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Devon finds common ground with dissident shareholders ahead of annual meeting

Facing five separate shareholder proposals on topics ranging from lobbying expenditures to hydraulic fracturing, shale driller Devon Energy Corp. relied on a new steering committee focused on environmental and social issues to reach agreements to provide additional disclosures sought by dissident shareholders and to avoid proxy votes at the company's June 6 annual meeting.

The agreements to end certain lobbying alliances and disclose more environmental information earned praise from the dissident shareholders, a diverse group ranging from the Unitarian Universalist Association to the public employee pension fund of Rhode Island.

After three resolutions on climate change and lobbying garnered a significant number of votes at Devon's 2017 annual meeting — 41% of shareholders voted for a measure calling for Devon to publish a report assessing the impact of climate change on the company's operations — Devon created a new, four-member board committee in December 2017 to advise management on environmental, social and governance issues.

Devon earned high marks for its willingness to talk from the religious, environmental and financial groups that filed for 2018 proxy votes, even though the company failed to reach complete agreement on every issue.

"We had a series of good faith and productive discussions," said Randall Rice, the deputy director of shareholder engagement for Rhode Island's general treasurer, Seth Magaziner. Magaziner chairs the board that manages the $8 billion retirement fund for Rhode Island's public employees.

After negotiating with Rhode Island, Devon added a "Political Activity and Lobbying Report" to its corporate social responsibility website late in 2017, detailing where company money was spent for advocacy efforts. Devon pledged to issue the report annually and Rhode Island withdrew its proxy motion.

"We didn't get all the transparency we wanted," Rice said, "but Devon took important first steps towards transparency."

"We also had some good conversation with them," Universalist Association CFO Tim Brennan said. "In the end, the company made improvements in their disclosure and committed to ongoing dialogue."

Miller Howard Investments Inc. withdrew its proposal that Devon publish the details of its hydraulic fracturing practices after Devon agreed to disclose information ranging from freshwater use to the impact on local communities, Miller Howard COO Luan Jenifer said.

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George Gund Foundation Executive Director David Abbott said his organization agreed to withdraw its proposal when Devon committed to undertake an assessment this year that it had requested. "That assessment will analyze the impacts on the company of a world in which demand drops because of restrictions resulting from efforts to limit global warming to 2 degrees Celsius or less," Abbott said.

"This agreement emerged from conversations with Devon corporate officials over a few months, and I will note that those conversations were uniformly cordial and productive," Abbott said. "We hope the process of developing the assessment will be likewise, but we reserved our right to refile the resolution next year if the process or the results are unsatisfactory."

Things went well from the point of view of Devon officials. "Company officials engaged with several proponents and co-filers to discuss the issues they desired to present for consideration," Devon Director of Corporate Communications John Porreto said. "In some cases, a proposal converged with our pre-existing activities or shift in approach on certain issues, which helped satisfy a proponent's request. This work has been primarily overseen by the company's ESG Steering Committee."

By settling the shareholder requests prior to the annual meeting, Devon avoided being second-guessed by shareholders as happened to pipeline giant Kinder Morgan at its May 9 annual meeting. Shareholders overrode Kinder Morgan Inc.'s board with 59% voting in favor of resolutions calling for more environmental disclosures and a plan for operating in a carbon–constrained world.

The next week, shareholders at oil and gas drillers Anadarko Petroleum Corp. and Range Resources Corp. voted in favor of environmental measures that management opposed. Shale gas driller Chesapeake Energy Corp. settled with the New York State comptroller and the Unitarians over climate change-related disclosures and lobbying activity.