Exxon Texas Move Should Prompt Shareholders to Read Fine Print

Anyone who has been watching Exxon Mobil Corp.’s governance moves in recent years likely wasn’t surprised by its March 10 announcement that its board unanimously recommended shareholders vote to reincorporate in Texas at the company’s May 27 annual meeting. The move has been telegraphed for years.

ExxonMobil has been headquartered in Texas since 1989, giving it deep familiarity with the state as a corporate home. That longstanding relationship has only grown stronger as Texas has cultivated “a policy and regulatory environment that can allow the company to maximize shareholder value,” a point CEO Darren Woods has emphasized in explaining the reincorporation decision.

“Maximize shareholder value” is a phrase that deserves scrutiny. Because ExxonMobil’s proposed move may or may not maximize value for its shareholders. What it will unquestionably maximize, however, is management’s insulation from them.

To reframe that risk as a benefit to shareholders isn’t stewardship—it’s paternalism.

In an article, my co-author Sergio Alberto Gramitto Ricci and I have identified what we call the Leopard Paradigm: the pattern by which corporate elites adapt to perceived threats to their governance power while preserving the appearance of shareholder engagement.

The logic is captured in a line that has become almost proverbial among students of political elites: “If we want things to stay as they are, things will have to change.” ExxonMobil’s reincorporation is the epitome of the leopard paradigm.

Consider what Texas incorporation opens the door to. Texas Senate Bill 1057, enacted in 2025, allows publicly listed Texas-incorporated companies to impose shareholder proposal thresholds requiring shareholders to hold the lesser of $1 million in market value or 3% of the corporation’s voting shares for six months, and to solicit 67% of outstanding voting power, before a proposal can reach the ballot. A companion provision in Texas Senate Bill 29, also enacted last year, allows boards to impose a similar ownership threshold of up to 3% for derivative suits.

Both are opt-in systems. ExxonMobil hasn’t opted in to either.

But here is what “opt-in” means in practice: Under Texas law, the board of directors can amend the company’s bylaws to activate these provisions unilaterally, without a shareholder vote. Notice in a proxy statement is required, but approval isn’t.

Some companies reincorporating in Texas have gone further, including an affirmative opt-out in their Texas charter to foreclose the option entirely. Arcbest Corp., a freight transportation company in the process of reincorporating in Texas, did exactly that.

ExxonMobil hasn’t. Its proxy says the company isn’t adopting provisions that “weaken shareholder rights” as part of this transaction. But that’s a statement about today, not a binding commitment about tomorrow. ExxonMobil’s own 2024 lawsuit against activist shareholders in Texas federal court put shareholder proposal rights squarely in legislators’ sights, helping produce the very law it can now use.

That the board could activate SB 1057 and SB 29 at any time, through a simple bylaw amendment, is the point. Reincorporation isn’t a commitment to apply these rules today. It is the architecture that makes applying them possible, at the board’s discretion, not the shareholders’ discretion.

At a company with ExxonMobil’s size, a 3% stake is worth approximately $19 billion. Even a $1 million threshold isn’t a procedural filter. It’s a price of admission that shuts out ordinary retail investors and many smaller outside shareholders that have historically been willing to push for governance reforms that larger institutional investors decline to champion.

ExxonMobil’s roughly 40% retail shareholder base could find itself subject to these barriers, should the company choose to opt in. But a second strategy is already underway. Last September, the Securities and Exchange Commission approved ExxonMobil’s first-of-its-kind retail investor voting program.

Under the program, retail investors can enroll in a standing instruction to automatically vote with the board on every future matter, except contested director elections and mergers and acquisitions. ExxonMobil notes that shareholders can opt out at any time. But inertia always favors the default, and ExxonMobil’s largest shareholder bloc can become a permanent management ally.

This isn’t a coincidence. ExxonMobil’s 2021 proxy contest, in which Engine No. 1 (a hedge fund with a 0.02% stake) succeeded in electing three directors by mobilizing institutional investors around climate concerns, appears to have been an inflection point. The retail investor voting program was designed, by the company’s own account, to counter that kind of campaign. Texas incorporation adds structural reinforcement.

If ExxonMobil activates SB 1057’s thresholds, smaller outside shareholders could find themselves priced out of the proposal process. Meanwhile, the retail voting program is already live and collecting enrollments ahead of the May 27 meeting.

Gov. Greg Abbott (R) celebrated the reincorporation announcement: “Freed from the stranglehold of over-regulation, Texas is where global brand leaders thrive.” Texas has every right to build a business-friendly legal environment, but there also needs to be shareholder accountability.

The deepest irony is structural. ExxonMobil must ask its shareholders to vote yes on a move that will, if approved, potentially limit those same shareholders’ future governance rights. Most retail shareholders, unaware of Texas’ new corporate laws, will likely vote yes or default to board support through the very retail investor voting program ExxonMobil created for them.

This is corporate disenfranchisement by design—the Leopard Paradigm at its best. As we argue in our article, shareholder proposals are the canary in the corporate governance mine shaft. When they are silenced, it’s a warning that corporate elites are consolidating power before anyone notices the air has changed.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Christina M. Sautter is the associate dean for research and a professor of law at SMU Dedman School of Law and is the co-founder of the Center for Retail Investors & Corporate Inclusion.

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