Would Jeff Ubben shake up Exxon Mobil?

Like the proverbial buses, we waited a while for an activist to show up at Exxon Mobil Corp and then three came along. The third is Jeff Ubben, founder and former head of ValueAct Capital Management, who is now reportedly raising an $8 billion ESG fund for his new firm, Inclusive Capital Partners. He arrives in the wake of Engine No. 1 LLC, a small new fund that kicked things off in December and is now engaged in a proxy battle, and
DE Shaw & Co, whose own campaign became public soon thereafter.
Exxon is said to be considering inviting Ubben onto its board. That sentence is itself remarkable; the idea of Exxon bringing any activist, particularly one touting green credentials, into the inner sanctum would have seemed ridiculous until very recently.
It’s a measure of how much pressure is on the company over its weak returns and foot-dragging on climate-change planning. A spate of actions over the past two months, including slashing spending plans, disclosing emissions data, updating emissions targets and bringing a new director onto the board, have led up to this point.
So what might a board seat for Ubben mean? He declined to comment for this column, but he has talked at length in public about his interest in the energy sector over the past year or so. Last March, being interviewed on CNBC, he spoke of investing in BP Plc in the wake of new CEO Bernard Looney’s announcement of a net-zero carbon strategy. While Ubben’s characterisation of BP’s financials being “fine” was at odds with its weak returns and rising leverage, his premise that the collapse in valuation creates an impetus for change is sound.
But how far impetus translates into movement is a function of the object’s inertia. One aspect of Ubben’s approach that may appeal to Exxon in relative terms — and this is all relative — is that he comes across as a friendlier type of activist. Speaking at a conference just over a year ago, Ubben drew a contrast between traditional shareholder activism (“get the right CEO”) and ESG activism: “Get the right investor base.” That doesn’t necessarily rule out a push to unseat CEO Darren Woods. But it contrasts with, say, Engine No. 1’s public criticism and push to get four candidates onto the board; one of whom, Greg Goff, is a respected ex-CEO from the oil business. DE Shaw, meanwhile, is said to support Ubben’s candidacy.
Ubben’s objective of changing the shareholder base is something he spoke of last year in connection with AES Corp. Ubben joined the board of what was a coal-heavy power generator in early 2018. AES had begun to move in a greener direction already, and Ubben worked with rather than against the existing CEO. In transitioning to renewable energy, selling assets, slowing dividend growth and paying off debt, AES doubled its price/earnings multiple. Oil companies could certainly use new shareholders. The excesses of the past decade and the growing uncertainty about oil’s future in the decades to come have led many to desert the sector.
Exxon, however, appears more focused on keeping its existing base onside. About 70% of its shareholders consist of retail or long-term investors, an unusually high proportion.They prioritise the dividend, and Exxon spent much of its latest earnings call reaffirming its commitment to that, making it clear capex would be cut first. The company did also announce a new initiative in carbon capture, but this looks more like preserving the existing model rather than transforming it.

—Bloomberg