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Exxon Sparks Investor Rights Battle. Why It Could Spread.

Sep 18, 2025 15:03:00 -0400 by Avi Salzman | #Energy

Exxon says that its program allows individual shareholders to bypass the time-consuming process of reviewing the proxy documents. (David Paul Morris/Bloomberg)

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Exxon Mobil is rolling out a new system that lets individual shareholders automatically vote in favor of all management-approved policies, a move that could blunt the power of activist investors.

Investors who opt into Exxon’s electronic system will vote their shares in favor of management-endorsed positions at shareholder meetings indefinitely, although they can later opt out.

Some activist investors are already crying foul, saying the Exxon technology undermines a basic tenet of American capitalism: that shareholders should control their own votes on company policies.

But proponents think it could be a model for other companies that want to fight back against activist investors, by enlisting retail investors against institution-driven campaigns. Exxon’s move is the first of its kind, but it may not be the last, lawyers said. It should “open the doors for other companies to adopt similar platforms and increase retail voting,” wrote Bill Hulse, a senior vice president at the U.S. Chamber of Commerce, in a blog post.

Exxon has been subject to considerable activist pressure in the past, both from climate-focused shareholders who want the company to clean up its operations and from investors upset about corporate policies that have hurt stock returns. An activist campaign in 2021 ousted three members of the board after Exxon’s poor performance led to it being taken out of the Dow Jones Industrial Average.

But Exxon’s new shareholder-voting program could make similar campaigns harder to launch, if mom-and-pop investors buy in. Exxon received the go-ahead on Monday from the Securities and Exchange Commission to roll out the technology, and will be sending notices to retail investors about it through their brokers in the coming weeks. Investment advisors who exercise voting authority for client securities are not eligible for the program. Exxon’s 2025 annual meeting is over, but the program could make a big impact at next year’s meeting.

Exxon says that its program allows individual shareholders to bypass the time-consuming process of reviewing the proxy documents and voting on their own. “Reading all those shareholder proposals takes too much time so they often settle for silence instead of being heard,” the company said.

While retail shareholders own nearly 40% of Exxon’s shares, only about one-quarter of them vote in annual meetings. That’s in line with the trend across public companies, where about 30% of retail investors vote their shares, according to financial tech company Broadridge, which facilitates proxy voting. By comparison, institutional investors vote around 80% of their shares.

Historically retail investors have been very pro-management, as compared to institutional investors, who have been more willing to buck the company. “Over the last five years, approximately 90% of retail investors that voted at Exxon Mobil meetings supported all of the Board’s recommendations” Exxon said in a letter to the SEC.

Investor groups that have challenged Exxon in the past cried foul about the new system. As You Sow, a nonprofit shareholder advocacy organization, has its own “set it and forget it” system that allows shareholders to direct their proxy votes toward environmental or social justice issues. Exxon actually referenced As You Sow’s system in a blog post about its new voting system, a comparison that As You Sow executives said was inapt.

Exxon’s system is “a delegation to agree with management on everything,” said Andy Behar, CEO of As You Sow. “What we’re offering is a very nuanced policy that goes across all shareholder resolutions.”

Danielle Fugere, As You Sow’s chief counsel, said she was blindsided by the SEC’s acceptance of this new system. She thinks the SEC should have at least opened this proposal up to public comment, because it’s a new issue. Fugere believes that under previous administrations the SEC would have rejected the idea or at least opened it up for debate, she said. The SEC declined to comment on Fugere’s criticism. The agency’s endorsement of Exxon’s idea was issued in a so-called “no action” letter—such letters tell companies that they’re unlikely to face enforcement action, but are different from formal SEC rules.

The SEC said in its letter that Exxon’s program could only go forward if shareholders still had full disclosure and the ability to override the system. Exxon notes that the program allows shareholders to opt out at any time, and reminds them every year of their choice to vote with management. If the investors want to vote against management on individual issues, they can still do so, and those individual votes will override the auto-voting system, Exxon said.

Write to Avi Salzman at avi.salzman@barrons.com