Hedge Fund, Engine No.1 LLC founded by Chris James effectively exercised its position as an investor to influence the composition of the Board of ExxonMobil.  With less than 0.5 percent of the shareholding, the hedge fund motivated activist groups to propose three nominees for the board of twelve members and to gain two seats.

At issue was the need to "implement a strategic plan for sustainable value creation in a changing world by fully exploring growth areas including more significant investment in clean energy to help the company profitably diversify and ensure it can commit to a mission of reducing targets".  The sentiments of Engine No.1 reflect current investor concerns over emissions, profitability and responses to a changing business environment especially important in the energy sector.

ExxonMobil derided the intention of their antagonist claiming false statements by Engine No.1 regarding plans and strategy and confirming that the company would generate earnings and cash flow to support a dividend.  The Board claimed that it had a plan to grow earnings and cash flow and play a meaningful role in the energy transition.  Approximately twenty percent of ExxonMobil's shareholding was held collectively by Vanguard, BlackRock and State Street Corporation suggesting that these hedge funds either defected from supporting the Board or overwhelming opposition was demonstrated by institutions such as CalPERS and independent investors.

Although the case for developing appropriate strategy is most critical for energy companies, investment activism will be an ongoing feature of corporate governance. Some companies with boards compliant to company founders will China has previously imposed a blanket ban on all imports of live poultry and products from the U.S.  be subject to challenge unless they exercise acceptable SGE and are receptive to shareholder sentiment.  And then of course there are the shorts waiting in the wings.