Dominion Energy Receives a Wake Up Call from Shareholders
Shareholders delivered a strong rebuke of Dominion Energy’s board and CEO for their lack of leadership in confronting the long-term risks of climate change. A remarkable 40% of the votes cast at this week’s shareholder meeting went to supporting a proposal for the creation of an independent chair of the board — which would have put a check on a board with questionable qualifications to lead.
In a world where boards of directors all too often get a free pass for irresponsible behavior, Dominion’s shareholders have sounded the alarm loud and clear to Dominion’s board and CEO/Chair Thomas Farrell.
Dominion’s largest investors, the giant asset managers, BlackRock and Vanguard together own more than 12% of Dominion’s outstanding shares. It remains to be seen whether BlackRock and Vanguard voted to ensure boardroom accountability, climate responsibility, and long-term value creation at Dominion. Across this season of shareholder meetings, they have more often chosen to use their significant voting power to promote business-as-usual by preventing important shareholder proposals from achieving majority votes — despite BlackRock previously calling upon investors to wake up to the dangers of climate change.
Regardless, responsible shareholders will not stop pressing fossil-fuel based companies like Dominion for the needed reforms to ensure long-term sustainability and value.
Ahead of this week’s meeting, Majority Action issued an advisory to Dominion shareholders to vote for independent oversight of the board of directors, citing multiple concerns about the qualifications of the board’s leadership as well as corporate governance practices around the long-term risks related to climate change, including whether the board is capable of providing necessary independent oversight over CEO/Chair Thomas Farrell to manage these risks to shareholders.
Proxy advisor Institutional Shareholder Services also recommended that investors support this proposal for an independent chair of the Dominion board.
Through our Climate Majority Project, we also partnered with New York City Comptroller to launch a $1.8 trillion investor coalition calling for top US utilities including Dominion to commit this year to full decarbonization by 2050 at the latest. Nearly 130,000 grassroots activists have also called on BlackRock and Vanguard, Dominion’s largest investors, to support the proposal for independent oversight and other critical climate shareholder votes this season.
In response to this pressure, Dominion’s recently announced emissions reduction targets. However, according to research from the Energy and Policy Institute, these targets actually represent a significant slowdown of its decarbonization rate. According to Dominion’s data, the company reduced its carbon emissions at an average rate of 4% per year from 2005 to 2017, mostly by retiring coal plants in the later years of that period. That reduction rate plummets to 1% per year between now and 2030 under Dominion’s new goal.
In addition, Dominion faces significant community backlash against its construction of the Atlantic Coast Pipeline, with concerns that the siting of the Union Hill-Atlantic Coast Pipeline compressor is a controversial example of environmental racism given its potential to cause disproportionate harm from toxic air pollution on communities of color in Union Hill, Virginia. Analysts from the Institute for Energy Economics and Financial Analysis have warned that the financial viability of the Atlantic Coast Pipeline depends on unrealistic expectations of demand for natural gas.
We also raised concerns about whether the board is currently capable of providing necessary independent oversight over CEO/Chair Thomas Farrell to manage these business and shareholder risks.
The four longest serving directors other than Farrell control key committee chair positions on the board. The lead independent director, John Harris, has served on the Dominion board since 1999 and chairs its powerful Corporate Governance and Nominating committee. His only other recent public company board experience was at Piedmont Gas, which is also invested in the controversial Atlantic Coast Pipeline venture. Two of those four committee chairs, director Helen Dragas and Mark Kington, have no outside experience serving on boards or in executive leadership of publicly-traded companies — though both led the University of Virginia Board of Visitors through a failed attempt to remove UVA’s president, resulting to Kingston’s resignation.
For all of these reasons and more, Farrell, Harris, Dragas, Kington and the rest of the board should understandably be alarmed by the wave of shareholder concern that is continuing to build against their lack of leadership. We’ll see if BlackRock and Vanguard join that demand for accountability and reforms to protect long-term value creation.
