Investors Push Tesla to Reveal Diversity Data After Racism Lawsuit
(Bloomberg) -- Tesla Inc. may join some of the biggest U.S. companies that have been pressed to fully divulge details about the diversity of their workforces and efforts to close any inequities.
A shareholder resolution filed by Calvert Research & Management calling on Tesla Inc. to share the data likely won the backing of investors based on preliminary results Thursday at the electric-vehicle maker’s annual meeting.
The vote came after investors filed a record number of diversity-related proposals to corporations, including International Business Machines Corp., during the recent season of shareholder meetings, asking companies to keep their word on pledges to support racial justice. Last year, the death of an unarmed Black man while in police custody fueled a national reckoning in the U.S. over race. Tesla also lost a case this week brought by a former worker alleging racism in one of its factories.
“To have a green company that doesn’t get it right on issues of racial justice, they’re putting themselves in a precarious position,” said Rachel Robasciotti, founder and chief executive officer of Adasina Social Capital, whose firm focuses on social justice investing. Tesla is excluded from the Adasina portfolio because of those concerns, she said. “For us, social justice is environmental justice.”
Diversity-related resolutions at companies such as American Express Co. and chemical giant DuPont de Nemours Inc. garnered more than 80% of shareholder support in the last proxy season. In all, investors submitted a record 36 proposals, which received an average 38.1% of support as of the end of September, according to Bloomberg Intelligence.
Calvert, which is one of the oldest socially-responsible investors, said Tesla’s disclosures have lagged behind its peers. It asked the company to publish detailed workforce data by race and gender that companies file annually to the U.S. Equal Employment Opportunity Commission. This information, known as EEO-1, is private unless company’s voluntarily disclose it.
Calvert, a longtime Tesla shareholder, said it filed the resolution to help give stakeholders the information needed to analyze the company’s ability to improve and maintain its “competitive edge.”
“After years of having the market to themselves, Tesla now has to compete with many strong players,” John Streur, Calvert’s CEO, and Kimberly Stokes, the firm’s corporate engagement strategist, said in an emailed statement. “In other words, the race is on for talent.”
Streur had said last year that ending racism in America is a responsibility of corporations and added that Calvert will push for greater disclosures of information about racial diversity.
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The Tesla resolution came up for a shareholder vote days after the company lost a case against a Black former elevator operator. The court ruled that Tesla must pay an unprecedented $137 million in damages for having turned a blind eye to racial taunts and offensive graffiti the man endured at one of the electric carmaker’s plant.
Tesla’s defensive blog post after the verdict suggests the company isn’t going to change without added pressure and a sustained effort, said Kabrina Chang, a business ethics professor and associate dean for diversity, equity, and inclusion at the Questrom School of Business at Boston University. A growing trend is for investors and employees to team up in areas of interest, which may be an option for the electric car maker.
Separately, a resolution asking Tesla to publish a report on how its mandatory arbitration policy impacts employees and workplace culture probably failed based on preliminary results. A similar proposal had won backing at renewable energy company Sunrun Inc., while another filed at Goldman Sachs Group Inc. won a high level of support prompting the investment bank to take action.
Tesla said it will formally announce the results of the four management proposals and five shareholder resolutions within four business days.
There’s a growing risk for companies that don’t respond to shareholder concerns, particularly related to environment, social and governance topics, said Tom C. W. Lin, a professor at the Temple University Beasley School of Law, and author of the upcoming book “The Capitalist and the Activist, corporate social activism and the new business of change.”
“Many people don’t just invest in business because they want to generate a positive return or because the business is profitable, they want to feel good about their investment,” he said. “Over the long run, businesses and CEOs, including dominant shareholders, who aren’t sensitive to these changing sentiments, I think they will fall behind.”
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