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26 Mar 2024
BY Gabi Mailula , Asanda Lembede AND Nina Gamsu

ExxonMobil's legal battle with shareholder activists, Arjuna Capital and Follow This: A watershed moment in ESG shareholder activism?

In an unprecedented legal move, ExxonMobil has instituted a lawsuit against two shareholder activists, alleging that their proposed resolution seeks to unduly interfere with the company's day-to-day operations. Notably, Exxon points out that a similar proposal failed to gain significant support last year, securing less than 10% backing.


This legal confrontation not only pits one of the world's largest oil and gas companies against activist investors but also raises fundamental questions about the trajectory of ESG activism itself. Does this legal battle signify a landmark turning point in the evolving landscape of corporate accountability and sustainability advocacy?

The ExxonMobil Case

On 22 January 2024, ExxonMobil Corporation ("Exxon") filed a lawsuit with the United States district court against Arjuna Capital and Follow This ("Shareholder Activists") to seek a declaratory order which would prevent the Shareholder Activists, who do not own any direct shares, from tabling a climate related shareholder proposal tabled in terms of SEC Rule 14a-8 (which is similar to section 65(3) of the Companies Act (South Africa)), which urges Exxon to establish targets for Scope 3 emissions reduction (carbon emissions generated indirectly), aiming to address the carbon footprint stemming from its oil and gas consumers.

Although Exxon has set net zero objectives for its Scope 1 and Scope 2 emissions by 2050, which encompass emissions from its production operations and energy usage, it notably lacks such targets for Scope 3 emissions, which account for indirectly generated carbon emissions. This sets it apart from the approach adopted by the four other leading oil majors in the industry.

While the Shareholder Activists have, in the interim, withdrawn the shareholder proposal, Exxon has indicated that it will continue to pursue the lawsuit. The aim of which is to get clarity in the form of legal precedent on circumstances were Shareholder Activists are abusing the corporate process by consistently levelling demands that are aligned with their personal agendas and are designed to undermine the company's current operations – a practice seen as exploiting SEC Regulations. These personal agendas can be deduced from the mission statements of the various NPC's: with Arjuna Capital's mission being to “shrink” energy companies, and its chief investment officer was found to be “manifestly biased” against Exxon by a New York court. Notably, Exxon points out that a similar proposal failed to gain significant support in the previous years, securing less than 10% backing. Even though these proposals have been consistently rejected by Exxon shareholders, it is an expensive and time-consuming process which is usually at odds with investors who seek to receive a return on their investment.

The relief sought will only provide Exxon with a relief to exclude the proposal from its 2024 proxy statement to be presented at its 2024 annual general meeting. Exxon has requested that the relief be provided by 19 March 2024, however, we have not had sight of the outcome of this lawsuit, as yet.

Potential implications of the judgment

Overall, the lawsuit has the potential to shape the future landscape of corporate accountability, shareholder activism, and sustainability practices, with far-reaching implications for companies, investors, and society as a whole across the globe.

  • Legal Precedent

The outcome of this lawsuit could establish a legal precedent regarding the rights of shareholders to propose certain resolutions and the extent to which companies can challenge such proposals. Depending on the ruling, it may influence future shareholder activism efforts and the dynamics between corporations and their investors.

  • Market Perception

The public nature of the lawsuit could impact market perception of Exxon and other companies involved in similar disputes. Investors, consumers, and other stakeholders may reassess their relationships with these companies based on their handling of ESG issues and shareholder activism. A similar impact could hold true for Shareholder Activists who acquire minority stakes in companies solely to be able to table climate change proposals.

  • Regulatory Response

Depending on the outcome and public reaction to the lawsuit, regulators may consider implementing or revising regulations related to shareholder rights, ESG reporting, and corporate accountability. This could lead to changes in disclosure requirements and processes to curb abuse.

Key Takeaways

Shareholder activism has certainly had a positive impact and encouraged corporations to pay close attention to ESG considerations in their reporting and their investing. However, the repeated requests to table climate change proposals, which for the most part, can only be satisfactorily dealt with if responded to exactly as requested by Shareholder Activists, has set a dangerous precedent where activists are able to subordinate the rights and interests of other shareholders of a company to achieve their ESG goals.

We foresee the implications of this legal confrontation extending beyond the courtroom, resonating throughout the corporate world and investment community. The outcome of this lawsuit has the potential to set a precedent for how companies, including South Africa companies and regulators, navigate shareholder activism and address sustainability concerns in the future.


Gabi Mailula

Executive | Corporate Commercial


Asanda Lembede

Candidate Legal Practitioner | Corporate Commercial


Nina Gamsu 

Candidate Legal Practitioner | Corporate Commercial