In a significant blow to Exxon Mobil, the California Public Employees' Retirement System (CalPERS) announced its decision to oppose all 12 director nominees and CEO Darren Woods at the upcoming shareholder meeting. The move comes as a direct response to Exxon's ongoing lawsuit against activist investors Arjuna Capital and Follow This.

CalPERS, a pension fund manager with assets worth $484 billion, revealed its position in an open letter, labeling Exxon's actions as potentially "devastating." The pension fund holds a $1 billion stake in Exxon, making its opposition a notable development.

The dispute stems from a shareholder proposal submitted by Arjuna Capital and Follow This, which aimed to enforce environmental disclosures and emission reduction targets for suppliers and customers. Despite the activists withdrawing the proposal, Exxon persists with the lawsuit, seeking to prevent any future submission of similar initiatives.

Exxon's decision to continue the legal battle has provoked criticism from CalPERS. The pension fund expressed concerns about the implications of silencing shareholder voices, thereby hindering shareholder activism efforts on a wide range of issues. CalPERS CEO Marcie Frost and board President Theresa Taylor questioned whether important matters like worker safety and excessive executive compensation might also become off-limits.

CalPERS is calling on fellow shareholders to join its stance, emphasizing that their voices will not be silenced. The pension fund's move raises questions about the potential impact on Exxon's shareholder democracy, as well as its future engagement with investors.

Exxon, in response, has expressed its bafflement at CalPERS' decision, claiming that engagement with the pension fund has taken place and calling the decision a "poor fiduciary decision." The company highlighted its commitment to creating shareholder value and seeking clarity on what it deems an abuse of the shareholder proposal process.

Notably, this is not the first time Exxon has faced activist investors. In 2021, Engine No.1, with a stake of only 0.02%, successfully campaigned for three board seats. CalPERS, among other institutional investors, supported Engine No.1's efforts to reform Exxon's disclosure standards and assess the company's role in the transition to a zero-carbon world. Ironically, CalPERS is now opposing those very same directors it helped elect.

CalPERS concluded its letter by urging Exxon's board to reassess its legal strategy, likening it to "schoolyard bullying" rather than responsible corporate leadership. The outcome of the ongoing lawsuit and the shareholder meeting will undoubtedly have significant implications for Exxon's relationship with its investors and the future direction of the company.