Letter from CalPERS CEO Marcie Frost and Board President Theresa Taylor

Dear CalPERS member,

When you own shares of stock in a publicly traded company, you have a vested interest in how that company is run and whether its leaders are doing all they can to ensure lasting financial success.

You have a right to have your concerns heard by corporate directors and executives. They work for you.

For almost four decades, CalPERS has used its investments in major corporations to hold shareholder-elected directors and top officials accountable. We believe this is key to how we ensure long-term, sustainable investment returns for more than 2 million members. We do so, in part, by asking company leaders tough questions and, in some cases, demanding action through our support for various shareholder proposals. We cast thousands of votes every year.

Now, decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful U.S. corporation, designed to punish two small groups that dared to speak truth to power. If successful, the legal action could diminish the role—and the rights—of every investor in improving a company’s bottom line.

That’s why on May 29, 2024, CalPERS will cast our shareholder votes in opposition to all 12 members of ExxonMobil’s board of directors and its chief executive officer.

We urge other ExxonMobil shareholders to do the same, to send a message that our voices will not be silenced.

ExxonMobil had a better option and didn’t choose it. Why?

We don’t take this action lightly.

In fact, we urged ExxonMobil to drop the anti-shareholder lawsuit that is now pending in a Texas federal court. The company’s allegations, both about the shareholders in question and the existing regulatory process for relief, just don’t match the facts.

A company that wishes to block consideration of a shareholder proposal at its annual meeting can seek permission from the U.S. Securities and Exchange Commission. And the agency frequently provides relief: SEC officials have approved two-thirds of all such requests this year.

But ExxonMobil insists the regulatory process isn’t good enough and instead seeks a sweeping, dangerous precedent in the courts. Even after the shareholder groups dropped their proposal, ExxonMobil insists its lawsuit will continue.

The existing rules work for both shareholders and corporate America. ExxonMobil is seeking radical change.

What issues will be off-limits if ExxonMobil wins?

The repercussions of the lawsuit could be devastating.

Shareholder rights are a cornerstone of CalPERS' approach to corporate governance and an essential component of our investing principles. The roots of our approach stretch back almost 40 years to the crusading efforts of the late California Treasurer Jesse Unruh, who used his seat on the pension fund's Board of Administration to rail against instances where, he said, "shareholder interests have been stepped on."

The two small shareholder groups being sued by ExxonMobil seek additional actions on climate change, a serious threat to long-term investment returns. But let’s be clear: This is not about climate change. The company's decision to seek new, broad corporate power puts every issue on the table.

If ExxonMobil succeeds in silencing voices and upending the rules of shareholder democracy, what other subjects will the leaders of any company make off limits? Worker safety? Excessive executive compensation?

Might future shareholders who seek answers from a company's leaders be ignored because of the legal precedent now sought by ExxonMobil?

The lawsuit is reckless. ExxonMobil’s directors should know better.

We’ve told ExxonMobil that we strongly disagree with its decision to pursue the matter in court and to keep doing so long after the shareholder groups agreed to withdraw their proposals.

We helped elect many of the directors we are now voting against, and we do not take this step lightly. But we have to act. ExxonMobil's directors are allowing Chief Executive Officer Darren Woods to pursue a reckless and destructive effort and we cannot offer them our support at the May 29 annual meeting.

It's important to point out that almost all shareholder resolutions are non-binding, meaning that ExxonMobil's real agenda here seems to be intimidation, empowering corporate leaders at the expense of the investors who own the company and provide capital.

We can't let that stand.

CalPERS' investments make a difference. We make a difference in the lives of our members and their families; we make a difference in financing the creativity that improves our world and generates strong returns; and we make a difference by using the size of our portfolio to demand companies do better.

We hope ExxonMobil's directors will reconsider the lawsuit, an effort that seems more suited to schoolyard bullying than corporate leadership.