Fortune | Since the 2008 financial crisis, a growing chorus of advocates and scholars have argued that corporations have a responsibility toward a number of different stakeholders, including their employees. The opposing camp has held that shareholders come first: They are the owners of the firm, and they should ultimately decide how it acts.
However, there is a schism forming among those who claim to adhere to the idea of shareholder primacy–the notion that a company should serve only its investors. And it widened again last month when oil giant ExxonMobil sued two of its shareholders, Arjuna Capital and Follow This, to block them from submitting climate-related resolutions at its shareholder meeting.
But what do shareholders really want, and are companies ever allowed to ignore them? Arjuna and Follow This own Exxon stock and are trying to dictate how the energy giant behaves. However, they are demanding more than dividends: They want Exxon to commit to more ambitious emissions reductions, and to some, that’s just as bad as companies admitting an obligation to workers or the community.
[…]Arjuna and Follow This are, quite sensibly, proposing that like all the other Western oil majors, Exxon’s emissions goals include not just their own operations but also what is emitted when a customer burns the oil (also known as Scope 3 emissions).
Exxon contends that this “does not serve the interests of investors.” Why not let shareholders decide for themselves what their interests are and aren’t? Exxon argues that the proposals are a form of micromanagement–one of several criteria that would allow a company to ignore such a proposal. The normal process for doing so is for a company to file a letter with the SEC explaining why the proposal violates its rules. The SEC can then respond with its own “no-action” letter saying it will not punish the company for ignoring the proposal.
[…]That’s what Exxon and its anti-ESG allies likely fear most. If activist investors demonstrate that even many shareholders are uncomfortable with its vision of the energy future, then action from government won’t be far behind.
