ExxonMobil’s planned move of its legal domicile from New Jersey to Texas has become the centerpiece of a new lawsuit filed by Attorney General Ken Paxton against one of the world’s most powerful proxy advisory firms.
Paxton sued Institutional Shareholder Services (ISS), accusing the company of using its massive influence over corporate shareholder votes to advance ESG and diversity-focused political agendas rather than objective financial guidance. The lawsuit specifically points to ISS opposing ExxonMobil’s planned reincorporation in Texas as evidence the firm was prioritizing ideology over shareholder interests.
Earlier this year, ExxonMobil announced that its board had unanimously recommended relocating the company’s legal domicile to Texas, citing the state’s “modernized business statutes” and new business courts aimed at efficiently handling complex commercial disputes.
“In making its recommendation, the Board considered Texas’ legal and regulatory environment, including its modernized business statutes and the Texas Business Court,” the company stated at the time.
ExxonMobil Chairman and CEO Darren Woods added that Texas had created “a policy and regulatory environment that can allow the company to maximize shareholder value.”
Gov. Greg Abbott celebrated the announcement in March, saying Texas was “where global brand leaders thrive and jobs for hardworking Texans grow.”
Paxton’s lawsuit argues ISS attempted to obstruct the move despite ExxonMobil’s long operational history in Texas and the company’s stated business rationale for the change.
ISS is one of the two dominant proxy advisory firms in the world, alongside Glass Lewis, with the lawsuit alleging the pair control more than 90 percent of the market. Proxy advisors help institutional investors determine how to vote on corporate governance issues and shareholder proposals.
According to the lawsuit, ISS falsely marketed its recommendations as “independent and objective” while incorporating ESG-driven priorities into its voting guidance.
The filing points to ISS policies encouraging investors to vote against boards lacking racial or gender diversity and company scorecards grading corporations based on greenhouse gas emissions and climate-related disclosures.
The suit also alleges ISS failed to disclose ties to ESG activist groups and ownership connections to organizations committed to “net zero” climate initiatives.
“ISS has enormous influence over how billions of dollars are invested and managed across this country, and they have abused that influence in order to push woke ideology,” Paxton said in a statement. “I will not allow this woke corporation to smuggle radical, liberal ideology into the companies they advise and hurt our financial system.”
Filed in Collin County under the Texas Deceptive Trade Practices Act, the lawsuit seeks civil penalties of up to $10,000 per violation and an injunction requiring ISS to clearly disclose that its proxy recommendations “are not made from a purely financial standpoint and focus heavily on ESG initiatives.”
ISS had not responded to the lawsuit as of publication.
