Shareholder Activism for Profit and Purpose

In 2021, two campaigns by little-known activist hedge funds attracted global attention due to their perceived consequences for sustainable capitalism. In France, the food products company Danone and its CEO Emmanuel Faber became the target of a London-based activist hedge fund, Bluebell Capital Partners. The abrupt ousting of Faber–who had long been a vocal advocate of corporate social and environmental responsibility–was lamented as a major blow to sustainable capitalism. Meanwhile in the United States, ExxonMobil–the world’s largest listed oil company–was targeted by another activist hedge fund, Engine No. 1. The highly publicised proxy contest that followed was the first boardroom battle to be fought and won on a platform of sustainability issues, with three of Exxon’s board members ultimately being replaced by Engine No. 1’s nominees ¹ . Engine No. 1’s victory was therefore celebrated as a pivotal moment for environmental and social shareholder activism and sustainable capitalism. 

At first sight, these two examples appear to have completely different implications for the growth of purpose-driven companies and the role that investors might play in promoting sustainable capitalism. The campaign at Exxon inspired hope and the campaign at Danone generated despair. However, on closer examination, the campaigns have much in common. They both serve to illustrate that even environmentally and socially focused investors will typically also be astutely concerned with the financial performance of a target company. The Danone campaign reveals that a strong focus on environmental and social issues will not shield a CEO from being targeted by activists who believe the company is underperforming financially. The Exxon case highlights that if a company performs poorly both financially and with respect to environmental, social and governance (‘ESG’) goals, this can lead to activists launching an even stronger two-pronged attack. The ability to campaign on a dual platform of profitability and sustainability can enable activist hedge funds to secure even more widespread support from other investors. 

These recent campaigns also raise important questions about ESG investing, ESG activism and purpose-driven companies. To what extent will investors be willing to trade-off financial returns in favour of environmental and social progress? How should companies and their leaders prioritise and balance environmental, social and governance factors with the pursuit of shareholder wealth maximisation? An examination of the high-profile activist campaigns at Danone and Exxon can perhaps provide some anecdotal evidence of the balancing act that companies need to undertake and the strategies that activists might use against target companies in the future. 

1. Danone: From Toppling Milton Friedman to Toppling the CEO

Less than a year before Emmanuel Faber’s dramatic exit in March 2021, Danone made history by becoming the first publicly traded company in France to adopt a new société à mission legal structure ² . In 2019, France passed a law to enable companies to take greater account of social and environmental issues ³ . Although such companies remain commercial enterprises, they have a defined corporate purpose (raison d’être) and are required to pursue social and environmental objectives aligned with that purpose. Companies are accountable to a ‘Mission Committee’ that is responsible for monitoring the progress made towards achieving these objectives ⁴ . In June 2020, following a shareholder vote where 99.4% of shareholders voted in favour of the necessary bylaw amendment to transform Danone into a société à mission, Faber congratulated investors, proclaiming ‘You have toppled the statue of Milton Friedman here today’ ⁵ . Here, Faber was referring to Friedman’s famous 1970 New York Times essay, ‘The social responsibility of business is to increase its profits’ ⁶ , which has long been associated with (or blamed for) the blinkered focus on shareholder wealth maximisation in corporate America ⁷ . Shortly thereafter, it was Faber himself who was toppled. In January 2021–less than seven months after the momentous shareholder vote–the activist hedge fund Bluebell Capital campaigned to replace him as CEO, and on 15 March 2021 Faber was removed both as CEO and chairman ⁸ . In the media coverage that ensued, the outcome was viewed as detrimental to sustainable capitalism and the ESG movement and the ousting of Faber was highlighted as ‘a case study in the pitfalls of purpose’ ⁹ . 

2. Exxon: The Small Hedge Fund that took on Big Oil

Less than a decade ago, ExxonMobil was the most valuable company in the world ¹⁰ . Yet in June 2021, Engine No. 1–a newly launched impact hedge fund holding only 0.02% of Exxon’s shares–replaced a quarter of the oil giant’s board of directors ¹¹ . Unlike Danone, Exxon was a notorious industry laggard in terms of sustainability. Due to decades of denial and misinformation about the impact of climate change, the company was long referred to as a ‘fossil fuel dinosaur’ by environmentalists ¹² . More recently, Exxon’s investors had grown increasingly uneasy about its outlier status in an industry where its competitors had taken more meaningful steps towards energy transition ¹³ . Engine No. 1 put forward four alternative independent director candidates who had expertise in traditional energy, renewable energy, regulation and technology, and energy transition ¹⁴ . With Exxon refusing to back down or compromise with the activists, the matter progressed to a full shareholder vote at Exxon’s annual meeting in May 2021. Ultimately Engine No. 1 was victorious, with three of its four nominees securing seats on Exxon’s board ¹⁵ . In direct contrast to the media coverage that the Danone case attracted, Engine No. 1’s success at Exxon was heralded as an example of the perils of failing to pursue sustainability, with reports noting that the case represented a ‘sea change in the climate battle’ and an indication that ‘investors are increasingly using their clout to bring carbon-intensive businesses into line on climate change’ ¹⁶ .

3. Parallels between Danone and Exxon 

Although Danone and Exxon are very different companies with completely divergent approaches to sustainability, the shareholder activist campaigns they encountered did have some similarities. For example, both companies were targeted by fledging activist hedge funds, rather than the formidable, established players that CEOs have grown to fear. London-based Bluebell Capital Partners is an activist hedge fund focused on investing in European medium-large cap companies ¹⁷ . It was launched in November 2019 and manages around €70 million in assets. Bluebell’s asset base primarily comprises the founder’s own funds and that of friends and family ¹⁸ . Similarly, San Francisco-headquartered impact hedge fund Engine No. 1 was officially formed in December 2020 and was only weeks old when it announced its inaugural campaign at Exxon ¹⁹ . It launched with initial capital of around $250 million that was largely comprised of founder Chris James’ own funds ²⁰ . By way of comparison, Elliott Management–the biggest activist hedge fund in the US–was founded in 1977 and currently manages approximately $51.5 billion in assets ²¹ .

If companies are targeted by hedge funds that have minimal capital, this naturally means that they can only acquire tiny shareholdings in such large companies. Bluebell did not disclose the size of the stake that it held in Danone, but it was less than the 5% threshold that triggers a requirement to file a disclosure with France’s market regulator ²³ , with commentators describing the company as having ‘torched billions in shareholder value in the past few years’ ²⁴ . The company was also removed from the S&P Dow Jones Industrial Average for the first time in almost a century ²⁵ . Although the sustainability issues that formed a major part of Engine No. 1’s campaign were the central focus of most of the media coverage, Engine No. 1 was always upfront in emphasising that their campaign was as much about shareholder value as it was about wider environmental and social values. The hedge fund noted that their ‘idea was that this was going to have a positive impact on the share price’ ²⁶ and that the proposals were designed to help the company secure its dividend for shareholders ²⁷ . In essence, Engine No. 1 was ‘a shareholder crusader for long-term value, not a climate crusader’ ²⁸ .

Of course, poor financial performance was more obviously associated with Bluebell’s intervention in Danone. Danone’s financial performance and share price significantly lagged major European rivals Nestlé and Unilever. Bluebell’s campaign highlighted the company’s ‘chronic underperformance compared with larger rival Nestlé’ ²⁹ . The hedge fund noted that Danone’s share price had consistently underperformed Nestlé and Unilever, since Faber had been appointed as CEO in October 2014. While Danone’s shares increased by 2.7% since Faber’s appointment, Nestlé’s shares rose by 45% and Unilever’s by 72% ³⁰ . Those are striking differences in financial performance, which would concern any shareholder focused on financial returns. Bluebell also pointed out that Nestlé and Unilever were also ‘extremely committed to sustainability’ yet received far superior financial returns ³¹ .

4. ESG Activism: A Trojan Horse?

Given their small shareholdings, Bluebell and Engine No. 1 needed the support of larger institutional investors to succeed in their campaigns. The Engine No. 1 campaign is a masterclass in how an activist with an incredibly small shareholding can effectively secure powerful support from other shareholders. With only a 0.02% shareholding, the hedge fund clearly could not have succeeded in replacing three directors on Exxon’s board without widespread investor support. There seems little doubt that Engine No. 1’s focus on sustainability was instrumental in generating the level of investor support that was needed for the ambitious campaign to succeed. In that sense, might ESG issues become a form of ‘Trojan horse’ that enables activist hedge funds to generate broader investor support for their campaigns? Conversely, if ESG issues are now so important to investors, how did Bluebell succeed in ousting such a progressive CEO of an iconic mission-driven company? 

One of the most significant changes to take place in the investment ecosystem in recent years is the explosion in demand for passive investment funds and bespoke ESG investment products ³² . This shift in investor ideology has led to a concentration of power among the largest asset managers who dominate the market for these products. In the United States, the ‘Big Three’ asset managers–BlackRock, Vanguard and State Street–are inevitably the largest investors in the majority of economically significant companies, due to the fact that they offer passive index funds at the lowest cost ³³ . With power come expectations of responsibility and the Big Three and other asset managers have begun to assume the role of ‘sustainable capitalists’ ³⁴ . The huge shift in investor attention to sustainability has been accompanied by ESG investor stewardship and engagement, alongside a rise in ESG shareholder activism.

In terms of asset manager engagement and stewardship, around the time of Engine No. 1’s campaign, BlackRock had strengthened its public commitment to addressing climate change. Each year, BlackRock’s chief executive Larry Fink issues an annual letter to CEOs. The 2020 instalment, ‘A Fundamental Reshaping of Finance’ emphasised that BlackRock will be ‘increasingly disposed to vote against management and board directors when companies are not making sufficient progress on sustainability-related disclosures and the business practices and plans underlying them’ ³⁵ . As such, the launch of Engine No. 1’s campaign was perfectly timed to test the credibility of the Big Three’s commitments to vote against directors who failed to take action with respect to the climate crisis ³⁶ . 

Engine No. 1 had the support of powerful allies from the outset of its campaign, particularly from one of America’s largest pension funds, the California State Teachers Retirement System (CalSTRS), which was vocal in backing the dissident slate of board members ³⁷ . By April 2021, Engine No. 1 had secured the support of the three of the largest U.S. pension funds, with each announcing that they would vote for all four of the dissident nominees ³⁸ . Ultimately, however, the pivotal voters in any proxy contest at a U.S. S&P 500 company are the Big Three asset managers – BlackRock, Vanguard and State Street. The Big Three control more than 20% of the shares of the average S&P 500 company, which ordinarily translates into more than 25% of the voting power ³⁹ . In the Engine No. 1 proxy contest, the Big Three had collective voting power of around 31%, so they had the power to make or break any activist campaign. As a mere 0.02% shareholder, Engine No. 1 relied on its sustainability arguments to boost the success of its campaign. 

The Exxon case is a very clear demonstration of how a platform of ESG issues can generate support for an activist campaign. The stewardship activities of big asset managers are slowly becoming more transparent, so during Engine No. 1’s highly publicised campaign at Exxon, the world was watching the Big Three to assess whether they would live up to their public commitments on climate change in practice. 

Alongside the highly publicised commitments on the part of asset managers, there has been increased interest in ESG campaigns by activist hedge funds. Activist hedge funds–typically portrayed as villainous actors ⁴⁰ –may seem unlikely protagonists in global efforts to promote sustainability and responsible capitalism ⁴¹ . Historically, such funds have been laser focused on financial returns and have neither promoted sustainability goals, nor launched activist campaigns with environmental or social components ⁴² . Although investing in ESG index funds has now become a mainstream investment strategy, ESG-focused activist hedge fund campaigns are currently a niche strategy. However, a vocal minority of activist hedge funds have transitioned (to varying extents) to focus on ESG activism ⁴³ . The formation of such bespoke funds began in January 2018, when two formidable activist hedge funds, Jana Partners and ValueAct Capital Partners launched the specialist ESG-focused funds, Jana Impact Capital ⁴⁴ and ValueAct’s Spring Fund ⁴⁵ , respectively, and the first ESG hedge fund campaigns took place ⁴⁶ . The Spring Fund led to ValueAct’s founder, Jeffrey Ubben, leaving the hedge fund altogether to form a new impact hedge fund, Inclusive Capital Partners ⁴⁷ . New players like Engine No. 1 were then formed, often involving executives who have left more traditional activist hedge funds.   

Coming back to the Trojan Horse analogy, sceptics of ESG hedge fund activism might worry that environmental and social issues are being used by hedge funds to obscure the true financial motivations driving their campaigns. Here, some parallels might be drawn with the way that activist hedge funds sometimes append governance issues to their core campaigns as a tactical means of securing support from institutional investors ⁴⁸ . It seems clear that activist hedge funds can use ESG platforms to increase the appeal of their overall campaigns to a wider range of other investors. However, these ESG-focused activist funds are upfront about their purpose and business model. Engine No. 1, for example, made clear that it is ‘a capitalist group, definitely not a non-profit’ ⁴⁹ . Inclusive Capital Partners also grounds its philosophy in the context of sustainability driving superior long-term financial returns ⁵⁰ .  

Engine No. 1’s campaign at Exxon demonstrated how effective campaigning on a platform of sustainability can be to gaining the support of powerful institutional investors. What is more curious, perhaps, is how Bluebell managed to succeed in a campaign that challenged Emmanuel Faber, a poster-CEO for sustainability and responsible capitalism. Although Bluebell did not launch a proxy contest like Engine No. 1, they would not have succeeded in their campaign to remove the CEO unless there was considerable institutional investor backing behind the proposal. Given the public pressure on institutional investors to promote ESG issues, and their public pledges to do so, Danone and Faber could have proved to be a risky and misguided activist target for Bluebell. 

Notwithstanding the potentially negative implications for the sustainable capitalism and ESG investor movements, Bluebell was reported to have significant investor support at Danone. At the time of the campaign, Danone’s shareholding was made up of 78% institutional investors, 44% of which were US-based and 50% were European (including UK) based ⁵¹ . In an interview following the ouster of Faber, Bluebell’s co-founder stated that ‘support by fellow shareholders–also the French ones–was overwhelming’ ⁵² . The activist noted that there had been growing shareholder frustration over lacklustre performance under CEO Faber’s leadership ⁵³ . It was revealed that other investors had been agitating for change in private discussions with Danone since the previous year ⁵⁴ .

The position of asset managers such as the Big Three was much less visible in Danone’s case than it had been in Engine No. 1’s campaign at Exxon. With Exxon, it was very clear where the Big Three stood with respect to the director nominees. Each of the three asset managers published press releases setting out their position and voting decisions ⁵⁵ . With Danone, however, the position of the Big Three was much less clear. In 2020 BlackRock had highlighted in an Investment Stewardship Report that it supported Danone designating itself as a société à mission ⁵⁶ . The 2021 BlackRock Investor Stewardship Report, discussing the period when Faber was ousted, describes BlackRock’s engagement on that matter in very vague terms ⁵⁷ . In the latter stewardship report, it is not clear at all whether BlackRock supported the change in leadership at Danone or not. Instead, the report simply notes that BlackRock had a ‘strong history of engagement with Danone and following recent investor pressure we…met with the then Chairman and CEO Emmanuel Faber in February 2021 to discuss governance and strategic direction.’ ⁵⁸ Given the sensitivities of challenging a company that was a model for purpose-driven business, BlackRock and other institutions may have been reluctant to publicly support Faber’s ousting, even if they privately supported it. Although some large investors–for example, Artisan Partners–publicly voiced concerns about Danone’s leader ⁵⁹ , other well-known asset managers took a similar approach to BlackRock and were relatively quiet on the topic. This illustrates that it is much easier for asset managers to publicly support a campaign like Engine No. 1’s at Exxon, than a campaign like Bluebell’s at Danone. Therefore, a two-pronged campaign where ESG issues are highlighted may be the most effective means to enable activist shareholders to generate the highest levels of public support for their proposals. 

Finally, even the hedge fund activists themselves were keen to emphasise that they were not dismissing environmental and social goals. In its letter to the board, Bluebell stressed that it supported Danone’s ‘dual economic and social project’ but indicated that ‘under the leadership of Mr Faber, Danone did not manage to strike the right balance between shareholder value creation and sustainability’ ⁶⁰ . Contrary to some of the press reports, the activist hedge fund generally insisted that sustainability concerns did not play a major role in their decision to target Danone and Faber. 

Overall, an analysis of investor behaviour with respect to the campaigns shows that an ESG-oriented campaign can prove to be an effective means of generating widespread institutional investor support, even for a newly created hedge fund with a very small shareholding. However, it is also clear that financial considerations remain key for most investors. A strong commitment to ESG goals will not protect companies from becoming an activist target.  

5. The Shareholders Who Want It All: Profit and Purpose

These cases of activist hedge fund campaigns at prominent companies therefore provide significant evidence that shareholders still strongly focus on financial returns, despite growing attention to environmental and social factors. This could prove to be a challenge for companies who try to be more forward thinking and ground-breaking in pushing environmental or social aspirations or companies whose investments in sustainability will not pay off financially until the much longer-term. As seen with Danone, companies that prioritise environmental and social factors over financial return risk becoming a target of activist hedge funds. It was argued that Faber ‘spent too much time talking up the “mission” and too little energising the “enterprise”’ ⁶¹ . Therefore, ‘distractions from the core goal of making a profit can be dangerous’ ⁶² .

These lessons are in line with the enlightened shareholder value version of stakeholder theory, namely that corporate leaders should pursue environmental and social goals as a means of maximising long-term shareholder value ⁶³ . ESG goals are thought of as a means to an end rather than an end in themselves. In the view of shareholders, Danone’s CEO veered too far into the territory of prioritising environmental and social goals as ends in themselves. Such an approach would be more in line with an alternative version of stakeholder theory, which goes further and considers stakeholder welfare to be valuable independently of its effect on shareholder value ⁶⁴ . 

These theoretical debates over corporate purpose highlight the key challenges for ESG investing and sustainable capitalism more generally. Are investors willing to make any trade-offs to financial returns to invest in more environmentally and socially responsible companies? Should corporate managers ever prioritise stakeholder interests over shareholder interests? 

In their public statements, most companies insist that no such compromise is necessary. For example, in the US a study has shown that almost none of signatories to the stakeholder focused Business Roundtable Statement on the Purpose of a Corporation in 2019 ⁶⁵ expressed any willingness to prioritise benefits to stakeholders over shareholder wealth maximisation ⁶⁶ . The relevant players in ESG investing, engagement and activism similarly insist that the two goals of profit and purpose are not incompatible, and that ESG strategies are win-win. Starting with activist hedge funds, the business model of these funds relies upon them maximising returns in target companies ⁶⁷ . Even when funds specifically focus on ESG issues, they will still only be willing to invest in targets where they see potential financial value. The funds themselves are upfront about the focus on a double-bottom line. For example, Jeffrey Ubben has highlighted that the premise of the Spring Fund, launched by ValueAct in January 2018 (and ultimately superseded by a new venture known as Inclusive Capital Partners), was ‘that there is not just a societal good to be done, but excess return to be capture in identifying and investing in businesses that are emphasizing and addressing environmental and social problems’ ⁶⁸ . 

The big asset managers whose support is necessary for activist hedge fund campaigns to succeed similarly explain ESG goals as a means to the end of shareholder wealth maximisation. In his annual letters to CEOs, BlackRock’s Larry Fink consistently emphasises that ‘climate risk is investment risk’ ⁶⁹ . In his 2022 letter he also stressed ‘We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients’ and that ‘stakeholder capitalism is all about delivering long-term, durable returns for shareholders’ ⁷⁰ . Action that was taken by the Big Three with respect to increasing the representation of women on boards is also justified on the basis that diversity boosts corporate performance, rather than on any equity or social justice considerations ⁷¹ .

More generally, this ‘win-win’ attitude is reflected in the evolution of the concept of corporate social responsibility to the modern-day ESG movement. While corporate social responsibility ‘was once framed in moral terms as a goal for management irrespective of profit’, ESG as a concept is generally argued ‘to provide sustainable long-term value or higher risk-adjusted returns for shareholders’ ⁷² . 

6. The Limits of ESG Shareholder Activism 

It is a matter of academic debate whether an ESG investment strategy is likely to also be accompanied by superior financial performance. ESG funds have often been marketed as performing better financially compared to non-ESG funds ⁷³ . Despite these claims, in some respects ESG index investing goes against key principles of passive index investing such as ensuring maximum diversification. As ESG funds might deviate from the broader market by excluding entire industries, this increases some forms of risk for investors ⁷⁴ . Indeed, in practice, much of the outperformance of ESG funds has been attributed to the funds being heavily invested in technology stocks such as Alphabet, Apple and Microsoft, which have performed particularly well in recent years ⁷⁵ . However, in the past year, some other industries have performed better than technology. For example, oil and gas outperformed ESG funds in 2021 ⁷⁶ . This illustrates that the financial success and growth that ESG funds have recently enjoyed is by no means guaranteed in future. ‘Doing well’ may not always align with ‘doing good’ ⁷⁷ . Contrary to the assertions of companies and investors, it would be naïve to suggest that profit and purpose always align. If that were the case, companies and investors would already have ample incentives to act responsibly. There will always be situations where companies and their managers need to decide whether to prioritise shareholders or stakeholders.

Just as ESG investment fund success is not guaranteed, the Danone case shows that strong corporate ESG performance will not prove to be an effective shield for companies that are performing poorly financially. To avoid being targeted by activists, companies should ideally meet the challenges of ensuring short-term and long-term profitability while also focusing on sustainability.  

ESG-focused shareholder activism will also most likely continue to concentrate on situations where purpose can in fact boost profit. There are some examples of campaigns that focus purely on environmental or social factors for their own sake, but such campaigns do not form part of activist hedge funds’ core investment strategies. For example, Bluebell Capital has a programme where it commits to buy one share at one company per year that lags on environmental or social issues, in order to advocate for better ESG performance ⁷⁸ . As part of this programme, Bluebell campaigned to replace the CEO of the Belgian chemicals company Solvay after she failed to put an end to dumping chemical waste into the sea ⁷⁹ . The noticeable divergence from the hedge fund’s normal investment model to conduct these types of pro-bono campaigns is an implicit admission that activists do always not expect higher ESG standards to increase profitability.

There are various reasons why an activist hedge fund might choose to engage in these types of pro bono campaigns. It could help with visibility and credibility when the fund pursues a for-profit ESG campaign. However, in their core business, activist hedge funds that focus on ESG issues will focus on campaigns that can contribute to the ‘double bottom-line’ – where the intervention generates a significant profit as well as being environmentally or socially beneficial ⁸⁰ . 

In the past, activist hedge funds adapted their campaigns to align their goals with those of institutional investors ⁸¹ . Similarly, preliminary evidence indicates that activist hedge funds are also attempting to adapt their strategies to exploit the fact that asset managers are focusing on sustainable capitalism. Aligning their campaigns with the goals of pivotal voters in a proxy contest–as Engine No. 1 did with Exxon–could result in much higher levels of support for activist campaigns ⁸² . Ultimately, it seems that ESG focused investors and activists will increasingly support companies that promote environmental and social goals, but only if this does not negatively impact financial performance and shareholder wealth. Sustainable capitalism is still capitalism, after all. 

1. Anna Christie, ‘Battle for the Board: Climate Rebellion at Exxon marks a New Era of Shareholder Activism’ (Oxford Business Law Blog, 12 July 2021) <https://www.law.ox.ac.uk/business-law-blog/blog/2021/07/battle-board-climate-rebellion-exxon-marks-new-era-shareholder> accessed 20 April 20
2. Leila Abboud, ‘Danone adopts new legal status to reflect social mission’ Financial Times (Paris, 26 June 2020). Earlier in 2018, Danone’s largest subsidiary, Danone North America, had become the world’s largest Public Benefit Corporation. 
3. The PACTE Act no. 2019-486 encouraged socially responsible business by creating ‘mission businesses’ (société à mission). 
4. ‘Danone, “Société à Mission” (Danone) <https://www.danone.com/about-danone/sustainable-value-creation/danone-entreprise-a-mission.html#Framework> accessed 20 April 2022.
5. Abboud, (n 2). 
6. Milton Friedman, ‘The Social Responsibility of Business Is to Increase Its Profits’ New York Times (New York, 13 September 1970).
7. Brian R. Cheffins, ‘Stop Blaming Milton Friedman!’ (2021) 98(6) Washington University Law Review, 1607, 1608-1609.
8.  Leila Abboud, ‘Danone board ousts Emmanuel Faber as chief and chairman’ Financial Times (Paris, 15 March 2021).
9. The editorial board, ‘Danone: a case study in the pitfalls of purpose’ Financial Times (London, 18 March 2021).
10. Jennifer Hiller, ‘Exxon Mobil’s fading star: no longer the biggest U.S. energy company’ Reuters (Houston, 29 October 2020).
11. Jennifer Hiller and Svea Herbst-Bayliss, ‘Engine No. 1 extends gains with a third seat on Exxon board’ Reuters (Houston and New York, 3 June 2021). See Christie (n 1). 
12. Terry Macalister, ‘Shell chief delivers global warming warning to Bush in his own back yard’ The Guardian (London, 12 March 2003). 
13. Christie (n 1).
14. Reenergize Exxon, ‘Engine No. 1 Releases Full Slate of Nominees it Recommends for Election at ExxonMobil’s 2021 Annual Meeting of Shareholders’ (Engine No. 1, 15 March 2021) <https://reenergizexom.com/materials/engine-no-1-releases-full-slate-of-nominees-it-recommends-for-election-at-exxonmobils-2021-annual-meeting-of-shareholders/> accessed 20 April 2022.
15. Hiller and Herbst-Bayliss (n 11).
16. Justin Jacobs and Anjli Raval ‘Defeats for Big Oil mark ‘sea change’ in climate battle’ Financial Times (Washington and London, 27 May 2021). 
17. Although the hedge fund was launched in 2019, its founders had been working alongside high profile activist hedge funds such as JANA Partners, Elliott Management and Third Point Partners for many years through their advisory business, Bluebell Partners.
18. Laurence Fletcher and Leila Abboud, ‘The little-known activist hedge fund that helped topple Danone’s CEO’ Financial Times (London, Paris, 24 March 2021).
19. Svea Herbst-Bayliss, ‘Hedge fund veteran launches impact firm with former Jana, BlackRock executives’ Reuters (New York, 1 December 2020); Svea Herbst-Bayliss, ‘Exxon faces proxy fight launched by new activist firm Engine No. 1’ (New York, 7 December 2020).  
20. Saijel Kishan, ‘Hedge Fund Veteran Chris James to Start Impact-Investing Firm’ Bloomberg (New York, 1 December 2020).
21.  ‘Founded in 1977’ (Elliott Management) <https://www.elliottmgmt.com/about-elliott/> accessed 20 April 2022.
23. [Leila Abboud, ‘Activist fund Bluebell Capital takes aim at Danone’ Financial Times (Paris, 18 January 2021)./note]. At the time of the campaign, Danone’s market capitalisation was €41 billion so even if Bluebell had invested its entire fund in Danone, it would only have held 0.17% of the shares. Given Exxon’s size, Engine No. 1 also held an incredibly small percentage of the company’s shares – 0.02%. As a result of their small shareholdings, neither Bluebell Capital nor Engine No. 1 could have succeeded in their campaigns alone. Significant levels of support from large (predominantly institutional) investors who hold a much larger proportion of the shares was therefore necessary for these activist hedge fund campaigns to succeed.

    Perhaps the most significant similarity between Danone and Exxon–and the one that was most often obscured in the divergent media coverage–is the role that poor financial performance played in each campaign. It is unlikely that either Danone or Exxon would have been successfully targeted by activist hedge funds if they had been outperforming their competitors in terms of shareholder wealth maximisation. Despite its status as an energy giant, Exxon was in many respects an obvious activist target as its financial underperformance stood out among its industry competitors. In 2021, Exxon recorded a $22 billion loss ²² Jennifer Hiller, ‘Pandemic pushes Exxon to historic annual loss, $20 billion cut in shale value’ Reuters (Houston, 2 February 2021).

24. ‘The little Engine that could: ExxonMobil loses a proxy fight with green investors’ The Economist (London, 29 May 2021). 
25. Eric Platt, ‘ExxonMobil booted from the Dow after close to a century’ Financial Times (New York, 25 August 2020). 
26. Derek Brower, ‘Hedge fund that beat ExxonMobil says it will have to cut oil output’ Financial Times (New York, 27 May 2021).
27. Ortenca Aliaj, Derek Brower and Myles McCormick, ‘ExxonMobil Under Pressure as Church of England Joins Investor Campaign’ Financial Times (New York, 10 December 2020). 
28. ‘Activist investors are both greening and greying, The Economist (London, 10 June 2021).
29. Billy Nauman, ‘Danone sacking shows limits of stakeholder ‘smokescreens’’ Financial Times (New York, 17 March 2021).
30. Leila Abboud, ‘Activist fund Bluebell Capital takes aim at Danone’ Financial Times (Paris, 18 January 2021).
31. Abboud (n 30). 
32. Attracta Mooney and Patrick Mathurin, ‘ESG funds defy havoc to ratchet huge inflows’ Financial Times (London, 6 February 2021) (noting that 2020 “was the year ESG came of age” and that by the end of 2020, total assets in sustainable funds hit a record of almost $1.7 trillion, up 50% over the year).
33. Lucian Bebchuk and Scott Hirst, ‘The Specter of the Giant Three’ (2019) 99 Boston University Law Review 721, 732-37.
34. Anna Christie, ‘The Agency Costs of Sustainable Capitalism’ (2021) 55(2) UC Davis Law Review 875, 893-897.
35. Larry Fink’s 2020 Letter to CEOs, ‘A Fundamental Reshaping of Finance’ (BlackRock, 16 January 2020) <https://www.blackrock.com/us/individual/larry-fink-ceo-letter> accessed 20 April 2022.
36. Christie (n 34) 926.
37. ‘Statement on alternate board members for ExxonMobil’ (CalSTRS, 7 December 2020) <https://www.calstrs.com/statement-on-alternate-board-members-for-exxonmobil> accessed 20 April 2022.
38. Jennifer Hiller and Svea Herbst-Bayliss, ‘CalPERS to back activist’s four director nominees in Exxon board fight’ Reuters (London and New York, 26 April 2021).
39. Bebchuk and Hirst (n 33), 724. 
40.  Anna Christie, ‘The new hedge fund activism: activist directors and the market for corporate quasi-control’ (2019) 19(1) JCLS 1, 1-2.
41. Christie (n 1).
42. Christie (n 34) 916. 
43. Christie (n 34) 912.
44. David Benoit, ‘Wall Street Fighters, Do-Gooders–And Sting–Converge in New Jana Fund’ The Wall Street Journal (New York, 7 January 2018).
45.  David Faber, ‘Jeff Ubben’s ValueAct launching fund with social goals, following similar moves by Jana, BlackRock’ CNBC (New York, 19 January 2018).
46. Christie (n 34) 916-917.
47. Svea Herbst-Bayliss, ‘ValueAct’s founder Ubben retires from firm, starts new venture’ Reuters (New York, 23 June 2020).
48. William Bratton, ‘Hedge Funds and Governance Targets’ (2007) 95 Georgetown Law Journal 1377, 1397.
49. Brower (n 26).
50. ‘Inclusive Capital Partners’ (Council for Inclusive Capitalism) <https://www.inclusivecapitalism.com/organization/inclusive-capital-partners/> accessed 20 April 2022.
51. <https://www.danone.com/investor-relations/danone-at-a-glance/ownership.html> accessed 20 April 2022. 
52. ‘Shareholder Activism in Europe 2021’ (Insightia, 2021) <https://www.activistinsight.com/research/Insightia_Europe2021.pdf> accessed 20 April 2022.
53. Fletcher and Abboud (n 18). 
54. ‘Inside Artisan’s Battle With Danone – And What Critics Got Wrong’ (Institutional Investor, 18 March 2021).
55. BlackRock ‘Vote Bulletin: ExxonMobil Corporation’ (BlackRock, 26 May 2021) <https://www.blackrock.com/corporate/literature/press-release/blk-vote-bulletin-exxon-may-2021.pdf>; Vanguard Investment Stewardship Insights, ‘Voting insights: A proxy contest and shareholder proposals related to material risk oversight at ExxonMobil’ (Vanguard, 2021) <https://static.vgcontent.info/crp/intl/avw/mexico/documents/inv-stew-voting-insights-exxonmobil.pdf> accessed 20 April 2022; State Street, Ross Kerber, ‘Top Exxon Investors State Street, Vanguard Backed Activist Nominees’ Reuters (New York, 28 May 2021).
56.  BlackRock Investment Stewardship, ‘Our approach to sustainability’ (BlackRock, 8 July 2020) 23 <https://www.blackrock.com/corporate/literature/publication/our-commitment-to-sustainability-full-report.pdf> accessed 20 April 2022 (noting that ‘This proposal was supported by more than 99% of the company’s shareholders, including BlackRock’).
57. BlackRock Investment Stewardship, ‘Q1 2021 Global Quarterly Report’ (BlackRock, May 2021) <https://www.blackrock.com/corporate/literature/publication/blk-qrtly-stewardship-report-q1-2021.pdf> accessed 20 April 2022. 
58. BlackRock (n 54) 17. 
59. Laurence Fletcher and Leila Abboud, ‘The little-known activist hedge fund that helped topple Danone’s CEO’ Financial Times (London, Paris, 24 March 2021).
60. Leila Abboud, ‘Danone’s test case for sustainable business’ Financial Times (Paris, 24 February 2021); Leila Abboud, ‘Activist fund Bluebell Capital takes aim at Danone’ Financial Times (Paris, 18 January 2021).
61.  The editorial board, ‘Danone: a case study in the pitfalls of purpose’ Financial Times (London, 18 March 2021).
62.  ibid.
63. Lucian A Bebchuk and Roberto Tallarita, ‘The Illusory Promise of Stakeholder Governance’ (2020) 106 Cornell Law Review 91, 108-110.
64. Bebchuk and Tallarita (n 63) 114-115.
65. Business Roundtable, ‘Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’’ (Business Roundtable, 19 August 2019) <https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans> accessed 20 April 2022.
66. Lucian A Bebchuk and Roberto Tallarita, ‘Will Corporations Deliver Value to All Stakeholders?’ (2022) 75 Vanderbilt Law Review (forthcoming), <https://ssrn.com/abstract=3899421> accessed 20 April 2022.
67.  Christie (n 39), 21.
68. David Faber, ‘Jeff Ubben’s ValueAct launching fund with social goals, following similar moves by Jana, BlackRock’ CNBC (New York, 19 January 2018) (citing a letter from Ubben to ValueAct’s limited partners).
69. Fink (n 34).
70. Larry Fink’s 2022 Letter to CEOs, ‘The Power of Capitalism’ (BlackRock, 18 January 2022) <https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter> accessed 20 April 2022.
71. See Michal Barzuza, Quinn Curtis and David H. Webber, ‘Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance, (2020) 93 Southern California Law Review 1243, 1277 and Ann M. Lipton, ‘ESG investing, or, if you can’t beat ‘em, join ‘em’ in Elizabeth Pollman and Robert B. Thompson (Eds), Research Handbook on Corporate Purpose and Personhood (Edward Elgar 2021) 140.
72. Dorothy S. Lund and Elizabeth Pollman, ‘The Corporate Governance Machine’ (2021) 121 Columbia Law Review 2563, 2566.
73. Siobhan Riding, ‘Majority of ESG funds outperform wider market over 10 years’ Financial Times (London, 13 June 2020). 
74.  John Armour and Jeffrey N Gordon, ‘Systemic Harms and Shareholder Value’ (2014) 6 Journal of Legal Analysis 35, 36 (noting that “the portfolios of diversified shareholders are insulated from the effects of idiosyncratic (firm-specific) risks”).
75.  Ardienne Klasa, ‘Sustainable funds face threat from tech sector turmoil’ Financial Times (London, 18 January 2022).
76. Patrick Temple-West and Kristen Talman, ‘ESG shares underperform oil and gas in 2021’ Financial Times (New York and Washington, 30 December 2021). 
77. Christie (n 34) 911.
78. Fletcher and Abboud (n 18).
79. Valentina Za and Simon Jessop, ‘Activist Bluebell urges Solvay’s board to oust CEO over sea discharge’ Reuters (Milan and London, 15 September 2021).
80. Christie (n 34) 883.
81. Christie (n 34) 922-923.
82. Christie (n 34) 923.