Big investors and proxy advisers, including the manager of Norway’s trillion-dollar sovereign wealth fund, Norges Bank Investment Management (NBIM), are backing three worker rights proposals at Tesla today, including one calling on the electric carmaker to commit not to interfere with employee efforts to join trade unions.
Filed by SOC Investment Group, the US-based investment firm which helped pioneer racial equity audit proposals, and Canadian responsible investment body SHARE, the unionisation proposal asks Tesla to “adopt and publicly disclose a policy on its commitment to respect the rights to freedom of association and collective bargaining in its operations”.
Also on the ballot is a resolution calling on Tesla to report on the impacts of its use of mandatory arbitration – which requires employees to settle claims with the company rather than through courts – and one asking the EV maker to annually report on its efforts to prevent harassment and discrimination against “protected classes of employees”.
Californian public pension giant CalSTRS and the Office of the New York City Comptroller, which oversees the city’s five pension pots, have also thrown their weight behind the three proposals, as have influential proxy advisers ISS and Glass Lewis.
Their backing is likely to buoy support for the resolutions – however, given that Tesla CEO Elon Musk owns around 15 percent of the company’s shares, the threshold needed to secure a majority and pass is particularly high.
The proposal on freedom of association highlighted the “overwhelming negative media coverage in the US and internationally” on the issue, which documented allegations “of several anti-union tactics, including intimidation strategies, retaliation actions and monitoring systems”.
It also cited the National Labor Relations Board decision in March last year to uphold a 2019 ruling that Tesla illegally fired a worker involved in union organising and that Musk had illegally threatened workers regarding unionisation.
Tesla’s board is opposing the resolution. In the response in its proxy statement, it stated: “We have more than 100,000 employees worldwide, and we comply with all applicable local laws related to freedom of association and collective bargaining, and respect internationally recognised human rights in all the areas we operate.”
In its rationale for supporting the proposal on unionisation, ISS highlighted that – in contrast to its non-unionised peers – Tesla does not have a policy on respecting freedom of association and collective bargaining for its operations.
It concluded: “The criteria laid out in the proposed policy may benefit shareholders by improving the company’s management of freedom of association and collective bargaining issues, while still offering the company enough flexibility to constructively engage on these issues.”
In May, financial services firm S&P Global dropped Tesla from its S&P 500 ESG Index, in part due to an analysis which “identified two separate events centred around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory, as well as its handling of the NHTSA [National Highway Traffic Safety Administration] investigation after multiple deaths and injuries were linked to its autopilot vehicles”.
“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” S&P concluded.
New York State Common Retirement Fund is behind the anti-harassment proposal at Tesla, while activist investor Nia Impact Capital filed the one on mandatory arbitration.
In its advice on New York State’s proposal, Glass Lewis noted that Tesla “has faced more than 40 lawsuits [in the last five years] from former and current employees alleging that it fosters a sexist and racist work culture”.
Nia Impact Capital has already had significant success this year with worker-focused votes, achieving majority support for its resolutions on corporate use of concealment clauses – non-disclosure agreements with staff – at IBM and Apple.
Worker right issues appear to be rising up investors’ agenda this year, with two resolutions on disclosure of race and gender-based pay gaps securing majority support at Disney (60 percent) and Lowe’s (58 percent).
Kristin Hull, founder and CEO of Nia Impact Capital, shared her speech for Tesla’s AGM with Responsible Investor. In it, she states: “Mandatory arbitration of employee claims may allow bad corporate behaviour to continue, hidden from other employees and investors. Bias, discrimination and harassment in the workplace create uncompensated risks for investors and invite legal, brand, financial, and human capital risks to Tesla.”
Other ESG-focused proposals going to the vote at Tesla today cover climate lobbying, board diversity, child labour in supply chains, and water risks.
ISS and Glass Lewis are supporting all except for the ones on board diversity and child labour, a pattern echoed by CalSTRS and NBIM. New York City’s funds, by contrast, planned to support the child labour proposal and abstain on the board diversity one.
On the child labour resolution, ISS stated that Tesla currently provides “sufficient disclosure…specifically with respect to its batteries and the potential risks of child labour.”
It added that it is unclear how “additional reporting would be substantially different from the company’s current disclosures”.