Tesla shareholders reject ESG-linked compensation and workers’ rights proposals

Shareholders at Tesla’s annual general meeting (AGM) have rejected proposals to enhance workers’ rights and transparency at the firm, as well as one seeking to link executive compensation to ESG performance.

The measures rejected at last week’s AGM include the production of a report on employee harassment and discrimination, allowing employees to form or join unions, imposing a moratorium on sourcing minerals from deep-sea mining, and linking executive pay to ESG performance.

Tesla’s board of directors had advised shareholders to vote against these proposals ahead of the meeting.

Tying executive pay to human rights metrics

Impact investor Tulipshare Securities Limited had submitted the proposal on ESG-linked compensation, pushing for the Board Compensation Committee to adopt targets and metrics around human rights risk mitigation in Tesla’s supply chain, and add a “performance-based component in the executive compensation structure directly tied to the achievement of the established human rights and performance metrics”.

The call came as a report by the Business and Human Rights Resource Centre revealed numerous allegations of human rights violations in the supply chains of critical minerals such as cobalt and nickel – which are used in electric vehicle batteries.

But Tesla’s management believes its current disclosures already meet expectations, and its current compensation programmes already work for sustainability: “We believe that true ‘sustainability’ is not achieved through simply an image of action, producing reports or tying confused metrics to compensation plans. Rather, it is done through actions which have created visible, substantive changes. Every vehicle we sell, battery we install and solar panel we add moves the needle in the direction of sustainable future,” the board said in its proxy statement.

Tesla urged to join industry movement against deep-sea mining

Another proposal, submitted by activist shareholder As You Sow, urged Tesla to commit to a moratorium on sourcing minerals from deep sea mining, following the examples set by BMW, Volvo, Volkswagen, Rivian, and Renault.

The controversial practice is seen by some as necessary to meet the need for minerals that are key to the energy transition, but scientists and NGOs warn that it could lead to irreversible damage to marine ecosystems. 

“There is a false perception that mining in the deep sea isn’t as harmful as terrestrial mining and is thus a more accessible supply, a perception that comes largely from the deep-sea mining industry,” said Elizabeth Levy, Biodiversity Program Coordinator at As You Sow. “Deep-sea mining is not the sustainable choice, and the industry itself hasn’t been proven to be financially viable. Tesla shareholders don’t want to see the company’s supply chain invested in an industry that’s neither sound nor sustainable.”

But again, Tesla’s management advised investors to vote against the proposal, arguing that maintaining flexibility of supply is “fundamental to [its] ability to operate nimbly on a day-to-day basis while adhering to high responsible sourcing expectations”. 

Transparency around workers’ rights

Two other proposals, respectively by the Comptroller of the State of New York and SOC Investment Group, sought to require Tesla to produce a report on its efforts to prevent harassment and discrimination against its employees after “numerous serious allegations of racial or sexual harassment and discrimination at Tesla”, and to adopt a non-interference policy on collective bargaining within its operations.