Does ‘Corporate Bullying’ Work?

Nobody likes a bully, or so the saying goes. That may be true, but it has never stopped bullies from popping up in places ranging from playgrounds to office cubicles to the highest reaches of government. The modus operandi doesn’t change, regardless of the setting: Use force and intimidation to try to get what you want, even after being told you can’t have it.

Corporations can be bullies, too, leveraging their resources and influence to get the outcomes they desire. ExxonMobil is a prime example of a company currently throwing its weight around to circumvent standard corporate and legal processes. But the multinational oil company’s litigious counterattacks against activist shareholders are starting to turn off some major investors, illustrating the downside of such intimidation tactics.

Dozens of institutional investors with a combined total of nearly $5 trillion in assets under management recently called out ExxonMobil for suing activists that put forward a climate-related proposal to shareholders of the oil company. Notably, ExxonMobil is continuing to pursue legal action against the two organizations involved, Arjuna Capital and Follow This, even after they pulled the shareholder proposal altogether.

Going to court over shareholder proposals is a bad turn of events for investors in the long run, according to the consortium. “We are concerned that these actions will deter the filing of proposals concerning the sustainability issues that are material to the performance of our equity and fixed income portfolios,” the institutional investors said. “We want to protect the right of shareholders to use their vote to decide for themselves when a proposal, sustainability-related or otherwise, is in their best interests and that of their stakeholders.”

Meanwhile, capricious electric vehicle pioneer and sometimes cyber bully, Elon Musk, is lashing out at his detractors in a long-running dispute over his compensation. Tesla’s chief executive is making a move to relocate the company to Texas after a Delaware court’s decision forced a shareholder vote on a pay package for Musk valued at more than $45 billion. As Musk used his social media platform to flame the California Public Employees’ Retirement System – commonly known as CalPERS – for announcing it is voting against his compensation proposal, Tesla was firing back at proxy advisory service Glass Lewis for recommending a down vote on the pay package.

Business interests are also starting to lean on regulators for being too heavy-handed when it comes to shareholder proposals. Recent reforms enacted by the Securities and Exchange Commission have led to an increase in the submission of shareholder proposals touching on controversial issues such as climate change and workforce diversity. The National Association of Manufacturers is currently suing the SEC, claiming the agency has overreached by making it easier to get such measures on companies’ proxy statements.

Of course, these legal disputes may not amount to much if most investors still side with the bullies. If we’re using ExxonMobil as a bellwether, for instance, it’s worth noting that an effort fell flat to punish the company for its activist-targeted lawsuit by voting down two nominees to the company’s board of directors. The nominations ultimately passed the stockholder vote with ease.

While it may be true that nobody likes a bully, that doesn’t mean corporate bullying isn’t an effective strategy.

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