San Ramon – After a year in which a company posts a record $13 billion in profits and sees its stock price rise 20 percent, what is there to complain about?
Quite a lot, judging by a demonstration outside and comments inside ChevronTexaco Corp.’s annual shareholders meeting, which was held early Wednesday morning at the company’s leafy campus alongside Bollinger Canyon Road and Interstate 680.
ChevronTexaco’s top managers opened the meeting with a brief presentation highlighting the company’s accomplishments and prospects. “We’re moving in the right direction driven by a good corporate strategy,” Chief Executive Dave O’Reilly told 150 shareholders at the meeting.
But most of the two dozen shareholders who lined up at the microphone to speak or introduce resolutions had gripes to air about the global footprint left by ChevronTexaco as it hunts for, produces, refines and markets petroleum products that fuel the world’s developed economies.
Speakers questioned ChevronTexaco’s willingness to take seriously its private talks with advocates of renewable energy, its lack of progress in reducing flaring of natural gas that is a byproduct of oil wells in Nigeria and its choice of contractors for some security services.
Others in attendance questioned O’Reilly about a natural gas pipeline in Burma that ChevronTexaco stands to acquire if it completes its proposed $18-billion purchase of El Segundo-based Unocal Corp. “Stay out of Burma,” one speaker urged. But O’Reilly sloughed off the issue: “I’m not going to speculate at this time as to what we’re going to do in a transaction that has not yet received regulatory approval.”
Earlier, O’Reilly did tout the pending deal as “a rare opportunity to acquire a unique set of assets” that would boost ChevronTexaco’s inventory of energy reserves – a key concern of investors – by about 15 percent.
So far shareholders have been less than enthusiastic about the Unocal buy. ChevronTexaco’s shares closed Wednesday at $52.18, down 12 percent since the deal was announced April 4.
That skepticism spilled over into Wednesday’s meeting. “Why are you unable to grow organically, and is buying Unocal going to help the situation?” asked one shareholder. O’Reilly acknowledged that in 2004 ChevronTexaco’s production had outpaced new discoveries of petroleum reserves but noted that over longer periods of time the company was adding to its reserve base. “Reserve adds are lumpy,” he said.
Shareholders’ meetings often provide a soapbox for corporate critics. No group has proven more adept at seizing that opportunity at ChevronTexaco’s past two annual confabs than residents of the Ecuadorian rain forest who allege that the company polluted their homeland and caused diseases and birth defects that plague their impoverished communities. “If the situation is not resolved, our life will vanish,” said Humberto Piaguaje, a member of the Secoya tribe who traveled from Ecuador to address the shareholders.
But O’Reilly, noting the success of the Ecuadorians and their supporters at dominating discussion at last year’s meeting, sought to limit their microphone time to six minutes, although he bent that rule to allow Piaguaje and a couple of others to weigh in.
O’Reilly said he expects ChevronTexaco to prevail in a trial under way in Ecuador. “The factual and scientific foundation of our case has become even stronger” since last year’s meeting, he said.
Still, gaining support for nonbinding resolutions on environmental and social policy poses a big challenge to activists at companies like ChevronTexaco, where large institutional investors hold more than 60 percent of the 2.1 billion shares outstanding.
This year, shareholder resolutions seeking a new look at the Ecuador situation and at potential pollution from oil drilling in the Alaska National Wildlife Refuge and other sensitive areas drew only 9 percent of the 1.8 billion votes cast, mainly through proxies sent in prior to the meeting. A resolution from People for the Ethical Treatment of Animals seeking a reduction in the use of animals for chemical testing drew only 4 percent, according to a preliminary tally by the company.
But two other nonbinding resolutions aimed at corporate governance practices gained majority support. A measure seeking shareholder reviews of lucrative “golden parachute” severance deals with executives won 56 percent, while a resolution calling on ChevronTexaco to expense stock options won 59 percent. ChevronTexaco’s board opposed both proposals, but O’Reilly was cordial to the labor union sponsors, emphasizing that the company already has plans to expense options and rarely offers golden parachutes.
Nothing at the meeting pierced the composure of O’Reilly, although he managed to take a shot at federal laws that require ethanol to be added to gasoline in order to reduce pollution. “This is a make-the-farmers-rich movement and has nothing to do with environment,” he said.
In other news Wednesday, the company announced it is boosting its dividend to 45 cents per share, up 5 cents from the previous quarter. The dividend will be payable June 10 to holders of the company’s common stock as of May 19.
Rick Jurgens covers real estate and energy. Reach him at 925-943-8088 or at rjurgens@cctimes.com.
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