The boardroom shakeup at Exxon Mobil Corporation (XOM) and the stock market frenzy around AMC Entertainment Holdings’ (AMC) don’t seem related. But upon closer examination, these two stories reveal something important about the evolution of capital markets and corporate governance: the inescapability of social media and public opinion.
To recap, ExxonMobil appointed three activist shareholders to its board of directors this week in response to pressure from Engine No. 1, a climate activist hedge fund that has a miniscule $50 million stake in ExxonMobil (just .02% of the company’s market cap). Engine No. 1 says it wants to fundamentally transform ExxonMobil’s business, away from oil and gas production and towards green technology and renewable energy.
Meanwhile, the AMC saga is a continuation of the meme stock frenzy that’s been alive and well since January, when retail investors plowed billions of dollars into GameStop (GME). AMC was also part of that winter euphoria, but as spring has turned to summer, AMC shares have become the asset of choice for Reddit-inspired investors, who have pumped the stock up 1,400% in the last five months. AMC’s CEO Adam Aron has embraced the mania, encouraging retail investors to keep giving the company money.
The maneuvers of both ExxonMobile and AMC demonstrate how board members and executives are responding to pressure created within the evolving media ecosystem, and how their responses shape capital markets and corporate governance outcomes.
For Exxon, the media element is centered around the environmental-social-governance (ESG) movement. There is a growing demand from investors, company stakeholders and the general public for companies to align with ESG objectives, which includes reducing contributions to global warming. That demand has fallen especially hard on oil companies (and rightfully so).
At the same time, institutional investors like Blackrock and Vanguard have begun pushing their portfolio companies to make strides towards carbon neutrality. So are major pension funds and endowments; Calstrs, California’s $300 billion retirement fund, supported the board shakeup at Exxon. Allocators like Calstrs are also influenced by political considerations; indeed, the fund employees cannot be unaware of climate science, and of course the green energy movement, within California state politics.
Hence, we see that oil companies like ExxonMobile face pressure from multiple directions: mainstream public opinion, but also the world of investment management. Increasingly, these two movements are reinforcing each other.
Engine No. 1 is acutely aware of this dynamic. The seemingly endless stream of apocalyptic warnings about climate change -- not to mention the surging shares of renewable energy companies -- has created a favorable environment for its green goals. Engine No. 1 understands that its campaign to influence shareholders is tied up with its campaign to draw media attention: Shareholders are ultimately just people; like anyone, they respond to headlines and prevailing sentiment on hot-button issues like climate change.
AMC has learned these lessons. The company has fully embraced the retail speculation, even making it part of its communications strategy. The movie theatre chain has created a platform on its website where retail shareholders can take advantage of special promotions, including discounted items, exclusive screenings, and a direct line of communication with its CEO Adam Aron.
Indeed, Aron has become a vocal supporter of retail enthusiasm for AMC, tweeting out his support for retail investors and becoming a figurehead for the meme stock (much like Elon Musk became Dogecoin’s mascot). Unlike the CEOs of other unwitting Reddit fame (who seem sheepish or confused by their soaring shares), Aron is fully onboard with the insanity.
But the real question is, why haven’t other CEOs behaved like Aaron? A higher stock price is, after all, good for AMC’s existing shareholders and business. It makes shareholders wealthier. It allows the firm to sell more shares (as it did this week), pay off debt, and improve its capital structure. If achieving these ends is consequent on attracting more retail investors, then AMC is, in a sense, fulfilling its fiduciary duty by building a robust social media presence.
Like other institutions, the world of investment management is catching up to the profound technological disruption of the last two decades: the omnipresence of online news, the proliferation of smartphones, the rise of social media.
In ExxonMobile and AMC, we are seeing this ‘catching up’ happen in real time.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.