The Free Enterprise Action Fund (FEAOX) is pushing the ConocoPhillips board of directors to review and report the costs and benefits of company efforts to comply with climate change regulations.
Action Fund Management, the investment adviser to FEAOX, filed a proposal asking ConocoPhillips to prepare by next year a report as to how its actions have reduced global temperatures or helped avoid weather-related disasters. “Given that global warming regulation could significantly harm the company’s earnings, this failure on the part of the board to conduct the necessary due diligence may leave them open to liability for breach of fiduciary duty,” said FEAOX in a May 14 statement. It accused ConocoPhillips of “lobbying for greenhouse gas (GHG) regulation.”
Last year ConocoPhillips joined the US Climate Action Partnership, a coalition of 33 US companies and nonprofit environmental groups, to recommend prompt enactment of US legislation to slow, stop, and reverse the growth of greenhouse gas. “In our view, the climate change challenge will create more economic opportunities than risks for the US economy,” said ConocoPhillips.
In the past, the lion’s share of stockholder proposals listed in energy company proxies have been from representatives of special interest groups with a populist or liberal bent—for the environment and employee input in corporate decisions, against apartheid in Africa and human rights violations in host countries.
FEAOX marches to a different drum, however—one with a conservative economic beat. Founded in 2005, it is described by proponents as “the first mutual fund dedicated to providing both financial and pro-free enterprise ideological returns to investors.” It is headed by Steven J. Milloy, who also runs the blog junkscience.com and is a commentator for FoxNews.com. Tom Borelli, former head of corporate scientific affairs for Philip Morris, is portfolio manager for the fund.
But critics say FEAOX appears to be a lobbying enterprise masquerading as a mutual fund. Opponents accuse Milloy of being an advocate for the tobacco and oil industries because of his attacks on scientific links of secondhand smoke to health risks and human activity to global warming.
ConocoPhillips confrontation
Prior to election of officers at ConocoPhillips’s annual meeting May 14 in Houston, Borelli asked Chief Executive James J. Mulva, “When you made the decision to lobby for cap and trade [a system for reducing carbon dioxide emissions], did you conduct good proper due diligence in terms of a cost-benefit analysis of what this would mean to shareholders, and did you discuss it with the board?” With Mulva up for reelection to the board, Borelli said, “This directly has to do with you.”
Mulva replied, “Yes, we discussed the economic consequences of climate change, global warming, and all of our investments, all of our operations.” Borelli then asked to see the minutes of those discussions. Mulva offered to meet with him after the meeting.
“Yes, we met very briefly. I’m going to meet with him or his staff at a later date,” Borelli told OGJ. “It’s clear to me that their support of carbon caps will only harm the business. Carbon fears are already harming its investment in tar sands. Federal law now prohibits the US government from purchasing oil from tar sands because it releases more carbon dioxide than from oil wells. Also, his [Mulva’s] support of cap and trade did not stop the social activist shareholders from complaining about drilling for oil.”
A ConocoPhillips representative said the firm “has called for a national mandatory framework to address GHG emissions, and we’re actively engaged in the issue.” He said such a framework must include the following:
- Mandatory approaches to reduce GHG emissions from the major emitting sectors.
- Flexible approaches to establish the cost of carbon, market-based incentives, performance standards, incentives for technology, etc.
- Approaches that create incentives and encourage actions by other countries to implement GHG emission reduction strategies.
FEAOX’s proposal requiring a report on the cost and benefits of compliance with climate change regulations was defeated by 81% of the votes. By comparison, a proposal for adoption of quantitative goals for reducing GHG emissions lost by 59%.
Meanwhile, Milloy has a proposal pending for ExxonMobil Corp.’s annual meeting May 28 in Dallas to eliminate “nuisance proposals” by shareholders pushing political or social agendas. He wants a change in the company’s bylaws to require board approval before such proposals—including his—can be included in proxies.
