Two prominent and influential proxy consulting firms are urging Tesla Inc. investors to vote against the re-election of two directors and recommend challenging the wishes of the company and voting on six of the eight shareholder proposals.
is facing several employee-related disputes and is caught in the spotlight on CEO Elon Musk as he struggles to get out of the deal he made to buy Twitter Inc. TWTR,
The electric car maker will hold its annual general meeting on Thursday afternoon, and some of the shareholder proposals are targeted at issues that the controversies have highlighted.
The successful proposal called for declassifying the council: reorganizing all council members into one class, with each director subject to election each year. Instead, Tesla proposes to reduce a director’s tenure from three years to two years instead of one.
“If our shareholders approve Proposal two at the 2022 Annual Meeting, the Board will subsequently be split into two classes with staggered two-year terms, with directors distributed as evenly as possible among them,” Tesla said in his proxy. .
Glass Lewis and the ISS called that answer insufficient, noting in their proxy research papers that Tesla did not address the shareholder vote on the declassification and does not provide a reason to ignore the will of most of its investors.
“We believe this is a failure on the part of the Nomination and Corporate Governance Committee to fulfill its obligations to shareholders,” Glass Lewis said in his report.
In opposition to Tesla’s recommendation to vote against all eight shareholder proposals, Glass Lewis and ISS are urging a yes on six of them:
Access by proxy to shareholders
Annual report on efforts against harassment and discrimination
Employee arbitration reporting
Adoption of a policy on freedom of association and collective bargaining
Additional report on water risk
The resolution calling for an annual report on harassment and discrimination efforts, filed by the New York State Controller, comes as Tesla is facing multiple employee and shareholder lawsuits for alleged discrimination. Tesla stated in his proxy that he does not tolerate “discrimination, harassment, retaliation or any mistreatment of employees in the workplace or work-related situations.”
See also: California sues Tesla on charges of discrimination and harassment
Glass Lewis notes in his proxy report that over the past five years Tesla has faced “more than 40 lawsuits from former and current employees claiming that it promotes a sexist and racist work culture.” He also noted that Musk is facing allegations of sexually assaulting a SpaceX employee, where he also serves as the CEO.
“We believe that failure to adequately address human capital management issues, including those discussed in this proposal, can have significant negative impacts on companies and their shareholders,” said Glass Lewis.
The ISS said Tesla is currently facing at least seven sexual harassment lawsuits, as well as racial discrimination allegations that include a California Department of Fair Construction and Employment lawsuit and an Equal Opportunities Commission investigation. of work.
“Investors would benefit from additional information to understand how the company is managing and mitigating associated risks,” ISS said in its proxy report.
Both consultancy firms cited employment-related claims against Tesla recommending investors to vote yes on a proposal, also submitted for the third time by Nia Impact Capital, to report on the impact of the company’s mandatory arbitration policies. In its proxy, Tesla said its “standard arbitration provision specifically states that parties are entitled to all remedies available in a court of law.”
Another employee shareholder proposal supported by Glass Lewis and ISS asks Tesla to adopt a policy on freedom of association and collective bargaining. Such a policy would codify the right of trade unions to organize in the company, where they have not been successful so far.
The company has a documented record of behaviors that discourage unionization. In one example, the National Labor Relations Board found Tesla engaging in anti-union behavior, including firing an employee for union activity. Additionally, a judge discovered a few years ago that Musk’s tweets about unionization violated labor laws.
Tesla stated in its proxy: “We comply with all applicable local laws relating to freedom of association and collective bargaining and respect internationally recognized human rights in all areas in which we operate.”
In an exemption solicitation notice in support of the proposal, the Shareholder Association for Research & Education said: “Compliance with local laws is not the same as respecting freedom of association, as many US states and jurisdictions limit the ability of workers to exercise these rights .”
“Given its operations and the significant controversies surrounding its business practices, we believe that adopting the required policy would benefit shareholders and provide important protections for the company’s employees,” Glass Lewis wrote.
Tesla did not return a request for comment.