Exxon Mobil Corp. CEO Darren Woods suffered one of the biggest setbacks of his career at the hands of a tiny activist investment firm established less than six months ago. At least two of the activist’s nominees won seats on Exxon’s board Wednesday, despite the chief executive officer’s vocal opposition and an all-hands-on-deck battle by the oil giant to defeat the insurgents.

A third seat may yet fall to activist Engine No. 1 when the final results from Exxon’s annual meeting are tallied. That would put Woods in the tricky position of leading a board that’s 25% under the control of outsiders. Last-minute efforts by Woods and his team to appease climate-conscious investors and rebuff Engine No. 1’s assault were to no avail.

“Darren Woods has come from a long line of CEOs that have been very straightforward: it’s our ball, it’s our bat and we’re going to do what we want,” said Mark Stoeckle, chief executive of Adams Express Co., which oversees $2.8 billion in assets. “When you’re the biggest and the baddest you can get away with that. But you have to change with the times. The messaging has been terrible.”

xon. It’s also unprecedented in the rarefied world of Big Oil, and a sign that institutional investors are increasingly willing to force corporate America to tackle climate change. That Engine No. 1, with just a 0.02% stake and no history of activism in oil and gas, could notch up even a partial victory against the Western world’s biggest crude producer shows that environmental concerns are resonating all the way to the top of the largest U.S. companies.

For Woods, who was listed as 56 years old in the company’s March proxy filing, the defeat is just the latest black mark since his elevation to CEO in 2017. Exxon underperformed peers for the first five years of his reign and in 2020 the shares cratered by 41% for the worst performance in 40 years. Under his leadership, the company also posted its first annual loss in decades and saw oil production slump to the lowest since the Mobil Corp. merger in 1999. Meanwhile, Exxon’s debt load ballooned as it borrowed to pay for dividends and drilling amid shrinking cash flow.

Wednesday’s vote was also striking because of the force with which Exxon battled the activist, which also criticized the company’s financial performance. Exxon refused to to meet with the nominees and Woods told shareholders earlier this month that voting for them would “derail our progress and jeopardize your dividend.” The company even went as far as to pledge, just 48 hours before the meeting, that it will add two new directors, including one with “climate experience.”

READ: Exxon Activist Battle Turns Climate Angst Into Referendum on CEO

“This historic vote represents a tipping point for companies unprepared for the global energy transition,” CalSTRS, which had supported Engine No. 1, said in a statement after the meeting. “While the ExxonMobil board election is the first of a large U.S. company to focus on the global energy transition, it will not be the last.”

In other corners of the commodities sector, shareholders this year have already shown frustration with executives’ reluctance to embrace tough environmental goals. On the same day that Exxon investors met, management at Chevron Corp. were rebuked by their shareholders who voted for a proposal to reduce emissions from the company’s customers. DuPont de Nemours Inc. recently suffered an 81% vote against management on plastic-pollution disclosures, while ConocoPhillips lost a contest on adopting more stringent emission targets.

READ: ‘Hidden Gem’ Oil, Gas Stocks Hold Their Own Amid Climate Uproar

Also on Wednesday, Royal Dutch Shell Plc was ordered by a Dutch court to slash its emissions harder and faster than planned, a ruling that may have consequences for the rest of the fossil fuel industry.

The successful Engine No. 1 nominees were Gregory Goff, former CEO of refiner Andeavor, and environmental scientist Kaisa Hietala. Earlier this month, Exxon described all four dissident nominees as “unqualified.” Eight Exxon nominees were elected and two board seats remain undecided; one or both of them could potentially go to the activist.

Sacrosanct Dividend

The result shows a clear dissatisfaction with Woods’ strategy, despite the stock’s rally this year, up more than 40% due to surging oil prices. The stock rose more than 1% after the vote was disclosed.

Woods, who retained his board seat, should be able to continue improving Exxon’s financial performance as cash flows recover, securing the S&P 500’s third-largest dividend and leaving behind 2020’s record loss. But the bigger question concerns Exxon’s energy-transition strategy, considered by many shareholders to be well behind those of its European peers.

Exxon’s environmental record and unwillingness to embrace the pivot away from fossil fuels quickly enough was a key criticism in the proxy campaign. Engine No. 1 was scathing in its assessment of Exxon’s long-term financial performance, calling it “a decade of value destruction.”

It remains to be seen how Exxon pivots, if at all, but the message from shareholders is clear: The status quo cannot continue.