$9B In Chevron Shares Ended Up Defying Company Management
Amazon Defense Coalition
27 May 2009 - FOR IMMEDIATE RELEASE
Contact: Karen Hinton at +1.703.798.3109
San Ramon, CA (May 27, 2009) – In the days ahead of its annual meeting, Chevron's management engaged in a fierce and unconventional lobbying campaign to convince shareholders to defeat a shareholder resolution over the company's potential $27 billion liability in Ecuador but investors holding $9 billion in Chevron shares voted for it anyway, officials with the environmental group Amazon Watch said today.
The lobbying campaign apparently worked on one level, as the oil company reported today the resolution was defeated. But it failed on another level, in that the resolution galvanized a record number of public pension funds and investors that control more than $9 billion of Chevron stock to challenge Chevron CEO David O'Reilly.
"Chevron's intense lobbying effort to defeat the resolution actually played into the hands of shareholders in that it raised the profile of the resolution," said Mitch Anderson, who was working with shareholders on the Ecuador matter on behalf of Amazon Watch, a San Francisco-based environmental group.
Anderson also said the result – 7% support – is a "victory" for backers of the resolution given the "millions of dollars of resources" spent by Chevron on its lobbying campaign and that the fact $9 billion in Chevron shares voted for it because of the Ecuador liability. It was also clear that Chevron was calling funds that had announced their support for the resolution to try to convince them to change their stance.
"Chevron has been working on this intensively for the last several days, which is a sort of a sad commentary on the extent to which Chevron management is threatened by shareholders," he said, noting that the SEC turned down an attempt by Chevron to keep the resolution from even coming to a vote.
The shareholder resolution relating to Ecuador, which called on Chevron to examine whether it complies with host country laws and environmental regulations, notes the Ecuadorian litigation in its recital section and was filed by shareholders concerned about the outstanding liability. Two others resolution relating to Chevron's human rights problems garnered more than 25% support, but Chevron's management did not actively lobby against them.
Chevron faces a potential litigation liability of $27 billion in connection to a landmark environmental lawsuit alleging that Texaco, which Chevron purchased in 2001, used substandard oil-extraction practices in Ecuador from 1964-1990. The case, which is being heard in Ecuador at Chevron's request, is expected to be decided by the end of the year.
Chevron has publicly stated that the company expects a significant adverse judgment in the near future.
Over recent days, Chevron issued a three page letter to shareholders denouncing shareholder concerns as the result of a campaign by trial lawyers, rather than a genuine concern about management's handling of the Ecuador issue. Shelley Alpern of Trillium Asset Management, a firm which co-sponsored the resolution, responded to Chevron's allegations by saying that the company is "trying to shoot the messenger. The way they have handled the problem...has left them with a black eye."
The resolution was supported by the some of the nation's largest pension funds, including CalPERS, New York State, Maryland, Pennsylvania and the cities of New York, Philadelphia and Detroit.
"Chevron's aggressive tactics are exactly the desperate, panicky maneuvers that you see a company make when they are attempting to cover up a massive liability," said Anderson.
The company, which was facing ten separate shareholder resolutions, has not made similar lobbying efforts on any other resolution, despite the fact that other resolutions would likely impose a far greater financial burden on the company.