Rocky times for shareholder activists
Two interesting pieces of shareholder action have attracted attention lately, the Rockefellers encouraging management change in Exxon Mobil in North America and, the European Commission’s decision to suspend its investigation in to the attempted takeover of Hungarian Oil and Gas company MOL by Austrian OMV.
Exxon Mobil made a $10.9 billion profit in the first quarter of this year, a record for an Ameircan oil company, but the Rockefellers are looking past the bottom line. “Exxon Mobil is [...] focusing on a narrow path that ignores the rapidly shifting energy landscape around the world” said Peter O’Neill, great grandson of John D. Rockefller and head of the Rockefeller family committee dealing with Exxon Mobil issues.
As the largest individual stakeholders of Exxon Mobil, the Rockefellers are calling for greater investment in renewable energy and the separation of chairman and chief executive roles, both currently held by Rex W. Tillerson. Exxon seems less than concerned, pointing out that family members represent only 0.006 percent of Exxon’s stock. The board of directors has reccommended against the separation of roles and in a shareholder meeting on May 28th, it seems unlikely that the resolution will pass.
With the announcement of such high profits, Exxon is in a strong position right now. The Rockefellers could have chosen better timing to make their announcement, they are still one of America’s most important families but their power to force change in such a large firm is weak. Without convincing other shareholders their efforts will probably amount to good press and little else.
Across the Atlantic, the European Commission has suspended an inquiry in to the attempted takeover of MOL by OMV. The take-over has been described as “the biggest farce in corporate Europe right now” by one shareholder and it’s clear to see why.
OMV owns 20.2% of MOL and wants to buy the rest, but MOL is resisting through dubious means. In its annual shareholder meeting last week, a majority vote rejected the takeover. But many shareholders were not allowed to vote due to “missing documents.” Greg Koniecni, a representative of shareholder Franklin Templeton investments, said: “Half an hour before the meeting, investor relations called and said I could not vote because my documents were not in order.” Sources claim that up to 10% of the equity had been unable to vote.
The European Commission states that a lack of information has stalled the investigation. Commission spokesman Jonathan Todd said “we asked for information that they have not provided, so we have had to stop the clock”. The commission has not released information about which party it is investigating but ’stopping the clock’ on an investigation is common procedure. The investigation should continue when relevant documents have been released.
It’s clear that investors are rushing to commodities and specifically oil firms. As the number of shareholders rises, so too does shareholder activism and with it the complications of agency problems and conflicts of interest. As the Rockefellers’ attempt to organize Exxon mobil proves, the older ‘captains of industry’ of oil management are hesitant to embrace change in an industry in flux. Of course change is inevitable, but shareholders must also remember that too much too fast is not the right answer.
