Exxon Is Said to Be in Talks With D.E. Shaw on New Directors

Written by
Scott Deveau
Written by

Scott Deveau

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(Bloomberg) -- Exxon Mobil Corp. is in talks with investor D.E. Shaw & Co. that may lead to additional director nominations in the weeks ahead, according to people familiar with the matter.

D.E. Shaw met with representatives from the oil giant on Friday and presented a list of potential directors, the people said, asking not to be identified because the discussions are private. Exxon agreed to review the candidates, and has extended the deadline for D.E. Shaw to formally nominate directors in order to allow the talks to continue, they said.

Exxon said Tuesday it appointed former Petronas Chief Executive Officer Tan Sri Wan Zulkiflee Wan Ariffin to its board and is talking to other director candidates. Representatives for Exxon and D.E. Shaw declined to comment on the discussions.

Exxon has come under sustained shareholder pressure in recent weeks as it continues to bleed cash amid low oil prices while also facing questions over its climate strategy. Despite being the largest U.S. oil company, none of Exxon's current directors aside from Wan Zulkiflee joined with significant experience of the industry.

D.E. Shaw has built a sizable position in Exxon and is urging the company to cut spending to improve its performance and protect its dividend, people familiar with the matter said in December. The investment firm sent a letter to the company on Dec. 8 in which it argued change is needed at the company, which had consistently underperformed its rival Chevron Corp., the people said at the time.

It's possible that the additional D.E. Shaw director candidates could be appointed to the board in the coming weeks as part of a settlement or agreement with the company, the people said.

D.E. Shaw has urged Exxon to cut capital expenditure to a maintenance level of about $13 billion from a planned $23 billion this year, and to slash its operating expenses by as much as $5 billion, the people said.

First-time activist investor Engine No. 1 has also nominated four directors to the board of Exxon. The firm, which has the backing of the California State Teachers' Retirement System, has called on the company to refresh its board, overhaul executive compensation, and invest in more profitable drilling and clean energy.

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“A board that has underperformed this dramatically and defied shareholder sentiment for this long has not earned the right to choose its own new members or pack itself in the face of calls for change,” Engine No. 1 said in a statement after Wan Zulkiflee's appointment. “Exxon Mobil shareholders deserve a board that works proactively to create long-term value, not defensively in the face of deteriorating returns and the threat of losing their seats.”

D.E. Shaw has a history of agitating for changes at large companies, including Marathon Petroleum Corp., Emerson Electric Co., Lowe's Cos., Bunge Ltd. and others.