NY City Official Rallies Investors to Block ExxonMobil Move to Texas

The New York City comptroller, on behalf of a city pension fund investing in Exxon Mobil Corp, has written to shareholders urging them to vote down the oil and gas giant's proposed redomicile to Texas.

Texas is already ExxonMobil's center of operations, while New Jersey is its state of incorporation or jurisdiction. The transfer of its legal address to Texas, announced earlier this year, will be put to the ballot May 27 at ExxonMobil's annual shareholder meeting.

Comptroller Mark D. Levine, trustee of the city's five pension funds, called on shareholders to reject the redomicile (Item 4 of the meeting agenda), as well as vote up the expansion of options under the company's new retail voting program (Item 6).

"Exxon's proposed retail voting program and planned redomiciliation both appear designed to insulate Exxon's Board from accountability to shareholders", Levine said in a letter to shareholders, published online.

The New York City Police Pension Fund is "a substantial long-term Exxon shareholder", the letter said.

In announcing the move March 10, ExxonMobil said Texas offers an enabling environment for the oil and gas industry.

Moreover ExxonMobil's relationship to New Jersey is "largely historical, dating back to the 1882 incorporation of Standard Oil of New Jersey", it said.

"ExxonMobil is a Texas corporation in all but name, with most senior corporate executives and all corporate functions based in the state for the last 35 years", ExxonMobil said. "Our global headquarters are in Texas [since 1989]; approximately 30 percent of our global employees are based in Texas. Of the company’s U.S. employees, approximately 75 percent work in Texas and our U.S.-based research facilities are in Texas".

"We work in a long-cycle, complex industry where legal stability and certainty are critical. We believe Texas legislators, judges and juries that are more familiar with our business are more likely to provide legal certainty", the company said.

It added, "The board compared shareholders’ rights under New Jersey and Texas law and believes the economic and voting rights of shareholders are comparable, and stronger in some areas. Importantly, the company is not adopting any elective provisions of the Texas corporate statute that could be viewed as weakening shareholder rights as compared to New Jersey law".

The redomicile "will not affect business operations, management, strategy, assets or employee locations", ExxonMobil said.

ExxonMobil chief executive Darren Woods said, "Over the past several years, Texas has made a noticeable effort to embrace the business community. In doing so, it has created a policy and regulatory environment that can allow the company to maximize shareholder value".

The board unanimously approved the address change.

The New Jersey governor's office has not responded to Rigzone's comment request on ExxonMobil leaving.

Levine warned that while ExxonMobil said it would not adopt certain provisions under Texas law that would gatekeep shareholder participation in company decisions, the company has not made guarantees it would not backtrack in the future.

"Under Texas law, through a simple amendment to its bylaws, the Board could unilaterally opt to impose a 3 percent ownership prerequisite to file shareholder derivative actions, or own $1 million in stock to submit a shareholder proposal", Levine wrote.

On the other hand Levine is recommending Item 6 to protect dissenting shareholders, instead of "making Board recommendations the automatic default for retail investors who want to participate in the retail voting program".

"Investors who opt in do not simply make a one-time choice; they are enrolled indefinitely. Without the need for affirmative recommitment by the voter, the result is that many retail investors in the program will cast pro-Board votes in perpetuity", Levine said.

"Thus, what is framed as a convenience for retail shareholders can become a 'blank check' for the Board’s recommendations, which is silently, automatically and perpetually renewed.

"While increasing retail participation and simplifying voting mechanics are worthy goals that I support, offering those benefits only to retail investors who are willing to vote in lockstep with the Board’s recommendations is inconsistent with the principle of affording all retail investors the same treatment, regardless of their voting preferences", Levine added.

ExxonMobil has not replied to Rigzone's comment request on Levine's position.

To contact the author, email jov.onsat@rigzone.com