Chevron attempts to silence shareholder critics
Chevron has asked regulators in the US to let the company block a proposal from shareholders to unseat company chairman John Watson.
It's one of two shareholder proposals that the San Ramon company has asked the Securities and Exchange Commission for permission to block.
According to an article in the San Francisco Chronicle a similar proposal was sought last year against Watson who is also the company's CEO.
Both new proposals deal with a long-running $19 billion pollution lawsuit against Chevron in Ecuador. The shareholders pushing the proposals want Chevron to settle the suit. Company executives call the suit extortion and have vowed never to pay.
Last autumn, the company even subpoenaed documents from some shareholders who had requested that Chevron settle the claim. The second proposal Chevron seeks to block asks the company's board to explain the rationale behind those subpoenas.
"I've never had a case of a company playing such hardball tactics against its own shareholders this way," said Simon Billenness who received one of the subpoenas and filed the resolution on splitting up Watson's job.
"The feeling among institutional shareholders is we really have to draw a line in the sand here, because we can't have companies using these tactics against shareholders in the future," he said.
The idea of splitting the role of CEO and board chairman last year won the support of 38 percent of Chevron shareholders - well short of a majority, but still a substantial show of support. Many companies keep the jobs of CEO and board chairman separate as a way to hold top executives accountable for their performance.
Long standing issues
Billenness and the proposal's other backers don't just consider the idea a matter of good corporate governance. They say Watson is too personally vested in the Ecuador lawsuit and needs the oversight of an independent chairman.
The lawsuit was filed in 1993 against Texaco, which drilled for oil in Ecuador from 1964 through 1992. Residents of the area accused Texaco of contaminating the land and water, triggering a wave of disease. Chevron bought Texaco in 2001, inheriting the suit. Watson played a key role in that purchase. At the time, he served as Chevron's vice president of strategic planning, mergers and acquisitions. He became CEO at the end of 2009.
Chevron fights back
Ecuadoran courts have ruled against Chevron, fining the company $19 billion. Chevron calls the verdict the product of a criminal conspiracy and has filed a racketeering lawsuit in the United States against the Ecuadorans' lawyers.
Meanwhile, the Ecuadorans have taken Chevron to court in other countries where the company has assets that can be seized to pay off the judgement. A court in Argentina last year froze $2 billion of Chevron's assets as a result.
"As we got deeper into this, it became clear that it's not just a question of Chevron being unwilling to clean up its pollution and deal fairly with the affected communities," Billenness said. "There's also a question here for shareholders as to whether Chevron's management has actually jacked up the risk with this kind of scorched-earth legal strategy."
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