ExxonMobil’s proposal to change its domicile from New Jersey to Texas offers an important test of a principle that, in a forthcoming article, Corporate Disenfranchisement, Sergio Alberto Gramitto Ricci and I call the Leopard Paradigm. The paradigm holds that, when markets, legislatures, the public, or others force reforms to diffuse corporate power, those with the power— management or controlling shareholders, for example—capture the reforms while preserving the appearance of participatory governance. In the intense debate over ExxonMobil’s redomiciliation, which goes to a shareholder vote on May 27, proponents of the company’s move have criticized the Leopard Paradigm but failed to address its substance. This matters because ExxonMobil is doing exactly what the Leopard Paradigm predicts. It is changing its corporate structure so that the board not only maintains but increases its control while disguising the change as an exercise of shareholder voice.
The Leopard Paradigm’s key insight is that the most meaningful comparison is within constituencies rather than just between them. The question is not whether shareholders or directors should prevail, but which shareholders and which directors actually prevail. The answer is that those with the practical capacity to exercise formal rights will prevail regardless of how those rights are nominally allocated. Sometimes this happens through a direct response to a particular reform. Other times it happens through gradual structural change that makes formal rights effectively impossible to exercise. Either way, formal entitlements remain on paper while the practical power stays where it already was.
The current exchange over ExxonMobil’s redomiciliation makes the pattern visible. On May 4, New York City Comptroller Mark Levine filed a Notice of Exempt Solicitation urging shareholders to reject the redomiciliation and support his shareholder proposal on the Voluntary Retail Voting Program. The comptroller’s letter relied substantially on my work, including January 6 and March 20 Bloomberg OpEds, a Law360 OpEd, and Corporate Disenfranchisement. ExxonMobil’s responsive proxy materials, filed May 12, name me seven times and criticize my work while failing to engage with its substance. These criticisms are mere distractions that ignore how Exxon’s efforts to change its domicile are an important test of the Leopard Paradigm.
If the redomiciliation is approved on May 27, and if the post-reincorporation board ultimately amends the company’s bylaws to include any of the pro-management laws that Texas recently enacted, ExxonMobil will unwittingly prove the accuracy of the Leopard Paradigm. The shareholder engagement that led to the current board, including the directors appointed after the 2021 activist campaign by Engine No. 1, will have been answered with a further restriction on shareholder power.
ExxonMobil’s proxy does not say whether the board will adopt the thresholds authorized by Texas SB 1057 and SB 29. SB 1057 (Tex. Bus. Orgs. Code § 21.373) allows Texas corporations to adopt a bylaw requiring shareholders to hold the lesser of $1 million in market value or 3% of voting shares, and to solicit holders of 67% of shares, before submitting a proposal. SB 29 (Tex. Bus. Orgs. Code § 21.552(a)(3)) allows up to a 3% ownership threshold for derivative standing. The proxy also does not commit the board to refrain from adopting these thresholds in the future. ExxonMobil has not responded substantively on this point. The silence has a straightforward explanation. A company subject to Rule 14a-9 cannot make casual representations about future board action. A representation in proxy materials that the board will not amend the bylaws to impose those thresholds would expose the company to fraud liability under federal law.
Shareholders nonetheless want to know whether the redomiciliation signals restrictions to come, but ExxonMobil probably cannot answer directly without risking being sued. So the company directed investors to a May 5 post on this blog, in which my colleague Shane Goodwin states that ExxonMobil is subject to federal securities laws. Goodwin is correct. That is probably why the company is silent about the future and why it prefers that a third party not subject to Rule 14a-9 make the case for it. Goodwin is incorrect, however, that ExxonMobil has made forward-looking promises. The company has carefully avoided promising anything beyond the redomiciliation itself.
Goodwin argues that New Jersey already permits the same restrictions as Texas because nothing in New Jersey law prohibits such restrictions and that every board may amend bylaws. Both are accurate but unresponsive. The question is whether this board, in this proxy, has committed not to adopt the Texas provisions after redomiciliation. It has not. And Texas differs materially from New Jersey. It codifies the thresholds, supplies a statutory business judgment rule under § 21.419, and now has the Northern District of Texas’s decision in Gusinsky v. Reynolds confirming the validity of SB 29’s 3% threshold for derivative suits. New Jersey has none of that.
ExxonMobil’s silence is the point. The company has not engaged with the substance of my analysis of the Voluntary Retail Voting Program. It has not refuted the structural account of how the SB 1057 and SB 29 thresholds will operate in practice. And it has not committed that the post-reincorporation board will decline to adopt them. The omissions seem deliberate. They preserve the option to do later, when the redomiciliation vote is done and attention has moved elsewhere, what the company seems unwilling to foreclose now.
Goodwin’s coalition arithmetic shows that thousands of 13F filers individually clear the $1 million prong of SB 1057, and that more than 15,000 two-firm combinations clear the 3% prong of SB 29. I do not contest the arithmetic; I contest the inference.
The Leopard Paradigm argument is not that coordination is mathematically impossible. It is about who in practice can clear the threshold. Most individual retail shareholders cannot clear $1 million or 3% on their own. They must coordinate among themselves or with the large institutions whose holdings can surpass it.
Goodwin points to § 21.373(d), which requires that the proxy statement tell shareholders how to submit proposals (presumably for the following year, which already occurs under federal law) and how to contact other shareholders to combine holdings and meet the threshold. That is the statute’s answer to the coordination problem the increased threshold creates. Practically, the only mechanism that a company can point shareholders to is a state-law inspection right to obtain a shareholder list, which names brokers and nominees rather than the shareholders themselves. A duty to describe an unworkable path is not an answer to the coordination problem the threshold creates.
The practical effect is to route every formal shareholder proposal through institutional investors that can satisfy the threshold. Section 21.373(d) exemplifies the gap between rights and power that defines the Leopard Paradigm. The right to submit proposals remains with retail shareholders. The power to submit them does not.
Goodwin invokes Engine No. 1’s 2021 campaign to argue that the board recommending the redomiciliation is the board that resulted from shareholder engagement. Engine No. 1 held approximately 0.02% of ExxonMobil shares and rallied institutional investors to obtain three seats on the Exxon board. This reveals two things. First, this is the Leopard Paradigm in practice: empowerment in one round followed by adjustment that constrains the next. Second, as we detail in our article, the retail investors did not play a large role in Engine No. 1’s success. That seems precisely what Exxon has in mind with its Voluntary Investor Voting Program, which Goodwin does not address. If Exxon enrolls enough retail investors in the option to vote with directors on every item, the program functions as a poison pill against future activist campaigns.
The ExxonMobil redomiciliation is one instance of a broader pattern. In earlier work with Gramitto Ricci, here and here, we describe how mobile investing platforms, online communities, and the arrival of Millennial and GenZ investors are eroding the structural conditions that once produced retail investors apathy. Active engagement is taking the place of apathy.
As engagement by retail investors becomes a realistic prospect, the architecture of corporate law is being shaped to constrain it before it fully takes hold. SB 1057 and SB 29 are central to that response. They permit Texas corporations to set ownership thresholds for shareholder proposals and derivative suits at levels no realistic coalition of retail investors could reach without routing through institutional gatekeepers. Our earlier work captured the empowerment round. Corporate Disenfranchisement captures the adjustment round that follows. Goodwin’s reading of these projects as inconsistent runs the relationship backwards. Evidence that retail investors can coordinate at scale is what makes the disenfranchisement response intelligible, not what undermines the disenfranchisement claim.
The test on May 27 will be whether the form of shareholder rights at one of the largest corporations in the world can be preserved while their substance is restructured. ExxonMobil cannot say in its own proxy whether the post-reincorporation board will impose the SB 1057 or SB 29 thresholds without risking accusations of fraud. It has directed investors to a third party not subject to those accusations. What the company has done, and what it has chosen not to do, is what makes the redomiciliation the ultimate test of the Leopard Paradigm.
Christina M. Sautter is associate dean for research and professor of law at Southern Methodist University (SMU)’s Dedman School of Law and co-founder, secretary, and a board director of the Center for Retail Investors & Corporate Inclusion.