When Tesla held its 2021 annual meeting last October the electric vehicle maker was coming off a quarter of record-breaking deliveries, a marker of success that helped propel the company to a $1 trillion market cap later that month.
At this year’s annual meeting on August 4 the company is facing more difficult headwinds, marked by ongoing supply chain disruptions, a Covid-related shutdown at Tesla’s Shanghai plant, and recent layoffs affecting corporate employees. While Tesla recently reported a $2.3 billion profit in the quarter ending in June, this also marked its first profit decline from the previous quarter in more than a year.
Against this backdrop investors will vote on a packed slate of proposals which touch on executive board membership, share value, and concerns about harassment at the company.
Tesla’s seeking a 3-for-1 stock split
At the top of the annual meeting agenda is a 3-for-1 stock split, which investors are expected to approve. This would be the company’s second stock split in two years, and would increase the number of available Tesla shares by 4 million, in turn bringing down the price per share.
When Tesla did a 5-to-1 split in August 2020, its stock soared by over 70 percent. This new measure could once again boost the company’s stock, which has risen by 32 percent over the past month.
Tesla is also recommending investors re-elect venture capitalist Ira Ehrenpreis and Kathleen Wilson-Thompson, a former executive vice president of Walgreens, to the company’s board of directors. Additionally, the company is asking shareholders to vote for a proposal to decrease directors’ terms from three to two years. This falls short of a proposal that received support from a majority of shareholders last year, which called for Tesla to hold elections for each of its directors annually, rather than every three years. In Securities and Exchange Commission filing Tesla justified its decision to go against shareholders, saying holding a vote every two years will help the company’s board “more effectively defend itself from opportunistic corporate raiders.”
Concerns about labor practices
A number of shareholder proposals seek to address Tesla’s labor practices. One proposal asks Tesla to deliver an annual report describing its efforts to prevent harassment and discrimination at the company. The EV maker has been accused of allowing racial and gender discrimination in the workplace, and in February California’s Department of Employment and Fair Housing sued the company, alleging it discriminated against Black workers in its Fremont, California factory. The federal Equal Employment Opportunity Commission is now looking into those allegations. The proxy firm Institutional Shareholder Services, which is recommending shareholders vote for this proposal, said in light of these issues, “investors would benefit from additional information to understand how the company is managing and mitigating associated risks.”
Another proposal would require Tesla to produce an annual report on board diversity, while an additional measure asks for a report on employee arbitration, a practice that has reportedly been used to silence workers’ harassment and discrimination allegations.
Finally, Tesla is being asked to commit to respecting freedom of association and collective bargaining rights of workers, as well as non-interference with workers seeking to form or join unions. Richard Clayton, the research director at SOC Investment Group, which co-filed the proposal, said the “enormous” uptick of shareholder interest in sustainability and ESG issues created a space to raise these issues. While the recent lawsuits against Tesla don’t speak to unionization directly, they “make us concerned that there are some serious problems at Tesla’s workplace,” he said. A “clear, effective policy” on freedom of association and collective bargaining would be a precondition to address harassment and discrimination issues, Clayton added.
Tesla has recommended investors vote against all eight shareholder proposals, and the bar to passage looks high. Certain proposals require support from more than 66 percent of shareholders, and many of the company’s biggest investors—including Musk himself, who owns nearly a quarter of Tesla shares—are likely to vote no.
Though Tesla has consistently performed well for investors, shareholders have voiced more concerns about corporate governance in recent years. Some have recently spoken up about Musk’s bid to buy Twitter, which is currently held up in court.