30-second case study |
With just six months of business under its belt and a 0.02% stake in ExxonMobil, activist hedge fund Engine No. 1 managed to get at least two of its nominees elected to the board of the oil and gas giant. The crux of the fund's argument: Exxon has been consistently disappointing shareholders over the last 10 years and it needs fresh direction in a rapidly decarbonizing world. |
Engine No. 1 founder Chris James, whose family foundation endows scholarships and supports conservation and environmental studies programs at a number of public universities, told Bloomberg that Engine No. 1 was born out of his attempt to start a new coal mine in the mid-2000s, near his hometown of Harrisburg, Illinois. But he saw the price of coal fall and the market for coal withering. It seemed to point to radical shifts in the use of energy, he said. |
On Dec. 7, the hedge fund sent ExxonMobil a letter listing its four nominees for the board. "It is time," the fund wrote in the letter, "for shareholders to weigh in." |
The takeaway: The past decade saw ExxonMobil's total shareholder returns—dividends included—languish at -15%, compared to the 271% return the S&P 500 provided. That gave Engine No. 1 room to make an argument that was strategic rather than ideological. Its main message to investors: ExxonMobil has been consistently disappointing shareholders over the last 10 years, and it needs fresh direction in a rapidly decarbonizing world. |
The ideals of the climate change movement had little to do with Engine No. 1's methods, or its success. Instead, it campaigned on the idea that sticking to oil and gas, and not exploring clean energy alternatives, was an "existential risk" for ExxonMobil and its shareholders. |
Other investors, including the Church of England the New York State Common Retirement Fund, had tried before to replace ExxonMobil board members, invoking the company's long-term business prospects, global emissions levels, and the goals of the Paris agreement. Engine No. 1 broke through by focusing on the cost to shareholders, allowing a fund that manages $250 million in assets to set the stage for change at an oil juggernaut valued at $250 billion. |
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Upcoming workshop |
As offices slowly reopen, many of us who adapted to working from home are wondering what comes next. Next Thursday, June 10, joins us for the final Quartz at Work (from home) workshop of the season, when we'll explore the pitfalls and promises of hybrid workplaces, with expert guidance on how to mix things up productively. Keep your inbox tuned in for registration details. |
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ICYMI |
YouTube, LinkedIn, Zoom. These are just some of the biggest tech platforms founded by Asian Americans. In an illuminating article on Quartz, Tom Mulaney, professor of Chinese history at Stanford University, introduces us to three pioneering yet largely unknown Asian scientists who laid the foundations for a globally connected world. |
Chung-chin Kao, inventor of IBM's first electric Chinese typewriter. Mulaney writes: "Kao's electric Chinese typewriter was one of IBM's first major Chinese-specific products, and at that point its largest. Although the machine itself was never brought to market—foiled by the civil war then raging in China, which made investors understandably hesitant—nevertheless the project augured a future in which IBM would invest ever more heavily in east Asian markets." |
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Courtesy of the Smithsonian |
Chan Yeh, the Taiwanese American engineer who translated Chinese characters for computers: "While working with IBM, he dedicated his spare time to exploring an entirely different venture—the electronic processing of Chinese characters. He felt convinced it should be possible to digitize Chinese characters, and thereby bring Chinese writing into the computer age. Yeh nicknamed his side-venture 'Iron Eagle,' on account of the Chinese characters that he first digitized: ying (eagle) and tie (iron)." |
Leo Esaki, the Nobel-prize winning Japanese physicist made who made sense of electrons: "In 1957, Esaki and colleagues made the first demonstration of solid tunneling effects in physics, leading to a device that would come to bear his name: the Esaki tunnel diode, the first quantum electronic device. Discovery of the tunnel diode not only laid a foundation for further exploration in the electronic transport of solids, but it also inspired other advances in semiconductor science and electronics." |
To go deeper, read Mullaney's full article here. |
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Quartz field guide interlude |
A year after George Floyd's killing, how can corporate leaders move from words to action to make a real difference? |
This was the question a number of CEOs privately asked Robert F. Smith, the billionaire CEO of Vista Equity Partners. In response he proposed what he calls the "2% solution"—a principle by which large companies devote 2% of their earnings to any number of initiatives that help deliver racial equity. The number isn't arbitrary, he writes; the average American family donates 2% of its income to charity each year. |
"Large companies should do the same," he says. "If enough companies did, they would deploy capital and expertise to unleash opportunity in Black communities, which would drive systemic and permanent change." |
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