Investor Advocates for Social Justice

IASJ Urges Tesla Shareholders to Vote FOR Human Rights Disclosure Proposal

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Investor Advocates for Social Justice (IASJ) urges all Tesla shareholders to vote FOR Item 7 – Human Rights Disclosure in advance of Tesla’s Annual General Meeting (AGM) on September 22, 2020. The Human Rights Disclosure proposal was filed by the Sisters of the Good Shepherd, an IASJ Affiliate, due to concerns about the actual and potential human rights impacts in Tesla’s operations and supply chain. 

Tesla manufactures and sells electric vehicles and energy generation and storage systems. The success of the Tesla Model 3 has strengthened Tesla’s leading position among EV manufacturers, with a market share of 16.2% in 2019. Tesla is led by CEO Elon Musk, who holds a 20% stake in the company. Musk also has a lucrative compensation package that could be valued at $55 billion, with 12 “tranches” of stock options tied to a series of operational and earnings milestones. The value of Tesla shares had been rising dramatically this year until news hit that Tesla was not included in the S&P 500 index, which led the share price to fall by 20% on September 8th. 

A company of this size and influence, not to mention its efforts to position itself as a sustainable and responsible brand, must take seriously its responsibility to respect human rights throughout its operations and supply chain. Elon Musk should be setting a tone from the top that human rights is a priority for Tesla. Unfortunately, Tesla leadership has failed to effectively manage human rights risks. Tesla is currently facing a federal class action lawsuit for knowingly aiding and abetting child labor in its cobalt supply chain in the Democratic Republic of Congo (DRC), where children have been maimed and killed in mine tunnel collapses, which have been linked to Tesla through supplier relationships. Within its operations, Tesla’s poor health and safety record, insufficient actions to protect workers from COVID-19, alleged incidents of racial discrimination and harassment, and actions to dissuade union organizing each reflect a failure by management to foster a culture of respect for human rights within the company.

Institutional Shareholder Services (ISS) is recommending a vote FOR the Human Rights Disclosure proposal. In its analysis, ISS states that additional reporting on human rights due diligence would help shareholders assess the effectiveness of Tesla’s human rights risk management efforts.

Summary of the Proposal and Rationale for Support

The proposal asks Tesla to prepare a report on the company’s processes for embedding respect for human rights within operations and through its business relationships. Tesla is exposed to significant human rights risks which may have a material impact on the company. Yet existing disclosures fail to provide evidence of effective human rights due diligence. The report in the proposal would describe (1) board oversight of human rights and (2) human rights due diligence processes, including systems for providing meaningful remedy when adverse human rights impacts occur.

For more information on the rationale for support for the Human Rights Disclosure proposal, please view the full exempt solicitation. A summary of the rationale is below:

  1. Tesla is exposed to significant actual and potential human rights risks in its operations and supply chain that present litigation, reputational, human capital management, and regulatory risks which negatively impact long-term value creation for shareholders.
  2. Tesla’s existing disclosures fail to provide evidence that the company is effectively embedding respect for human rights throughout the business.
  3. Reporting requested by the Human Rights Disclosure proposal would help Tesla meet its responsibility to respect human rights and would minimize its exposure to risks and the potential harm its business activities and relationships would cause to rights holders.

To view the Human Rights Disclosure proposal and other items up for a vote at Tesla’s AGM on September 22nd, please consult Tesla’s 2020 Proxy Statement.

Shifting Gears Report Assessment

In IASJ’s Shifting Gears Report: An Assessment of Human Rights Risks & Due Diligence in the Automotive Industry, Tesla ranked 15th out of 21 automotive industry companies assessed on human rights policies, practices, and disclosure. Tesla received zero points in the Governance and Remedy sections, revealing poor oversight over human rights risks and a lack of effective grievance mechanisms to remedy adverse impacts when they occur. The report also notes weak policy language that does not include a baseline commitment to respect human rights and a lack of disclosure on processes to embed respect for human rights in the business.

For all the reasons noted above, IASJ strongly encourages all Tesla shareholders to vote FOR Item 7 – Human Rights Disclosure ahead of the Tesla AGM on September 22, 2020. The AGM will begin at 4:30 PM Eastern and the livestream will be available online.