer.

During the five years prior to the pandemic, Exxon’s total return (including dividends) fell by 17.5%, according to Engine No. 1. That was easily last among the five biggest oil companies over that span, with Exxon the only one suffering a loss. The S&P 500 surged nearly 80% during the same time frame.

However, Exxon has rebounded in 2021 as oil prices have climbed. The share price is up 41% this year, nearly quadrupling the S&P 500’s advance. Still, Exxon remains far from the record highs hit in mid-2014.

Although Engine No. 1 holds just 0.02% of Exxon’s shares, the hedge fund won backing from major institutional investors.

Institutional Shareholder Services advised shareholders to vote in favor of three of Engine No. 1’s candidates. Citing Exxon’s “questionable strategy” for the future and “diminishing returns,” Glass Lewis, another influential advisory firm, urged shareholders to back two of the four candidates.