AP7 Shines Light on Tesla Workers’ Rights

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    Stockholm (NordSIP) – Whilst Tesla is one of the world’s foremost leaders in carbon-free transportation, its CEO’s idiosyncracies and the company’s reputation for unsafe working conditions have shed a damning light on the company and caused controversies more than once.

    To address these concerns, and motivated by a feeling that Tesla executives have been unresponsive, investors have attempted to take steps to address these concerns. At the beginning of July, Swedish public pension fund AP7 joined forces with Nia Impact Capital to file a shareholder resolution at Tesla’s AGM to strengthen workers’ rights.

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    “AP7 has been in dialogue with Tesla for several years regarding concerns over workers’ rights. Given limited progress in those discussions AP7 has chosen to actively support this shareholder resolution which aims at strengthening employee rights and improving transparency on disputes such as discrimination and harassment,” says Charlotta Dawidowski Sydstrand, Head of ESG at AP7.

    Gaining Momentum?

    This is at least the third time that such a proposal has been presented by Nia Impact Capital since 2020. The proposal, which seeks to strengthen workers’ rights, gained 27% of votes in 2020 and 45% of votes in 2021.

    The resolution (Proposal #9) asks Tesla “ask the Board of Directors to oversee the preparation of a publicly-disclosed report on the impact of the use of mandatory arbitration on Tesla’s brand, employees and workplace culture. The report should evaluate the impact of Tesla’s current use of arbitration on the prevalence of harassment and discrimination in its workplace, on employees’ ability to seek redress, and on consumer perceptions of Tesla as an employer. The report should be prepared at reasonable cost and omit proprietary and personal information.”

    Tesla’s valuable brand would be harmed by an association with racist, sexist, or other discriminatory behaviors. Its future success also relies on its ability to innovate, and to implement those innovations effectively. For investors to have confidence that it will be able to do this well, Tesla must also have confidence that the company has effective human capital management systems, Nia Impact Investors writes in the Shareholder proposal.

    Opposition from Tesla’s Board

    Citing recent changes in US law, the board of Tesla recommends shareholders vote against AP7’s proposal. “The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders,” the board explains in its filing to the Securities Exchange Commission (SEC).

    “As with the similar proposal presented by this proponent at the 2020 and 2021 annual meetings of stockholders, both of which were rejected by Tesla’s stockholders, the proponent cites inaccurate and unsupported assertions regarding arbitration and its alleged impact on workplace conditions at Tesla,” the company’s board continues.

    “Much of the proposal has been obviated due to a recent change in the law. As the proponent recognizes, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act now prohibits employers from enforcing standard arbitration provisions for these types of claims that arise after the date of the law’s enactment. Tesla will fully comply with the new law and has already taken steps to amend the standard arbitration clause in its new hire agreement. Obviously, there is no need for Tesla to issue a report about the effects of arbitration on the existence of sexual harassment in the workplace when such claims will no longer be arbitrable, unless the employee so chooses,” Tesla’s board argues in its SEC filing.

    “The proponent incorrectly asserts that there is a connection between arbitration and workplace culture. Tesla has a zero-tolerance policy for harassment of any kind, and we have always disciplined and terminated employees who engage in misconduct, including those who use racial slurs or harass others in different ways,” Tesla’s board argues.

    Whether a majority of shareholders will see with the board or with AP7 and Nia Impact Investors remains to be seen. The company’s complex decision-making rules and the 22%-25% of the shares owned by CEO Elon Musk argue against reform. Tesla’s AGM will be held on Thursday, August 4, 2022 and can be watched live on the company’s youtube channel.

    Image courtesy of Tesla
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