Did you attend Tesla’s 2022 shareholder meeting this week? I did it remotely. Frankly, I have never before accepted my responsibility as a shareholder of any company I have invested in to attend a general meeting like this. I found it very strange, very disturbing, and an example of the power of big business to influence audiences.
Like many small investors, I have experienced joy when Tesla shares rise and anxiety when they fall. Its January 3 high of $1199 made me feel smart and smart about clean energy trends. Its May 24 low of $628 was downright depressing. My interest in Tesla prompted me to attend the annual shareholder meeting this year and vote early on the 5 board proposals (1-5) and 8 shareholder proposals (6-13), which are listed below in layman’s language. Tesla management opposed all 8 shareholder resolutions.
- To elect two Class III directors to serve for three-year terms. Plate: PRO
- Reduce the director’s term of office to two years. Plate: PRO
- Remove relevant supermajority voting requirements. Plate: PRO
- To increase the number of authorized shares of common stock by 4,000,000,000 shares (a three-for-one stock split). Plate: PRO
- Appoint Pricewaterhouse Coopers LLP as Tesla’s independent public accounting firm. Plate: PRO
- Proxy access. Plate: AGAINST
- Annual reports on efforts to combat harassment and discrimination. Plate: AGAINST
- Annual Board Diversity Reports. Plate: AGAINST
- Reporting on employment arbitration. Plate: AGAINST
- Reporting on lobbying. Plate: AGAINST
- Adoption of a policy of freedom of association and collective bargaining. Plate: AGAINST
- Another report on child labor. Plate: AGAINST
- Another water risk report. Plate: AGAINST
Corporations routinely oppose shareholder proposals, believing that their insider knowledge prevails in making decisions about the overall health of operations. Voting on 3 of 13 proposals at Tesla’s 2022 shareholder meeting did not follow board recommendations, according to preliminary results.
Despite board opposition, shareholders approved an advisory proposal that would increase investors’ ability to nominate directors.
Two of the board’s proposals—reducing director terms to 2 years and eliminating supermajority requirements—failed to win a supermajority (wry) must pass.
Investors approved the Proposition 4 stock split 3:1. While the split doesn’t change the way Tesla does business, the idea behind the split is that the publicly traded company could appeal to more small investors if the price per share is lower.
The motion, which required directors to allow large and long-standing shareholders or groups with at least 3% of the shares to nominate board members, cleared the board of objections. The board has previously said such a proposal could create opportunities for special interests to distort 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 Dive into the Tesla Activist Shareholder Proposals That Failed
“We wouldn’t be where we are today without you,” Robyn Denholm began. Denholm, a venture capitalist, has served as a Tesla director since August 2014 and chairwoman since November 2018. She has offered a litany of Tesla’s accomplishments and is in her 8th year as a director of the board. “Good governance,” she noted, “is a hallmark of stability.” Assuring the audience that the board respects its shareholders, she announced the creation of a shareholder portal for company information and updates, which will soon be launched.
The shareholder proposals took center stage after Denholm’s remarks, with appointed shareholder representatives each given 3 minutes to speak in favor of the proposal.
Shareholder proposals that failed included:
- Require the company to report annually on its efforts to prevent racial discrimination and sexual harassment (7): Shareholder representative spoke of hundreds of Tesla California employees of color experiencing racial slurs, disparate treatment and lack of interest from HR. Hidden arbitrage, the speaker said, can create legal and financial risks within human capital. “Racism has no business” at Tesla, the speaker concluded.
- Infusing better-aligned gender diversity on the Tesla board (8): A shareholder activist noted that research says greater gender diversity leads to better shareholder value, and reminded everyone that Tesla’s board is disproportionately male.
- Evaluating and reporting on its direct lobbying and influencing (10): The company gets 0/70 for transparency disclosures, a representative revealed. However, Tesla counters that the information is readily available online through internet searches. “Tesla’s message seems to be ‘trust us,'” while other car companies have more lobbying, the spokesman said.
- Approving the right of employees to form unions (11): The sixth speaker spoke about human rights and the due diligence of workers’ rights. The board’s indifferent response to workers’ rights is cause for concern for shareholders, a spokesman said. Tesla colleagues “expressly refer” to the right to freedom of association when it comes to operations, but Tesla is creating “workforce insecurity” by not allowing freedom of association.
- More reports on children’s human rights: Request for public report by 2025 A shareholder activist explained that cobalt mining in the Democratic Republic of Congo involves the exploitation of child labour, with children “often lured into working for a few coins”. As a result, “poverty, injury and even death are a daily reality.” The speaker said Tesla was involved in “aiding and abetting” the risks to children in its supply chain.
- Water risk reporting (13): An As You Sow representative asked the board to pay more attention to drinking water and agriculture because Tesla uses a significant amount of water in production, even in areas that are at risk of water. Shareholders need a tool 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 data.
Tesla CEO Elon Musk often speaks about the societal need to prioritize free speech and robust debate on key issues. Elon Musk is Tesla’s largest individual shareholder, owning 163.58 million shares, representing 15.79% of the stock. Musk can have a strong influence on the direction of the share price, as suggested by his celebrity reception at the shareholder meeting once voting on the proposals was complete.
Institutional investors who own the largest shares 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 stock and have a real impact on the stock price. Institutional investors accounted for the largest block of shares, about 431 million or 42% as of July.
Retail investors accounted for 39.8% of the stock ownership, totaling 411 million shares, and corporate executives held 18.68% of the stock, or 193.5 million shares. Large investors can have a substantial impact on the future performance of a company’s stock, which in turn can influence the adoption of social justice proposals such as those presented at Tesla’s 2022 shareholder meeting.
The company believes that the faster the world transitions away from fossil fuels and towards a zero-emissions future, the better. Still, Standard & Poor’s removed Tesla from the S&P 500 ESG index, a list of companies that meet certain environmental, social and governance standards, in May. Tesla’s mission is to accelerate the world’s transition to sustainable energy.
A small Tesla shareholder like myself has little influence on the decisions of a large corporation like Tesla. But as activist investors, we can continue to push society to rise to the better angels of its nature, to quote Abraham Lincoln.
When audience members scream and giggle at activist shareholder appeals, we may react with outrage.
When Tesla looks at child labor for cobalt from the other side, we can make supply chain actions more transparent.
When work is limited to profits over human rights, we can speak up and remind other stakeholders that modes of production can pursue profits while instilling justice, dignity and respect for people.
We can support Tesla to pursue profits while reducing inequality and improving the quality of the social environment, a sign of true disruptive force for the good of society.
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