Tesla Faces Pressure Campaign From Activist Shareholders
Tesla investors on Thursday will vote on several proposals by activist investors that seek to pressure the company and its chief executive, Elon Musk, to change the way they treat workers, add more independent voices to the automaker’s board and disclose more about how it lobbies government officials.
Tesla is widely credited with pioneering the market for electric cars and putting the auto industry on a path to greatly reduce its greenhouse gas emissions. But the company has been accused of racial discrimination at its California factory, union busting and for having a board stacked with people who are close to Mr. Musk. In May, the S&P 500 ESG Index, removed Tesla from a listing of companies that meet certain environmental, social and governance standards.
“No one doubts the seismic historic achievements that Tesla and Musk have made,” said Daniel Ives, an analyst at Wedbush Securities.
But he said investors are concerned about Mr. Musk’s aborted bid for Twitter, growing competition in the electric vehicle market, and production problems at Tesla. “Musk has had a magic carpet ride but you’re starting to see some frustration among investors,” Mr. Ives said.
In recent years, activist shareholders have been trying harder to change the behavior of Tesla and other companies, in some cases with support from big investors like BlackRock and Vanguard. But that movement has led to a backlash by conservative lawmakers and some corporate executives. Mr. Musk in May called E.S.G. “an outrageous scam.”
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As the overall auto market stagnates, the popularity of battery-powered cars is soaring worldwide.
Activist investor groups have submitted eight nonbinding proposals that will be voted on at Tesla’s annual meeting Thursday afternoon at the company’s factory in Austin, Texas. Last year, there were five such proposals.
Tesla management opposes all eight resolutions. A proposal by the board for a 3-to-1 stock split is expected to win broad support from shareholders, and will make Tesla shares, which currently trade at more than $900, easier for individuals and employees to buy.
The shareholder resolutions include a measure that would ask Tesla to disclose more information about whether its government lobbying aligns with efforts to limit climate change. “Tesla is a notable laggard when it comes to environmental, social, and governance-related disclosure,” said the resolution, which was submitted by the Nathan Cummings Foundation and the Green Century Equity Fund.
Other resolutions asked Tesla make it easier for shareholders to nominate candidates for the board, give employees more leeway to pursue complaints in court and more closely monitor whether cobalt used in its batteries is mined using child labor.
The New York State Common Retirement Fund, which manages the pension plan for state employees, filed a resolution asking management to file an annual report on its efforts to prevent racial discrimination and sexual harassment. The California Department of Fair Employment and Housing sued Tesla in February after receiving what it said were hundreds of complaints from employees who said they were subject to racial slurs, assigned physically arduous work and denied transfers and promotions
In a response to the resolution, Tesla said it did “not tolerate discrimination, harassment, retaliation or any mistreatment of employees in the workplace or work-related situations.”
Tesla maintains that its mission is “to accelerate the world’s transition to sustainable energy.” But shareholders have become increasingly critical of other aspects of the company’s and Mr. Musk’s behavior.
Several shareholder proposals were endorsed by Institutional Shareholder Services, which advises large investors on how to vote at annual meetings. One proposal supported by the firm, but opposed by Tesla management, would allow shareholders to nominate alternate candidates to the board.
Tesla has often faced criticism that its board, whose members include Kimbal Musk, Elon Musk’s brother, has been unable to restrain the chief executive from doing or saying things that damage the automaker.
In a response, Tesla said it has added more independent directors in recent years and that allowing shareholders to nominate members “could be exploited by corporate raiders.”
Shareholder proposals have received significant support in the past. Last year, 46 percent of shareholders voted in favor of a proposal challenging a Tesla policy that requires employees to resolve complaints of discrimination and sexual harassment before an arbitrator rather than in court. The resolution was filed by Nia Impact Capital in Oakland, Calif.
Last year the New York chapter of the Sisters of the Good Shepherd filed a resolution asking Tesla to disclose the human rights impact of its operations.
Kristin Hull, the chief executive of Nia Impact Capital, said that activist investment firms like hers were taking the lead in confronting Tesla management while big institutional shareholders, with far more clout, had stayed in the background.
“It’s the smaller asset managers and women-led asset managers and the nuns that are leading this,” Ms. Hull said. The big shareholders, she said, “just have to pick up the phone.”