Chevron CEO Faces Pressure Cooker Over Ecuador, Climate Change at Shareholder Meeting
- May 20, 2016
- FOR IMMEDIATE RELEASE
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Oakland, CA – Chevron's unprecedented $11 billion pollution liability in Ecuador and its refusal to address climate change are set to dominate the company's annual meeting on Wednesday, May 25th as CEO John Watson faces increasing pressure from his own shareholders, court rulings, and environmental groups who are accusing the company of trying to intimidate critics and evade its legacy contamination problems.
A renowned indigenous leader, Humberto Piaguaje of the Secoya nationality, is traveling from his jungle home in the Ecuadorian Amazon to confront Watson over Chevron's refusal to pay the historic court judgment requiring that the company remediate billions of gallons of toxic waste dumped into the rainforest. The court judgment is considered one of the greatest triumphs in the corporate accountability movement in history and prompted a U.S. congresswoman to demand an SEC investigation of company management for hiding the risk from shareholders.
(Here is a summary of the evidence against Chevron. Here is a 60 Minutes segment documenting the company's toxic dumping in Ecuador. Here is a recent podcast interview about the case conducted by Alec Baldwin.)
"John Watson and Chevron's Board are facing a perfect storm of burgeoning problems stemming from the company's poor environmental record and primitive governance structure," said Paul Paz y Miño, Associate Director at Amazon Watch, an Oakland-based environmental group that works with Chevron's victims. "Watson's refusal to clean up his toxic waste in Ecuador and his evasive approach to climate change might explain why the company is now seen as the poster child for corporate greed.
"These issues will come to the fore in a big way both inside and outside the shareholder meeting, where protestors will gather to urge responsible action from Chevron's narrow-minded management team," Paz y Miño said.
Chevron operated in Ecuador under the Texaco brand from 1964 to 1992, leaving behind an environmental and public health catastrophe called the "Amazon Chernobyl" by locals. The pollution has devastated dozens of indigenous and farmer communities, driven up cancer rates, and cost Chevron an estimated $2 billion in legal and other fees while the company's reputation has been pounded by journalists and good government groups.
A top Chevron official has said the company would fight the indigenous groups "until hell freezes over" and "then fight it out on the ice." Although Chevron insisted for years that the environmental claims be heard in Ecuador and had accepted jurisdiction there, the company later sold all of its assets in the country and now refuses to pay the judgment.
The indigenous groups last year won a resounding victory before Canada's Supreme Court in their effort to force Watson to comply with the judgment by seizing the company's assets. In Canada, Chevron has an estimated $15 billion worth of oil fields, bank accounts, and refineries – or more than enough to pay the entirety of the Ecuador judgment. Watson and his chief lawyer, R. Hewitt Pate, have tried to argue that company assets in Canada should be off limits to the Ecuadorians because they are held by a wholly-owned subsidiary.
Chevron also faces mounting pressure from a growing international movement of communities from Europe and Latin America who have banded together to oppose the company's sub-standard environmental practices. This year's action, called the "Anti-Chevron Day", will take place from May 20-21 and will include online and live activities in several countries that will denounce Chevron's environmental and human rights violations. (See here for background.)
Apart from pressure from the Amazonian communities, some of Chevron's own shareholders are also demanding that Watson – who in 2015 personally earned $22 million despite a 75% drop in company revenue – comply immediately with the Ecuador court judgment and clean up the estimated 1,000 toxic waste pits and other pollution it left behind when it departed the South American nation in 1992.
Seattle-based Newground Social Investment this year filed a shareholder resolution (see p. 80 of Chevron's 2016 proxy) that sharply rebukes Watson for his mishandling of the Ecuador litigation. Chevron has used dozens of law firms and up to 2,000 lawyers to fight the indigenous groups, but it continues to suffer courtroom setbacks.
Eighteen consecutive appellate judges in Ecuador and Canada have now ruled against Chevron in a case that is fast becoming a potential "litigation catastrophe" for the company. The Supreme Courts of both Ecuador and Canada have unanimously ruled against Chevron; another U.S. appellate court unanimously ruled against the company when it tried to use a U.S. trial judge to block enforcement of the Ecuador judgment anywhere in the world.
The Newground resolution calls for Chevron to make it easier to hold special meetings given that Watson's management team "has mishandled a number of issues in ways that significantly increase both risks and costs to shareholders. The most pressing of these issues is the ongoing legal effort by communities in Ecuador to enforce a $9.5 billion Ecuadorian judgment for oil pollution." (The judgment is now roughly $11 billion because of statutory interest.)
Newground asserts that under Watson's leadership, Chevron "has yet to properly report these risks in either public filings or statements to shareholders. As a result, investors requested on several occasions that the U.S. Securities and Exchange Commission investigate whether Chevron had violated securities laws by misrepresenting or materially omitting information" relevant to the Ecuador liability.
Chevron also faces several other shareholder resolutions – one sponsored by the Union of Concerned Scientists – that suggest the company has fallen well behind its industry peers in reducing its greenhouse gas emissions and adapting to the challenges of climate change. One such resolution calls on the company to produce reports establishing company-wide goals for the reduction of greenhouse gas emissions. Another asks for a change in dividend policy given that the global shift away from fossil fuels will likely lead to billions of dollars of stranded assets in the form of oil reserves. Watson and Chevron's Board oppose all of the climate change resolutions.
Piaguaje's trip, being made on behalf of dozens of indigenous and farmer communities devastated by Chevron's pollution, will culminate in an expected face-to-face showdown with Watson on May 25 at company headquarters near San Francisco. Piaguaje will confront Watson with the extensive evidence of the company's toxic dumping relied on by Ecuador's Supreme Court to unanimously affirm the judgment.
Chevron continues to get hit hard on the Ecuador issue. Several months ago, Chevron's star witness admitted lying under oath after being paid more than $2 million by the company, moved to the United States, and coached for 53 consecutive days by Chevron lawyers before being allowed to testify. Separately, Amazon Watch recently disclosed a Chevron whistleblower video showing company scientists trying to fraudulently hide extensive evidence of oil pollution from the Ecuador court. The video has been seen millions of times on the internet.
Piaguaje and other Ecuadorian rainforest leaders – including Goldman Environmental Prize winners Luis Yanza and Pablo Fajardo – have been pressuring Watson for years to pay the pollution liability so their ancestral lands can be remediated. Disease rates have skyrocketed in the affected area, groundwater has been contaminated, and there is virtually no clean water for tens of thousands of people. Piaguaje's Secoya community has seen its culture decimated because of a lack of fresh water and clean food, according to evidence in the case.
"Our leaders plan to confront Mr. Watson with judgments from multiple courts mandating the company pay its pollution bill to the people of Ecuador," said Piaguaje. "Mr. Watson needs to accept responsibility for Chevron's environmental crimes in Ecuador, apologize to the company's victims, and abide by court orders that compensation be paid.
"Until he abides by the rule of law, Mr. Watson and Chevron's Board members will be considered by us to be fugitives from justice subject to arrest for crimes against humanity under principles of universal jurisdiction," he added.
In previous shareholder meetings, Chevron's management has suffered a series of sharp rebukes over its Ecuador liability. One resolution calling on Watson to separate the positions of Chairman and CEO – widely considered a corporate governance anachronism – received a whopping 38% support from all company shareholders. Normally, any shareholder resolution that receives more than 10% support is considered successful.
In addition, in 2011 several of Chevron's institutional shareholders with more than $580 billion in assets under management sent Watson a letter urging the company to settle the Ecuador case. Amazon Watch also organized a letter signed by 43 non-profit human rights and corporate accountability groups blasting the company for trying to silence its critics over the Ecuador issue.
"In failing to negotiate a reasonable settlement prior to the Ecuadorian court's ruling against the company, we believe that Chevron's Board of Directors and management displayed poor judgment that has exposed the Corporation to a substantial financial liability and risk to its operations," said the investor letter.
U.S. Congressman James McGovern (D-MA), who visited the affected area in 2008, also sent a letter to President-elect Obama describing the horrid living conditions caused by Chevron's dumping practices. The company has also been criticized for trying to silence an anti-Chevron activist in Canada, for trying to intimidate lawyers and scientists for the villagers by suing them privately under racketeering laws, and for trying to shut down dissent by issuing subpoenas to more than 100 journalists, bloggers, and even some of its own shareholders who have questioned management. In 2010, his first year as CEO, Watson lost his cool at the shareholder meeting and had five people arrested who had challenged him over Ecuador.
Deepak Gupta, a prominent U.S. appellate lawyer who represents U.S. attorney Steven Donziger (the main target of Chevron's retaliation campaign), recent called Chevron's litigation strategy an "intimidation model" in an interview with Rolling Stone.
Chevron faces a critical court hearing in Canada in September that could knock out most of the company's case that it plans to use to evade enforcement of the judgment.
"The damage is so extensive that it is unclear whether the full amount of the judgment would be sufficient for a comprehensive clean-up," Piaguaje said. "The humanitarian crisis in our communities due to Chevron's pollution is dire and getting worse."