NEW YORK, Sept 10 (Reuters) - Exxon CEO Darren Woods on

Tuesday had warning words for activist shareholders thinking to

emulate those who filed a climate-related shareholder proposal

at the largest U.S. oil company.

Exxon sued the investors early this year and Woods indicated

the company was ready to repeat the exercise against others he

said might "abuse" the proxy proposal process.

"We hope we don't have to use that action in the future. But

if we find people continue to abuse the process, we're going to

hold them to the rules," Woods said.

Woods spoke via video link to a meeting of the Council of

Institutional Investors in New York, which represents pension

funds and other institutional investors.

Exxon had sued activists Follow This and Arjuna Capital in

January after they filed a climate-related resolution for the

company's annual meeting in May. A judge ultimately dismissed

the suit in June, but only after the defendants withdrew their

resolution and promised not to resubmit a similar one or help

others do so.

The suit raised concerns it would diminish shareholders'

influence. Woods said there is a still wide door for investors

to make suggestions to companies.

But the proxy system, while well-intended, can be abused

under regulators' current guidance, said Woods. He said

established protocols, including using the courts, must be

followed.

"We are not opposed to the shareholder proposal process,"

Woods said, but added that "We will insist it is used

appropriately."

Woods faced skeptics in the audience including fund managers

who, because of the lawsuit, had voted against Woods and other

Exxon directors at the company's annual meeting in May.

Nonetheless, Woods and other Exxon directors cruised to

re-election with backing from big investors BlackRock ( BLK )

and Vanguard, recent filings showed.

Sanford Lewis, an attorney who has represented Arjuna and

other shareholder activists, said Exxon's suit could have a

lasting effect on future proxy seasons.

"Small shareholders are going to think twice" about whether

to file resolutions, Lewis said at the event, after Woods

finished speaking.

Before addressing the lawsuit, Woods also spoke about

Exxon's climate outlook. He said that the world needs to balance

its concerns for emissions with the needs of a growing world

population, with billions of people still working to climb out

of poverty.

The idea the world needs to get rid of oil and gas misses

the "true problem," he said, which is that the world needs to

get rid of carbon emissions.

A system to account for carbon emissions would be a major

help, he said.