Update: Shareholders Agree to Withdraw Resolution at Exxon Mobil
Wespath Investment Management, the Needmor Fund and Zevin Asset Management co-filed a shareholder resolution at Exxon Mobil in late 2014 asking the company to include sustainability-related metrics in setting senior executive compensation.
Compensation paid to executives often is linked to the achievement of certain financial goals. Such “pay for performance” has become corporate governance good practice and an important indicator for investors evaluating how executive compensation plans align with their interests. Sustainable investors, like Wespath, believe that shareholder interests are better served when company executives are encouraged through incentives to focus on long-term value creation including the management of environmental, social and governance (ESG) issues. Compensation plans that include sustainability-related metrics, such as safety records, supply chain management targets and greenhouse gas reduction goals help ensure executives are attentive to a broad array of ESG factors that may influence operational and financial performance.
Exxon Mobil’s compensation plan has been structured with a strong emphasis on long-term results. The Compensation Discussion and Analysis section of the company’s most recent proxy statement, however, does not disclose specific performance measures related to sustainability – an omission that led Wespath to file the shareholder resolution with other investors. The resolution called upon Exxon Mobil's Compensation Committee to “include sustainability as one of the performance measures for senior executives under the Company’s annual and/or long-term incentive plans. Sustainability is defined as how environmental, social and financial considerations are integrated into corporate strategy over the long term.”
Representatives of Exxon Mobil met with Wespath and the other co-filers in February 2015 specifically to discuss the integration of sustainability metrics into compensation. Shareholders encouraged Exxon Mobil to explain more fully how sustainability (including energy efficiency and greenhouse gas reduction goals) is incorporated into executive compensation policies and practices. Following Exxon Mobil’s pledge to provide additional disclosure on executive compensation and sustainability performance, shareholders agreed to withdraw the resolution and to continue in dialogue. Wespath typically files or co-files a shareholder resolution only when dialogue has not been successful.