Did you attend the 2022 Tesla Shareholders Meeting this week? I did it remotely. To be honest, I have never before accepted my responsibility as a shareholder of any company I have invested in to attend such a shareholder meeting. I found it very strange, very disturbing and an example of the power of big business to influence audiences.
Like many small investors, I was happy when Tesla stock went up and worried when it went down. The January 3 high of $1,199 made me feel smart and insightful about clean energy trends. Its May 24 bottom of $628 was clearly bearish. My interest in Tesla made me want to attend this year’s annual shareholder meeting and vote early on the 5 board proposals (1–5) and 8 shareholder proposals (6–13) listed in plain language below. Tesla management opposed all 8 shareholder resolutions.
- Elect two Class III directors to serve three-year terms. Board: FOR
- Reduce director term to two years. Board: FOR
- Eliminate applicable majority requirements. Board: FOR
- Increase the number of authorized shares of common stock by 4,000,000,000 shares (one share divided into three). Board: FOR
- Appoint Pricewaterhouse Coopers LLP as Tesla’s independent registered public accounting firm. Board: FOR
- Proxy access. Board: AGAINST
- Annual report on efforts to combat harassment and discrimination. Board: AGAINST
- Annual report on board diversity. Board: AGAINST
- Report on employee arbitration. Board: AGAINST
- Report on lobbying. Board: AGAINST
- Freedom of association and adoption of collective bargaining policies. Board: AGAINST
- Supplementary report on child labour. Board: AGAINST
- Additional report on water risk. Board: AGAINST
Corporations routinely oppose shareholder proposals, believing that their insider knowledge dominates decisions about the overall health of operations. According to preliminary estimates, voting on 3 of the 13 proposals at Tesla’s 2022 Shareholders’ Meeting did not follow the board’s recommendations.
Over board objection, shareholders passed an advisory proposal that would increase the ability of investors to appoint directors.
Two of the board’s proposals – reducing director tenure to 2 years and eliminating majority requirements – did not receive super preference (sarcastically) must be passed.
Investors approved the Offer 4 three-for-one stock split. While the split doesn’t change the way Tesla does business, the idea behind the split is that a publicly traded company can attract smaller investors. share is low.
The proposal, which asked directors to allow large and long-standing shareholders or groups holding at least 3% of the shares to nominate directors, overcame objections from the board. The board has previously said such a proposal could create opportunities for special interests to bend Tesla’s plans.
The company did not announce the vote count Thursday at the company’s plant in Austin, Texas. Those numbers came in an SEC filing on Friday.
A Deeper Challenge to Failed Tesla Activist Shareholder Proposals
“Without you, we wouldn’t be where we are,” Robyn Denholm began. A venture capitalist, Denholm has served as a director of Tesla since August 2014 and as chairman since November 2018. He spoke proudly of Tesla’s achievements in his 8th year as a board director. “Good governance,” he noted, “is a sign of stability.” Assuring the audience that the board respects its shareholders, he announced the creation of a soon-to-be-launched shareholder portal for company information and updates.
Stockholder proposals took center stage after Denholm’s remarks, with designated stockholder representatives given 3 minutes each to speak in favor of the proposal.
Failed shareholder proposals include:
- Asks the company to report annually on its efforts to prevent racial discrimination and sexual harassment (7): A shareholder representative spoke of hundreds of Tesla California workers of color who faced racial slurs, disparate treatment and disinterest from the Human Resources Department. According to the speaker, hidden arbitration can create legal and financial risks within human capital. “Racism has nothing to do” at Tesla, the speaker said.
- Instilling better aligned gender diversity on the Tesla board (8): The shareholder activist said that research suggests that greater gender diversity leads to better shareholder value, and reminded everyone that Tesla’s board is disproportionately male.
- Evaluating and reporting direct lobbying and influence activities (10): Representative, the company receives 0/70 for transparency disclosure. Although Tesla believes that information is readily available online through an internet search. “Tesla’s message seems to be ‘trust us,’ while other car companies have more lobbying statements,” the spokesman said.
- Affirming the right of workers to form a trade union (11): The sixth speaker spoke of due diligence on human rights and workers’ rights. The board’s indifference to workers’ rights is causing concern to shareholders, the speaker said. Tesla’s peers “clearly refer” to the right to freedom of association in connection with operations, but Tesla creates “uncertainty in the workforce” by not allowing freedom of association.
- More reports on children’s human rights: A shareholder activist demanding a public report by 2025 explained that cobalt mining in the Democratic Republic of Congo involves the exploitation of child labor, children “often forced to work for a few coins”. The result is that “poverty, injury and even death are a daily reality.” The speaker noted that Tesla is complicit in “aiding and abetting” the risks to children in the supply chain.
- Water risk report (13): A representative from As You Sow asked the board to focus more on drinking water and agriculture because Tesla uses significant amounts of water in its production, including in water-risk areas. Shareholders need a way to put Tesla’s water-based use and risk into perspective, the speaker said.
Tesla has a total of 1.04 billion shares outstanding, according to Nasdaq.
Tesla CEO Elon Musk often speaks of the social need to promote freedom of speech and robust debate about key issues. Elon Musk is Tesla’s largest individual shareholder, owning 163.58 million shares, or 15.79% of the stock. Musk’s celebrity reception at a shareholder meeting after voting on the proposals is over can have a powerful effect on the direction of the stock price.
Institutional investors with the largest stakes in Tesla include investment advisers and managers, banks, financial services firms and asset management companies. As a group, they make up the largest portion of Tesla’s stock and have a real impact on the stock price. As of July, institutional investors own 431 million or 42% of the stock.
Retail investors own 39.8% of the stock with 411 million shares, while company executives own 18.68% of the stock, or 193.5 million shares. Large investors can have a significant impact on the future performance of the company’s stock, which in turn can affect the adoption of social justice proposals, such as those presented at Tesla’s 2022 Shareholders’ Meeting.
The company believes that the sooner the world can stop relying on fossil fuels and move towards a zero-emissions future, the better. However, in May, Standard & Poor’s removed Tesla from the S&P 500 ESG Index, a list of companies that meet certain environmental, social and governance standards. Tesla’s mission is to accelerate the world’s transition to sustainable energy.
A small Tesla shareholder like me has very little influence on the decision making of a large corporation like Tesla. However, as activist investors, we can continue to push the company to rise to the better angels of its nature, to quote Abraham Lincoln.
When audience members listen and laugh at activist shareholder appeals, we can respond with dignity.
When Tesla takes a different look at child labor for cobalt, we can make the actions involved in supply chains transparent.
When labor is reduced to profit over human rights, we can speak out and remind other stakeholders that production methods can seek profit, but also instill justice, dignity and respect for people.
We can support Tesla to make a profit while reducing inequality and improving the quality of the social environment, which is the hallmark of a truly disruptive force for societal well-being.
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