ExxonMobil took an aggressive stance against activist investors who wanted to vote in favor of reducing the company’s emissions, and this tactic is obviously controversial. Without commenting on this particular case, I would suggest that companies follow some guidelines.
There are many reasons not to listen to such activists. First, young people tend to have unreliable views on relevant strategy because they are young. This means that they have minimal life experience and are therefore prone to biased perceptions: they have a poor understanding of whether an event is unusual or not. A spike in oil prices or extreme weather will seem much more significant – and scary – to them than to those with decades of experience.
Secondly, young people are less likely to be taxpayers and/or have lower tax rates, so they don’t consider the cost of their proposals. I recall a case many years ago when an anti-nuclear activist, noting a study that suggested that closing all U.S. nuclear power plants would cost hundreds of billions of dollars, said he was willing to pay it. Needless to say, he did not pull out his checkbook:
In addition, there are single-issue activists for oil companies, usually environmentalists. Their position is usually (but not always) driven by environmental factors and environmental factors alone. They do not care about the cost of the proposal or its impact on the company’s operations and profits. True, it’s not their job, but it is the company’s job to have a more comprehensive view of costs and benefits.
This shortcoming is similar to the attitude of those who propose, for example, mandates for the purchase of technology or fuel. Their sole purpose is to promote a technology like electric cars, not to reduce emissions, and using mandates hides their costs.
A few years ago, when I pointed out that California’s zero-emission vehicle requirements in the 1990s were a failure, an environmentalist on the panel pointed out that at least it advanced the technology. Except that the technology being considered then was not state-of-the-art; companies like GM that developed electric vehicles lost all their money and learned very little that is applicable to the current generation of electric vehicles.