Major oil and gas companies in the United States have long been targeted by activist shareholders and climate alarmist groups for “human-caused” contributio
And many of those corporations caved to their demands.
For example, ExxonMobil and ConocoPhillips include greenhouse gas emissions reduction targets in their executive compensation packages.
The two oil majors incentivize their top officers to pursue what they call “Strategic Objectives” or “Strategic and ESG Milestones” through variable pay programs, which can represent a significant portion of an executive’s total compensation. Success under these goals is measured by progress towards 2030 or 2050 greenhouse gas emissions targets as outlined in the Paris Agreement, and/or by capital expenditures on non-hydrocarbon pursuits like projects for carbon capture and storage, hydrogen, and biofuels.
These perverse incentives present a conflict of interest. Executives should not be enticed to destroy shareholder wealth by measuring investment value
Including greenhouse gas emission targets in executive incentive plans is an unwise capitulation to a faulty narrative that is based on politics, not science. The alarmist push for decreased investment in oil and gas embraces the so-called “scientific consensus” – that anthropogenically driven climate change due to increased hydrocarbon usage will result in catastrophic impacts to the environment, the planet, and humans. Climate alarmist shareholders often cite emissions reduction targets outlined in the Paris Agreement as necessary to prevent disastrous results.
But those dire outcomes predic
Consequently, ExxonMobil and ConocoPhillips include emissions reduction measures in their executive compensation packages due to political pressure rather than objective data.
My organization, National Legal and Policy Center, seeks to reverse that. As a shareholder, NLPC has proposals at both companies to request that they remove these greenhouse gas emission targets from their executive pay incentives. The companies would be better suited to reinvest cash flow into even more hydrocarbon projects, or to return it to shareholders.
There are signs of a shift by hydrocarbon companies to resist the alarmist shareholder activists. For example, in ExxonMobil’s proxy statement for its 2023 annual meeting, the company called out “some anti-oil and natural gas activists who use the SEC’s shareholder proposal process to further their own interests, which are often in conflict with the interests of many of the Company’s other shareholders.” The oil giant added, “These activist firms, by their own admission, prefer not to own hydrocarbon stocks yet acquire a minimal ownership stake in the Company with the sole purpose of targeting campaigns and pressuring investors to support resolutions ultimately designed to eliminate oil and gas investments necessary to meet society’s needs.”
More of this frank talk and pushback are needed from oil and gas producers, who often act like they are ashamed of a futurewith hydrocarbons. ExxonMobil irrationally aims to reach net-zero by 2050, yet pledges to continue increasing capital expenditures on oil and gas projects, thus confusing outsiders with contradictory messaging. The company is talking out of both sides of its mouth. Oil and gas companies need not shy away from boasting about the health, wealth and prosperity their affordable energy generates throughout the global economy.
Besides, climate pressure groups are not interested in compromise. They want complete elimination of hydrocarbons.
If ExxonMobil and ConocoPhillips want to preserve their long-term viability and continue to benefit the vast majority of their shareholders, they need to go all the way in both their rhetoric and their actions, and remove politically motivated emissions reduction targets from executive compensation incentives.
