By Ross Kerber, US Sustainable Business Correspondent

A lawsuit by Exxon against a climate proposal marks the latest squabble by the biggest U.S. oil company with investors, and comes at a fraught time for pension funds, religious groups and others who have used corporate annual meetings to force shareholder debates about social issues, climate change, artificial intelligence and other matters.

Their growing visibility and occasional successes have prompted a backlash from some companies and allies who say many shareholder resolutions aren't relevant to their business or cost too much to process. A working group of the Republican-controlled U.S. House of Representatives Committee on Financial Services has floated reforms that could help the companies fight back. A pending rulemaking by the U.S. Securities and Exchange Commission could swing things the other way.

Given the stakes I thought it would be a good time to round up context around this debate, which you can find below. I've also added links to stories on the tough choice the Biden administration faces on a liquefied natural gas (LNG) project, and on a new book by my Reuters colleague Ernest Scheyder on the global race to obtain minerals needed for electric power and devices.
    
Feel free to connect with me on LinkedIn. Or, if you have a news tip, potential content, or general thoughts you can email me at ross.kerber@thomsonreuters.com

Protestors gather outside the ExxonMobil annual shareholders meeting to protest the company’s climate policies as people arrive at the 2019 annual shareholders meeting in Dallas, Texas, U.S., May 29, 2019. REUTERS/Jennifer Hiller

An Exxon lawsuit to block a vote on an environmental proposal marks its latest squabble with investors and shows how the company remains willing to join fights on policy matters. 
        
Exxon famously had three directors replaced in a shareholder campaign in 2021, and before that took heat before ending a policy barring its outside directors from meeting with big investors.
        
Now it is in the midst of another spat with shareholders, albeit this time who own only small stakes in the company. The outcome could lay down important markers in the ongoing battle for influence between corporate managers and investors. 

Exxon's suit seeks to block a shareholder resolution, the number of which has risen following a policy change from 2021 by the SEC that was favored by proponents of environmental, social and governance (ESG) topics. 

In guidance, the SEC indicated it would allow more votes on social policy issues such as by narrowing the ways in which companies could argue a proposal could be excluded from corporate proxy statements because investors sought to "micromanage" operations. 

Encouraged by the change, shareholders filed 889 proposals during the 2023 proxy season, according to law firm Gibson Dunn, the third consecutive annual increase and the highest number of submissions since 2016. 
    
Support for many ESG resolutions has waned, however, as top investors like BlackRock and Vanguard dialed back their votes in favor of the measures on issues like climate change and workforce diversity. The firms said the looser rules had led to more unneeded measures being filed.
    
In one example, resolutions asking top U.S. banks to wind down new fossil fuel lending drew only slim support last April.

Before they hold a vote, companies can ask the SEC for permission to leave resolutions off proxy statements that guide their annual shareholder meetings. Technically companies make a "no-action" request of the agency, an assurance it won't take enforcement action for skipping the vote.
    
The SEC granted such exclusions 58% of the time last year, compared with  38% in 2022 and 71% in 2021, according to Gibson Dunn. The number of requests for no-action fell in that span, which skeptics of the process say shows companies growing discouraged about their chances with the SEC after its 2021 guidance.

Exxon itself last year won the SEC's permission to skip a vote proposed by a conservative investor asking for a report on comments made by Exxon directors. The agency turned down Exxon's requests to skip votes on several other investor proposals.
    
In its complaint Exxon described what it called "a flawed shareholder proposal and proxy voting process that does not serve investors’ interests and has become ripe for abuse by activists" with only small stakes who don't care about long-term shareholder value. 

Maureen O'Brien, senior vice president for Segal Marco Advisors, a consulting firm helping pension funds file resolutions, told me the resolutions are useful as a feedback mechanism for companies. Suits like the one from Exxon aren't needed, she said, because "The SEC already provides an efficient and clear process for resolving requests for no action."  

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