In the first case, a tiny, newly formed hedge fund called Engine No. 1 nominated four directors to stand for election to the board of ExxonMobil, the largest oil company in the U.S.  Seen as an expensive fool’s errand by many, the fund spent upwards of $30 million in its campaign to get its nominees elected.  ExxonMobil CEO Darren Woods personally entered the fray, urging shareholders to reject the Engine No. 1 nominees.  In the end, Engine No. 1 gained the backing of some large shareholders and won three director positions.  ExxonMobil has been broadly resistant to changing on its own, but a long stretch of poor financial performance left it vulnerable.  Now, instead of having to deflect activist pressure coming from the outside, the company has activists walking right in through its own boardroom door.

In the ExxonMobil case, it is instructive to see which shareholders chose to back the Engine No. 1 slate.  BlackRock, the world’s largest fund manager and the operator of the iShares ETF family, has a 6.7% ownership stake in Exxon.  It voted its shares for Engine No. 1.  So too did the three largest pension funds in the U.S., the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS) and the New York State Common Retirement Fund.  Twenty years ago, it would have been hard to imagine such entities supporting a dissident slate at Exxon.  But unlike many other institutional investors that have divested their fossil-fuel holdings, these entities have decided to continue to own shares and to push for change from within.  It is likely we will see more pension systems and fund companies lining up behind activist investors in the future.