BlackRock ups the pressure on Exxon Mobil

BlackRock has shown it can get serious with portfolio companies, this week cranking up the pressure on Exxon Mobil by voting against the re-election of several of the company’s leadership team.

Citing insufficient progress on sustainable reporting, an inadequate mix of skillsets and an inability to assess material risks to the business, the world’s largest asset manager voted against the election of board directors Angela Braly and Kenneth Frazier last week.

The move was particularly significant for Exxon as BlackRock is its second largest shareholder, holding 5% of the business on behalf of institutional investors around the world.

BlackRock also voted in favour of a more robust independent leadership structure, headed by a new, independent board chair. All three actions were against the recommendations of Exxon’s board.

“When effective corporate governance is lacking, we believe that voting against the re-election of the responsible directors is often the most impactful action a shareholder can take,” BlackRock said in a statement following the vote.

“The directors in the boardroom, the independence of their voices, and the value of their collective experience are meaningful determinants of their ability to provide direction and leadership to management and to oversee and drive management’s performance.”

The company added that it had flagged its concerns about the current company disclosures published by Exxon in recent engagements.

“We continue to see a gap in the company’s disclosure and action with regard to several components of its climate risk management,” it said.

“We see this as a corporate governance issue that has the potential to undermine the company’s long-term financial sustainability.”

Despite BlackRock’s efforts, some critics took to social media to suggest that the fund manager’s actions didn’t go far enough. Some said they would have preferred to see BlackRock championing a shareholder resolution, but others noted that voting against directors had greater impact as shareholder resolutions are non-binding.

BlackRock did, however, attract support for its voting decisions from several UK pension fund representatives, including David Hickey, a portfolio manager for Lothian Pension Fund.

In an update after the vote, Mr Hickey wrote the vote was evidence that BlackRock was backing its words with actions.

“While I have no doubt there will be the usual complaints of Blackrock not going far enough, I think this is great progress by the company in both transparency and in backing Larry [Fink]’s words with action.

“While the world's largest asset manager is definitely late to the party, they're here now, and things are about to really kick off!”