(Bloomberg) -- Exxon Mobil Corp. may set a dangerous precedent by suing shareholders over a climate-related proposal, according to the head of the California Public Employees’ Retirement System, the largest public pension in the US.

The lawsuit “has far more implications than just climate,” Calpers Chief Executive Officer Marcie Frost said in a Bloomberg Television on Wednesday, the same day Exxon held its annual shareholder meeting. “It could be say on pay, it could be independence of board governors, and governance. This could be a very risky lawsuit to continue with if you’re an owner.”

At the meeting, Calpers voted against all sitting members of Exxon’s board of directors, including Chief Executive Officer Darren Woods. The pension has been publicly sparring with Exxon after the oil giant sued two climate-focused investors earlier this year, alleging they abused the shareholder-proposal process.

“We did not take this vote lightly, but the significance of what’s at stake can’t be understated,” Frost said, calling the suit “an absolute governance failure” by the oil giant’s board. “Exxon Mobil’s lawsuit threatens to silence shareholders everywhere by stripping away both their rights and their role in improving a company’s bottom line.”

Woods and the Calpers CEO met directly in recent weeks to discuss their views, and Frost asked Exxon to withdraw its lawsuit, she said. But by the end of a “very thorough discussion,” it was obvious the two sides wouldn’t reach an agreement on the litigation, Frost said.

Exxon opted to continue the legal proceedings even after the shareholders — investment firm Arjuna Capital and Amsterdam-based nonprofit Follow This — withdrew their proposals. Exxon asked the courts to provide more clarity on how the Securities and Exchange Commission interprets its own rules.

Calpers and other environmentally minded shareholders say Exxon’s suits will have a chilling effect on investors looking to raise legitimate concerns about climate change and corporate governance. But Exxon says allowing proposals that have repeatedly failed undermines the process. The company said the sponsors of such proposals are activists seeking publicity. 

“It’s unclear why Calpers is spending their time and energy defending the abuse of a shareholder process by proponents who have publicly stated they have no interest in creating shareholder value,” Exxon said in an earlier statement. Those proponents are attempting “to silence the voices of up to 90% of our voting shareholders who have rejected the proposal twice.”

Calpers, which manages roughly $490 billion, owns about 0.2% of Exxon stock, according to data compiled by Bloomberg. 

--With assistance from Kevin Crowley and Matthew Miller.

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