Exxon, Shell and the Price of Strategic Freedom

The Financial Times recently published a substantial profile piece of ExxonMobil and its chief executive, Darren Woods, under the title The King of Big Oil. The title suggests a conventional story about operational success, scale and corporate recovery. Those elements are there to begin with, but the article then becomes about power: who sets the strategy, how much freedom management should have to pursue it, and how far a company can go to insulate itself from activist shareholders pressing oil companies to pivot faster towards the energy transition.

Exxon’s first major encounter with this kind of activist pressure came five years ago, when a small hedge fund called Engine No. 1, which owned just 0.02 per cent of the company’s shares, managed to force the departure of three Exxon directors in a proxy battle over what it described as weak climate policies and poor financial performance. The timing was significant given its campaign followed the collapse in Exxon’s share price during the pandemic, when lockdowns sent oil demand sharply lower. For a brief period, Chevron, America’s second-largest oil company and Exxon’s long-standing rival, overtook it in market capitalisation.