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Chevron: Time to Change Course
In July 2012, after a 19 year long fiercely-fought and expensive lawsuit about the dumping of toxic waste in Ecuador, a USD $19.04 billion judgement was executed on Chevron Corporation (Chevron). Despite having agreed to abide by the decision of the Ecuador courts when successfully applying for the transfer of the case from New York - where it was originally filed - Chevron has, under the leadership of CEO and Chairman John Watson, refused to comply with the judgement.
Chevron's continued refusal to comply with the judgement and John Watson's emotive statement at the 2012 AGM that the company will resist the judgement "until hell freezes over" together with the company's antagonistic labelling of the Ecuadorian claimants as "criminals" has resulted in Chevron facing sustained media and civil society criticism and reputation damage.
The Ecuadorian claimants have now commenced enforcement actions in overseas jurisdictions, a move which a representative of Chevron acknowledged would, if successful, "cause significant, irreparable damage to Chevron".
Chevron's aggressive and much criticised management of the Ecuadorian case together with allegations of inadequate disclosure of the risks stemming from the case has highlighted a number of long-standing governance issues at the company which many believe are contributing to an unwise refusal to re-evaluate strategy. These include a lack of environmental expertise among independent directors, the combined role of CEO and Chairman, and restrictions on shareholders calling special meetings.
Chevron's repeated dismissal of valid shareholder concerns highlights the importance of international shareholders engaging with the company about these issues and supporting shareholder proposals to improve governance.