(FROM THE WALL STREET JOURNAL 4/1/15)
By Daniel Gilbert
Chevron Corp. shareholders will have the chance to vote later
this year on a proposal calling for an increase in dividends in
light of uncertain profits from energy projects.
Chevron has objected to the proposal, submitted by
social-responsibility groups, which is the first advisory proposal
of its kind to face a shareholder vote at a major U.S. oil company.
It also could be the last.
The proposal argues that the company should boost payouts to
investors because high-cost energy projects are becoming riskier,
in part due to climate regulations.
While Chevron didn't persuade regulators to exclude the
proposal, Exxon Mobil Corp. had better luck deflecting a similar
measure.
The Securities and Exchange Commission recently ruled that Exxon
could leave the proposal -- from some of the same
social-responsibility groups -- off its ballot. The SEC declined to
reconsider or to present an appeal to the full commission,
according to correspondence reviewed by The Wall Street
Journal.
The regulator's decision in Exxon's case could be used as a
precedent for other companies that want to block similar proposals.
"It will restrict shareholders' rights to request capital
distributions much more broadly," said Natasha Lamb, director of
equity research and shareholder engagement at Arjuna Capital, one
of the groups involved in submitting both the Chevron and Exxon
proposals.
Arjuna and peer groups represent investors and urge companies to
adopt policies that mitigate environmental and climate-related
risks.
Exxon declined to comment.
The company made several arguments for excluding the proposal
from a vote by shareholders: It was too vague; it contained two
proposals instead of one; it sought changes to Exxon's business
operations (rather than its investor payout policy); and the
company had already addressed the proposal's underlying goal.
Exxon has dialed down its efforts to buy back company shares in
recent years as it ramped up investment in massive energy projects
and as the price of oil tumbled. It plans to spend $1 billion in
the first quarter repurchasing stock, down from $7 billion in the
first quarter of 2009.
"The company's long-standing capital allocation strategy -- to
invest only in capital projects that offer attractive returns to
shareholders, to maintain a sustainable and growing cash dividend,
and to distribute surplus liquidity to shareholders through share
repurchases -- substantially implements the proposal," Exxon wrote
to the SEC.
The SEC concluded that Exxon's practices "compare favorably with
the guidelines of the proposal," an SEC staff member wrote.
As for Chevron, the company's main argument -- that the proposal
was vague and misleading -- was rejected by the SEC.
"The proposed policy is unnecessary and based on the flawed
premise that stockholders would be best served if Chevron stopped
investing in its business," a Chevron spokesman said, adding that
the company takes climate risks seriously. The company "has a
history of dialogue with the proponents of the proposal and looks
forward to continued discussion in the future."
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