Exxon and Chevron Got Their Teeth Kicked In, But Shareholders Won’t Finish the Job

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Oil workers and firemen try to extinguish flames at the Khabbaz oil field in Iraq.
It is a metaphor.
Photo: Marwan Ibrahim/AFP (Getty Images)

To say Tuesday was a bad day for Big Oil is an understatement. Chevron and Exxon, the two largest oil companies in the U.S., got rolled by their own investors.

Shell also suffered a crippling defeat in a Dutch court in what may end up being the biggest win for the climate. But it’s the investor revolts at Exxon and Chevron that are perhaps most telling about this moment. The threat of regulation coupled with the diminishing returns of oil companies shows that they no longer control their own fate. If ever there was a time to actually reform our energy system to run on clean energy, this is it.

At Exxon, shareholders voted at least two activist investors onto the board. Meanwhile, at Chevron, shareholders endorsed a resolution to curtail so-called Scope 3 carbon emissions. Scope 3 refers to carbon pollution that comes from burning Chevron’s products, which accounts for more than 90% of the company’s emissions. The same is true of other oil companies, and they’ve almost all to a tee failed to factor those emissions into their climate plans. (But make no mistake that Chevron and Exxon are the two biggest laggards by far.) It’s like tobacco companies pretending they could ignore the public health problems their products created, and we all know how that turned out.


Exxon management told shareholders to not vote for the activist board members and Chevron’s leadership team did the same for the Scope 3 resolution. Yet shareholders told them to kick rocks—and with good reason. The first is purely financial. Exxon and Chevron have steadily underperformed the market as a whole over the past decade. Shareholders want to make money, and America’s top oil firms have delivered decidedly middling returns. The past year has been an even bigger wake-up call as covid-19 brought the world to a standstill and caused oil prices to collapse, turning dwindling profits into losses. The shareholder resolutions and new board members are a call to change course and make Exxon and Chevron profitable once again.

The economics are also shifting toward renewables. Falling costs have sped up installation. Though it’s not at the scale needed to avert climate catastrophe yet, there are signs that help could be on the way to spur their development at the expense of oil and gas.


“Under severe environmental pressure, the Western coal industry has already imploded,” a report put out by Engine No. 1, the investor group that led the shareholder revolt at Exxon, said. “Oil is likely to feel the next blow.”

President Joe Biden ran on a platform of ending fossil fuel subsidies, pumping up the electric vehicle industry, and getting the U.S. on track to 100% clean electricity by 2035, among other goals. His infrastructure package—along with a number of executive orders—has shown he’s intent on delivering on at least some of that (though there have been some oil-related disappointments as well).


At the same time, the world is also tightening the screws on fossil fuels. G7 nations committed to ending funding for coal-fired power plants in developing countries by the end of this year in what perhaps is a warning for Big Oil’s future. World leaders are preparing for this year’s major climate conference and have already made a slew of emissions reduction commitments, including the U.S. plan to cut carbon emissions 50% by 2030.

Those pledges, of course, still need to be backed up by more serious action and regulation. But it’s this mere threat of regulations coupled with market forces that have pushed shareholders to rebuke the leadership at Exxon and Chevron (perhaps the desire to preserve the planet in some form of habitability played a role as well).


“As the technologies of the deep decarbonization revolution improve and expand outside their niche markets, the political winds will shift and so will capital,” the Engine No. 1 report said. “These reinforcing patterns will beget even stronger policies, bigger market shares, and better technological performance.”

While it’s nice that the very capital invested in oil companies is turning against said companies, it’s not enough to protect the climate. Scientists have documented that oil production in the pipeline is 120% more than what’s compatible with a 1.5-degree-Celsius (2.7-degree-Fahrenheit) world, a key target in the Paris Agreement. The International Energy Agency just last week found the world needs to stop all new fossil fuel exploration next year to meet that goal.


Shareholders did Exxon and Chevron a favor by bringing them closer in line with these new realities, though obviously TBD if companies that have spent decades being villains have a virtuous side. But the dramatic boardroom changes are nowhere near enough to bring about a safe climate. Governments need to follow through on the regulatory side as part of those “reinforcing patterns” to protect the climate. If they fail, sure, a few folks invested in Big Oil may make some money in the short-term, but we’re all likely to be poorer in the end.