Chevron’s shareholders have never been reluctant to question the company’s management of its liability for its oil pollution in Ecuador. And they do so in significant numbers.
Chevron management often tries to deny this. But the evidence of shareholder dissent is clear. At the May 2017 annual shareholder meeting, then CEO John Watson stated that shareholders had “almost universally supported Chevron management in the Ecuador case.”
Wason’s statement could not have been more untrue. In fact, Watson stated that even as he knew that 39% of Chevron shareholders had voted in favor of a resolution effectively calling on him to be fired as board chair.
Shareholders were crystal clear that Watson had mismanaged Chevron’s liability for its oil pollution in Ecuador. The resolution, supported by 39% of Chevron shareholders, stated:
We believe that inadequate board oversight has led management to mishandle a number of issues in ways that significantly increase both risk and costs to shareholders. The most pressing of these issues is the ongoing legal effort by communities in Ecuador to enforce a $9.5 billion judgment against Chevron for oil pollution.
Instead of negotiating an expedient, fair, and comprehensive settlement with the affected communities in Ecuador, management has pursued a costly legal strategy that has led to significant missteps, including moving the case from New York to Ecuador. In a move without precedent, management has harassed and subpoenaed shareholders who have questioned the Company’s legal strategy.
It is now 2018 and Chevron’s dissident shareholders are back and in even stronger force.
Led by Zevin Asset Management, shareholders have re-filed the resolution asking Chevron to separate the positions of CEO and Board Chair. This is simply good corporate governance. The CEO reports to the board. When a CEO is also board chair, he is in effect his own boss.
In another resolution designed to increase shareholder oversight of wayward managment, Newground Social Investment has re-filed its resolution calling for lowering the percentage of shareholders required to call a special meeting.
This resolution won the support of nearly one-third of Chevron shareholders in 2017. The resolution’s language is also highly critical of Chevron management stating:
Chevron has acknowledged the serious risk from enforcement of the $9.5 billion judgment. Deputy Controller, Rex Mitchell, testified that such seizures of Company assets “would cause significant, irreparable damage to Chevron’s business reputation and business relationships.”
However, Chevron has yet to fully report these risks in either public filings or statements to shareholders. As a result, investors have requested that the U.S. Securities and Exchange Commission investigate whether Chevron violated securities laws by misrepresenting or materially omitting information in regard to the multi-billion Ecuadoran judgment.
Mindful of Chevron’s enormous liability for its oil pollution in Ecuador, the resolution states:
… appointing an environmental specialist to the board, [an] authoritative figure with acknowledged expertise and standing could perform a valuable role by enabling Chevron to more effectively address the environmental issues inherent in its business. It would also help ensure that the highest levels of attention focus on the development of environmental standards for new projects.
Answering these shareholders will lie with Chevron’s new CEO Michael Wirth who assumes the position in February. It is hoped that, unlike his predecessor John Watson, Wirth will actually ackowledge not only these shareholders concerns but also the existence of this large bloc of shareholders itself.