follow the rules from Reuters

By Ross Kerber and Svea Herbst-Bayliss

NEW YORK (Reuters) – Exxon CEO Darren Woods had words of caution on Tuesday for activist shareholders considering imitating those who filed a climate-related shareholder proposal at the largest U.S. oil company .

Exxon (NYSE: ) sued investors earlier this year, and Woods has indicated the company is ready to repeat the exercise against others he said could “abuse” the proxy proposal process.

“Hopefully we won’t have to use this action in the future. But if we find that people continue to abuse the process, we will hold them to the rules,” Woods said.

Woods spoke via video link at a meeting of the Council of Institutional Investors in New York, which represents pension funds and other institutional investors.

Exxon sued activists Follow This and Arjuna Capital in January after they submitted a climate-related resolution to the company’s annual meeting in May. A judge ultimately dismissed the suit in June, but only after the defendants withdrew their motion and promised not to file a similar one again or help others do so.

The lawsuit raised fears that it would diminish shareholder influence. Woods said there is still a wide door for investors to make suggestions to companies.

But the proxy system, while well-intentioned, can be abused under current guidance from regulators, Woods said. He said established protocols must be followed, including the use of courts.

“We are not opposed to the shareholder proposal process,” Woods said, but added that “We will insist that it be used appropriately.”

Woods faced skeptics in the audience, including fund managers who, because of the lawsuit, voted against Woods and other Exxon executives at the company’s annual meeting in May. However, Woods and other Exxon executives ran for re-election with the support of major investors BlackRock (NYSE: ) and Vanguard, recent filings showed.

Some of the critical votes came from the California Public Employees Retirement System, the largest pension fund in the US. Its CEO, Marcie Frost, said via email after the event that “We hope the issue will be resolved. CalPERS believes that all shareholders have the right to be heard, whether or not they agree with the actions of a company’s leaders.”

Sanford Lewis, a lawyer who represented Arjuna and other shareholder activists, said Exxon’s lawsuit could have a lasting effect on future proxy seasons.

“Small shareholders will think twice” about filing resolutions, Lewis said at the event after Woods finished speaking.

Jessica Wirth Strine, managing partner of Jasper Street, a corporate governance consulting firm, said that while Woods took a firm stance, his overall tone was more conciliatory than at Exxon’s annual meeting, where Woods criticized the need for resolutions that appeared on his proxy.

“At the annual meeting he took more pictures. He seemed more accommodating today,” she said.

Before addressing the lawsuit, Woods also spoke about Exxon’s climate outlook. He said the world must balance emissions concerns with the needs of a growing world population, with billions still working to lift themselves out of poverty.

The idea that the world needs to get off oil and gas misses “the real issue,” he said, which is that the world needs to get off carbon emissions.

A system that accounts for carbon emissions would be a major help, he said.

Late Tuesday afternoon, conference organizers said staff and security prevented eight protesters from entering the ballroom during Woods’ appearance.

During the altercation, a member of council staff was knocked down “as the troublemakers tried to get through the registration area. The police and our security personnel blocked their entrance to the ballroom and they were removed from the premises. Our staff were not injured during the incident,” organizers said via email.

At Monday’s conference, climate change protesters took the stage and briefly interrupted New York City Comptroller Brad Lander’s remarks.