Two prominent and influential proxy consulting firms are urging Tesla Inc investors. to vote against the re-election of two members of the Board of Directors, recommend defying the wishes of the company and vote for six out of eight proposals for shareholders.
He faces several employee controversies and is caught up in the glare of the spotlight on CEO Elon Musk as he struggles to get out of his deal to buy Twitter Inc. TWTR,
The electric car maker holds its annual general meeting on Thursday afternoon, and some of the shareholder proposals target the issues highlighted by the controversy.
The successful proposal required declassification of the board of directors—reorganizing all board members into one category, with each director subject to election each year. Instead, Tesla proposes reducing the manager’s tenure from three years to two, instead of one.
“If our shareholders approve the second proposal at the 2022 Annual Meeting, the board will then be divided into two classes with staggered terms of two years, with directors distributed as equally among them as possible,” Tesla said in its proxy.
Glass Lewis and ISS called this response insufficient, noting in the agency’s research papers that Tesla did not address the shareholder vote on declassification and did not provide a reason for disregarding the will of the majority of its investors.
“We believe this is a failure on the part of the Nominating and Corporate Governance Committee to meet its shareholder obligations,” Glass Lewis said in its report.
In opposition to Tesla’s recommendation to vote against all eight shareholder proposals, Glass urges Lewis and the ISS to vote yes on six of them:
Arrival of the shareholder’s agent
Annual Reports on Efforts to Combat Harassment and Discrimination
Reporting an employee arbitration
Adoption of a policy of freedom of association and collective bargaining
Additional Reports on Water Hazards
The decision calling for an annual report on anti-harassment and discrimination efforts, filed by the New York state comptroller, comes as Tesla faces multiple lawsuits for employees and shareholders alleging discrimination. Tesla said in its agent that it does not tolerate “discrimination, harassment, retaliation, or any mistreatment of employees in the workplace or work-related situations.”
See also: California sues Tesla over allegations of discrimination and harassment
Glass Lewis notes in its proxy report that Tesla has faced “more than 40 lawsuits from former and current employees alleging that it fosters a racist and sexist work culture” in the past five years. It also noted that Musk is facing allegations that he sexually harassed a SpaceX employee, where he also serves as CEO.
“We believe that failure to adequately address issues related to human capital management, including those discussed in this proposal, could result in significant negative impacts on companies and their shareholders,” said Glass Lewis.
The ISS said Tesla currently faces at least seven lawsuits related to sexual harassment, as well as accusations of racial discrimination that include a lawsuit by the California Department of Housing and Fair Employment and an investigation by the Equal Employment Opportunity Commission.
“Investors will benefit from the additional information to understand how the company is managed and to mitigate the risks associated with it,” the ISS said in its proxy report.
Both consulting firms cited the employment-related claims against Tesla in recommending that investors also vote yes on a proposal submitted by Nia Impact Capital for the third time, to report on the impact of the company’s mandatory arbitration policies. In its proxy, Tesla said that “the standard arbitration clause specifically states that the parties are entitled to all available remedies in a court of law.”
Another proposal for employee-related shareholders backed by Glass Lewis and ISS calls for Tesla to adopt a policy on freedom of association and collective bargaining. Such a policy would legalize the right of unions to organize in the company, where it has not worked so far.
The company has a documented record of conduct that discourages unionization. In one example, the National Labor Relations Board found Tesla to engage in anti-union behavior, including firing an employee for union activity. In addition, a judge found a few years ago that Musk’s tweets about unions violated labor laws.
“We comply with all applicable domestic laws relating to freedom of association and collective bargaining, and respect internationally recognized human rights in all areas in which we operate,” Tesla said in its agent.
In a waiver request notice in support of the proposal, the Research and Education Contributors Association said: “Compliance with local law does not mean respect for freedom of association, as many US states and jurisdictions limit workers’ ability to exercise these rights.”
“Given its operations and significant controversies regarding its labor practices,” Glass Lewis wrote, “we believe that adopting the required policy would benefit shareholders and ensure important protections for Company employees.”
Tesla did not return a request for comment.