Tesla faces crunch votes

Labour relations, executive pay and governance all in the spotlight

As most people will be aware, Tesla has its AGM later this month and the company is facing pressure over a range of issues.

Tesla remains locked in an industrial dispute in Sweden which has now been going on for six months. In an interview earlier in year CEO Elon Musk suggested that the situation had calmed down. In contrast, last month another union joined action in support of IF Metall. The dispute has taken on more seriousness as it is seen by many as an attempt by a US-listed company to challenge the European model of social dialogue.

There is a shareholder resolution on the ballot directly aimed at the company’s approach to working with unions.

RESOLVED, the Board of Directors of Tesla, Inc. shall adopt and disclose a Noninterference Policy (“Policy”) upholding the rights to freedom of association and collective bargaining in its operations, as reflected in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work (“Fundamental Principles”). The Policy should contain a commitment to: Non-interference when employees seek to form or join a trade union, and a prohibition against acting to undermine this right or pressure employees not to form or join a trade union; Good faith and timely collective bargaining if employees form or join a trade union; Uphold the highest standard where national or local law differs from international human rights standards; and Define processes to identify, prevent, account for, and remedy practices that violate or are inconsistent with the Policy.

Given the situation in Sweden, this is a very significant vote. Elon Musk has said publicly that he opposes even the idea of unions. It’s hard to see how any investor that has a policy to uphold labour standards and/or support effective human capital management can do anything other than vote for the proposal in the circumstances.

Separately the company is also facing pressure over pay awards to Musk. After the previous incentive scheme for the CEO, the largest of its kind in the US, was subject to a successful legal challenge the company is once again seeking shareholder support to ratify it. This comes shortly after news that the company is cutting 10% of its workforce. The pay row has also led to increased scrutiny of the governance arrangements at Tesla that lead to outcomes like this.

Already both ISS and Glass Lewis have recommended opposing Musk’s incentive plan. I’d also recommend that people have a read of Paul Lee’s great blog on this one.

There are also two webinars this week on the respective votes.

The first will take place at 3pm UK / 4pm CET and focus on Freedom of Association and Collective Bargaining rights at the company. Speakers will include a Tesla worker, a representative from the Swedish trade union (IF Metall), and concerned Tesla shareholders. The panel will discuss the associated risks of the automaker’s anti-union practices and a shareholder resolution calling for a Non-interference and Collective Bargaining Policy at Tesla.

Register here: 

https://us02web.zoom.us/webinar/register/WN_pULEb4M2R5un8eOt9vI7Qg#/registration

The second will take place at 4:30pm UK / 5:30pm CET and will focus on a Vote No campaign at the company. A group of investors is asking Tesla shareholders to vote against the re-election of Directors Kimbal Musk and James Murdoch, and against the proposed ratification of the CEO’s 2018 pay package. Speakers will include Brad Lander, New York City Comptroller, Ivan Frishberg, Chief Sustainability Officer, Amalgamated Bank and Tejal Patel, Executive Director, SOC Investment Group.

Register here: 

https://us02web.zoom.us/webinar/register/WN_KvzIKMvDS5yPLfyjvXLRsw#/registration

This could be one of the most important AGMs on the year.