Guest hyperbole by David Middleton
Since, someone will very likely comment that the article doesn’t say that activist shareholders were trying to force oil companies to stop being oil companies, I will answer preemptively:
- You don’t know what an oil company is or does.
- The thread title was intentionally hyperbolical.
One of the two answers above may be hyperbolical.
However, my thread title is not nearly as misleading as the title of this Axios article:
Amy Harder Apr 2
Investors stunned over oil producer’s climate-change exemption
A new twist is unfolding in the fight between activist investors and the oil industry: an unprecedented move by federal regulators allowing a major producer to preemptively kill a shareholder resolution on climate change without a vote.
Why it matters: The Securities and Exchange Commission’s support of oil producer EOG Resources is emerging as a flashpoint in what has become America’s central battleground over climate change: what investors do about it. It’s an arcane fight, but a consequential one too, because President Trump is reversing course on climate policy.
“What the SEC has done here really feels like interfering with the marketplace, substituting their judgment for what shareholders and investors already think and do.”— Jonas Kron, director of shareholder advocacy at Trillium Asset Management, the investment firm that filed the now-blocked resolution
For the record, spokespeople at the SEC and EOG both declined to comment.
The details: Trillium proposed a resolution calling on EOG to set a target to reduce its greenhouse gas emissions. EOG complained to the SEC in late December that the proposal would micromanage the company, calling it a “rigid, time-bound” target, and asked to omit it from consideration.
Responding in late February, the SEC agreed and took a veiled shot at shareholders, implying they don’t know enough to set company policy. The SEC sent another letter last month to Kron’s firm rejecting an appeal request.
This is what the activist shareholders demanded:
Resolved: Shareholders request EOG Resources, Inc. (EOG) adopt company-wide, quantitative, time-bound targets for reducing greenhouse gas (GHG) emissions and issue a report, at reasonable cost and omitting proprietary information, discussing its plans and progress towards achieving these targets.
I’ve only worked in the oil industry for 37 years… So forgive my ignorance… How in the hell could an oil company, particularly the largest oil producer in Texas, reduce its greenhouse gas emissions and remain a viable oil company? Drill less wells? Produce less oil & natural gas? Solar-powered oil fields?
EOG very politely asked the SEC to schist-can this activist shareholder demand for the following reasons:
Under Rule 14a-8(i)(7), a proposal is excludable if it “deals with a matter relating to the company’s ordinary business operations.” In 1998, when the Commission adopted amendments to Rule 14a-8, the Commission explained that two central considerations determine whether a proposal is excludable under Rule 14a-8(i)(7). The first consideration relates to when a proposal concerns tasks “so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.” The second consideration relates to “the degree to which the proposal seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.” See SEC Release No. 34-40018 (May 21, 1998).
The SEC did not grant EOG a “climate-change exemption.” The SEC agreed with EOG that shareholders are not empowered to micro-manage corporations or interfere with their day-to-day operations. They do not have the right to vote for EOG to be something other than an oil company.
The Proposal requests that the Company adopt company-wide, quantitative, timebound targets for reducing greenhouse gas emissions and issue a report discussing its plans and progress towards achieving these targets.
There appears to be some basis for your view that the Company may exclude the Proposal under rule 14a-8(i)(7), as relating to the Company’s ordinary business operations. In our view, the Proposal seeks to micromanage the Company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment. Accordingly, we will not recommend enforcement action to the Commission if the Company omits the Proposal from its proxy materials in reliance on rule 14a-8(i)(7). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which the Company relies.
And sanity prevailed.