The fight over climate in the boardroom has arrived at NRG Energy Inc., marking the collision of short-term activist interests against the longer-term views of major institutional owners in the generator.
New York City Comptroller Scott Stringer, on behalf of the city's public pension funds he oversees, urged shareholders to cast proxy votes against the election of Barry Smitherman, a former chairman of the Railroad Commission of Texas and the Public Utility Commission of Texas, to NRG's board of directors during the annual shareholder meeting on April 27.
The funds overseen by Stringer include the New York City Employees' Retirement System, Teachers' Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System, which collectively own more than 1.27 million common shares and associated proxy votes in NRG, according to the April 6 filing.
Stringer identified Smitherman as having described climate change as a "hoax" during a 2013 bid for Texas Attorney General, and separate instances where Smitherman voiced skepticism as to the relationship between greenhouse gas emissions and climate change.
"Barry Smitherman's view that climate change is a hoax disqualifies him from serving as a director at NRG," Stringer said in an April 7 statement. "His anti-science claims are both counterproductive in NRG's boardroom and send a demoralizing message to the company's employees."
NRG responded in an emailed statement: "NRG welcomes input from the New York City Pension Fund as we do with all our shareholders. Mr. Smitherman was appointed to the Board as part of the settlement with Elliot, and we support the vote in favor of Mr. Smitherman, and all of the director nominees, at the 2017 annual meeting. Mr. Smitherman is one of five members of the Board's Business Review Committee formed in February and the committee is working diligently on its assessment and potential recommendations to the Board. Any actions taken by our Board will be based on the long term best interests of all of the company's stockholders."
Mr. Smitherman did not respond to request for comment.
Stringer is no stranger to using the proxy power afforded to him by the city's pension funds. He credited the proxy access gained at ExxonMobil as a precursor to the energy goliath's ultimate appointment of climate specialist Susan Avery to its board in January 2017.
In his letter, Stringer questioned the abrupt formation of NRG's business review committee following the arrival of activist hedge fund Elliott Management Corp. and former TXU Corp. CEO C. John Wilder on behalf of Bluescape Energy Partners LLC in January.
"We appreciate that boards must weigh a variety of factors when deciding whether to settle with an activist," the letter said. "The NRG board, however, has not explained why it agreed to its settlement with Elliott/Bluescape."
Both Wilder and Smitherman maintain seats on the five-person business review committee, joining NRG President and CEO Mauricio Gutierrez and fellow board members Anne Schaumburg and Paul Holly.
Wilder, who heads the committee, has in recent years deferred from expressing his views on climate change publicly, but did negotiate to make climate stewardship a pillar of his departure from TXU, following a $45 billion private buyout of the Texas utility in 2007.
Stringer suggested the Elliott-Bluescape campaign to extract short-term value was at odds with the comptroller's long-term, passive view. The robust cost-cutting and asset sales that could result in a selldown of NRG's stake in NRG Yield Inc., the generator's primary renewable energy vehicle, could "jeopardize" NRG's strategy to create long-term value, Stringer added.
"Those who want a quick pay day are now on a collision course with the long-term interests of NRG. That's unacceptable — and that's why we are urging NRG shareowners to vote against Mr. Smitherman's election," Stringer stated.
Stringer also urged NRG shareholders to vote to approve disclosure of political spending, a proxy item that fell short of a simple majority with 49.4% approval in NRG's 2016 annual meeting.
The letter filed with the Securities and Exchange Commission now allows Stringer and his office to begin making their case to other NRG shareholders in the lead up to the April 27 meeting, the comptroller's office said.