Yesterday, the Staff of the Division of Corporation Finance of the Securities and Exchange Commission said that it will not recommend enforcement action if Exxon Mobil Corporation implements its proposed Retail Voting Program (the “Voting Program”), under which ExxonMobil’s retail shareholders could authorize the Company to vote their shares in support of the recommendations of the Company’s board of directors. According to ExxonMobil, there are programs that exist on the market that may be complementary to this approach but “are not primarily targeted to retail investors.” The Voting Program provides potential new options for U.S. public companies in the coming proxy seasons.
Below is a summary of the key features of the Voting Program based on ExxonMobil’s no-action request letter and the SEC’s response thereto:
- Public disclosure. According to ExxonMobil, the Company intends to file with the SEC information regarding the Voting Program under cover of a Schedule 14A when the Voting Program is initiated, and will subsequently file any material changes to that information in the same manner.
- Eligible shareholders. The Voting Program would be voluntary and available to all retail investors, including any registered owner or beneficial owner (via their bank, broker or plan administrator). The Voting Program would not be available to investment advisers registered under the Investment Advisers Act of 1940 exercising voting authority with respect to client securities, unless the SEC otherwise determines.
- Standing voting instruction. The Voting Program would give retail shareholders the ability to authorize a standing voting instruction requiring the Company to vote their shares in alignment with the recommendation of the Board at each meeting of shareholders.[1]
- Cost; opting out. The Voting Program would be available at no cost for eligible shareholders, and participating shareholders may opt out of the program to cancel their standing voting instruction at any time. The Staff also noted that the Company represented that it will give participating shareholders the ability to override the instruction with respect to any particular proposal or proposals at no cost.
- Applicability of voting instruction to special situations. Participating shareholders have the choice of having their standing voting instructions apply to either (1) all matters or (2) all matters except special situations (e.g., contested director elections or M&A transactions that, under applicable state law or stock exchange rules, require approval of ExxonMobil’s shareholders). Based on ExxonMobil’s description of the Voting Program and the SEC’s response, the Company need not provide participating shareholders with an option to authorize a standing voting instruction in favor of a dissident.
- Annual reminders. Participating shareholders will receive annual reminders, during the time period when the Company is not soliciting votes for its annual shareholder meeting, of their enrollment in the program and their standing voting instruction. This reminder will include explicit language informing the participating shareholder of the ability to opt out and thereby cancel their standing voting instruction with respect to future meetings.
- Proxy statements. In addition to the annual reminders and other program-related communications, participating shareholders would also continue to receive all proxy materials filed for shareholder meetings.
- Voting. The details of the voting mechanics, including communications between and among ExxonMobil, banks and brokers, shareholders and the backend portal through which shareholders may choose to opt in or out of the Voting Program, will be developed and implemented with assistance from ExxonMobil’s vote-processing agent.
Issuers interested in pursuing a similar voting program for their 2026 annual meeting or upcoming special meeting(s), if applicable, should promptly undertake the process to establish a program, as there are a number of process items that will take substantial time, including obtaining opt in elections from shareholders. ISS and Glass Lewis have not yet offered their views on the Voting Program.
Investment companies registered under the Investment Company Act of 1940 and business development companies, each of which often have large retail investor bases, and their investors, will be interested in the applicability of this relief to the voting of shares issued by such companies.
[1] ExxonMobil’s no-action request letter sought relief with respect to voting at duly-called annual general or special shareholder meetings, and did not cover corporate actions taken by shareholder written consent, requisitions for special meetings or tender offers.