December 15, 2021

Warren Calls on SEC to Investigate Whether Giant Oil Firms are Misleading Investors and the Public on Executive Pay

Corporations are basing executives bonuses on flawed climate and environment metrics that pay out even when they cause severe environmental damage

Senator Warren’s Climate Risk Disclosure Act of 2021 would reduce the chances of environmental and financial catastrophe by requiring public companies to disclose more information about their exposure to climate-related risks

Text of Letter (PDF)

Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.) sent a letter to Securities and Exchange Commission (SEC) Chairman Gary Gensler asking the SEC to investigate whether giant corporations — including Marathon Petroleum, Chevron, and Occidental Petroleum — may be misleading investors and the public about their executive compensation by using loophole-ridden environmental, social, and governance (ESG) metrics tied to CEO pay while continuing to cause, and profit off of, environmental destruction. 

“On October 10, 2021, The Washington Post reported that many corporations that ostensibly tied executive compensation to climate goals, including fossil fuel companies like Marathon Petroleum, Chevron, and Occidental Petroleum, were using easily manipulated metrics and shifting goalposts that guaranteed high bonuses for executives even when the corporations caused severe environmental damage. These potentially deceptive environmental, social, and governance (ESG) metrics pose a serious problem: they have the potential to mislead investors and the public on the terms and conditions under which executive bonuses are paid to top company officials. I am requesting that the Securities and Exchange Commission (SEC) investigate this matter,” wrote Senator Warren.

Corporations like Marathon and Chevron use ESG metrics in both proxy shareholder filings for the SEC and public statements to reinforce their image as environmentally friendly companies, even when they contribute to major environmental incidents. Marathon Petroleum, one of the “world’s most egregious fossil fuel lobbying companies preventing policy-based climate action,” paid its then-CEO $1.9 million between 2011 and 2020 for meeting environmental goals, awarding bonuses in nearly every year, even though a Marathon Petroleum pipeline released 1,400 barrels of diesel fuel into an Indiana creek in 2018. Chevron has awarded its CEO, Michael Wirth, bonuses for meeting environmental goals every year since 2018, shelling out $968,000 for meeting environmental, health, and safety goals despite Chevron’s poor record, including 9 flaring incidents in 2018 - its highest level in 12 years.

These corporations are the primary examples of companies using ESG metrics to reward their top executives even though they appear to be misleading investors and the public by failing to  meet strict environmental standards. If the environmentally friendly narratives sold by these corporations, and the promises that they would hold their top executives to stringent environmental quality standards are found by SEC to be deceptive or fraudulent, they would represent a violation of the Securities Act of 1933, which bars corporations from making “any untrue statement of a material fact or to omit to state a material fact.”

Earlier this year, Senator Warren and Representative Sean Casten (D-Ill.) introduced the Climate Risk Disclosure Act of 2021, legislation that would require every public company to disclose its greenhouse gas emissions, the total amount of fossil-fuel related assets it owns or manages, and its risk management strategies for the risks posed by the climate crisis. 

“I am a strong supporter of providing investors and the public with climate-related disclosures and using the SEC as a valuable tool to increase climate accountability,” Senator Warren continued. “The SEC’s increased focus on ESG-related misconduct is a positive development, but the SEC must act to ensure that easily manipulated ESG metrics for executive compensation do not undermine investor protection.”

Senator Warren is requesting responses to her letter no later than January 7, 2022.