On the perils of underestimating activist shareholders: the little engine that could.

Picture this. You're ExxonMobil, a $250 billion-dollar corporation.¹ An activist shareholder named Engine No. 1 (real name - no kidding), holding 0.02% (!!) of your shares, proposes to shake up the board and nominates 4 new director candidates. Everyone laughs, pats them on the head, and moves on. Right?

Not quite.

Vote counting commences, and Engine No. 1 manages to get 2 directors on the board! Engine No. 1 may yet get 1 more nominee on the board by the time counting concludes. To add insult to injury, a board committee had previously considered these candidates and "ruled them out".²

Some key takeaways:

a) Nothing is more powerful than an idea whose time has come.³ Engine No. 1 was pushing for a climate strategy change. In the present climate, corporations who do not sufficiently address ESG considerations should expect stiff shareholder resistance.

b) Perhaps profits aren't everything. ExxonMobil warned shareholders that Engine No. 1's plans would jeopardise dividends. The argument didn't work - ExxonMobil may have failed to read the room.

c) But this isn't really a feel-good David v Goliath story. Engine No. 1 had a $30 million budget for its PR campaign - hardly chump change.⁴ It used its resources to rally support from institutions who were upset with ExxonMobil's weak financial performance in recent years.⁵ Money still talks, and loudly.