Tesla Shareholder Proposal #7

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Download Proposal Here

RESOLVED:  

Shareholders of Tesla, Inc. (“Tesla”) ask the Board of Directors to oversee the preparation  of a public report on the impact of the use of mandatory arbitration on Tesla’s employees  and workplace culture. The report should evaluate the impact of Tesla’s current use of  arbitration on the prevalence of harassment and discrimination in its workplace and on  employees’ ability to seek redress. The report should be prepared at reasonable cost and  omit proprietary and personal information. 

WHEREAS:  

A workplace that tolerates harassment and discrimination invites legal, brand, financial,  and human capital risk. Companies may experience reduced morale, lost productivity,  absenteeism, and challenges in attracting and retaining talent. A number of studies have  found significant share value benefits associated with diverse, equitable and inclusive  workplaces. 

Tesla requires employees to agree to arbitrate employment-related claims. In its 2020  proxy statement, Tesla stated that its arbitration proceedings are private if a “court rules  that the underlying claims are subject to arbitration.” Tesla also stated that employees  are allowed “remedies available in a court of law.” [1] However, arbitrated employees may  not access the courts directly, waive rights to all forms of judicial relief and may not bring  class-action lawsuits. [2] 

Mandatory arbitration limits employees’ remedies for wrongdoing, reduces employee  willingness to report discrimination [3], and prevents their learning about shared  concerns.[4] It may enable further discrimination, reduce workforce effectiveness, and  create brand, legal and human capital risks. It masks from investors true workplace  conditions. 

These concerns are particularly relevant to Tesla. Employees who sought court trials but  whose cases were held in arbitration have alleged experiencing sexual harassment,  discrimination, racism and violent threats. In California, over 140 discrimination  complaints have been filed with the Department of Fair Employment and Housing. [5] In New  York, at least 12 employees anonymously brought concerns to a Buffalo news station.  

Ongoing use of employee arbitration creates a long-tail risk for Tesla, particularly as  arbitration clauses face a changing regulatory landscape. The Biden Administration stated  within its campaign platform its intention to reduce arbitration’s use and some states,  

such as New York, have sought to retroactively release employees from arbitration  agreements when discrimination concerns exist. 

A number of companies have ceased to require employees to arbitrate discrimination  claims. This includes Google, whose use of arbitration was identified as a key aspect of a  “culture of concealment” in its $310 million misconduct settlement. [6] 

Companies with effective human capital management programs, as Tesla claims to have, should not need arbitration as a protection against lawsuits. Tesla has said ”We do the  work required to ensure that our culture is as diverse and inclusive as it is collaborative  and driven.” [7] 

After the Board of a company with 74,000 employees conducted the study requested by  this proposal it changed its use of arbitration in cases alleging discrimination and altered  the charter of its compensation committee to include workplace culture.

1https://www.sec.gov/Archives/edgar/data/1318605/000156459020027321/tsla-def14a_20200707.htm 2https://casetext.com/case/balan-v-tesla-motors-inc-1 

3 https://www.hnlr.org/2020/08/forced-into-employment-arbitration-sexual-harassment-victims-are-saying metoo-and-beginning-to-fight-back-but-they-need-congressional-help/ 

4https://www.eeoc.gov/eeoc/systemic/review/ 

5 https://www.bloombergquint.com/business/tesla-s-report-shows-minorities-make-up-60-of-u-s-workforce

such as New York, have sought to retroactively release employees from arbitration  agreements when discrimination concerns exist. 

A number of companies have ceased to require employees to arbitrate discrimination  claims. This includes Google, whose use of arbitration was identified as a key aspect of a  “culture of concealment” in its $310 million misconduct settlement.6 

Companies with effective human capital management programs, as Tesla claims to have, should not need arbitration as a protection against lawsuits. Tesla has said ”We do the  work required to ensure that our culture is as diverse and inclusive as it is collaborative  and driven.”7 

After the Board of a company with 74,000 employees conducted the study requested by  this proposal it changed its use of arbitration in cases alleging discrimination and altered  the charter of its compensation committee to include workplace culture. 

6https://www.law.com/therecorder/2020/09/25/google-ends-mandatory-arbitration-in-310m-sexual-harassment settlement/ 

7https://www.tesla.com/sites/default/files/downloads/2020-DEI-impact-report.pdf