Tesla 2021 annual meeting is October 7, 2:30 PM Pacific Time. To watch the Annual Meeting visit here. To actually participate, such as voting and/or asking questions, you will need to obtain a legal proxy (instructions). Then you can attend here. At my broker, that means nullifying any vote already cast and trusting all the paperwork or electronic files will work out, allowing you to vote at the meeting. I would not risk it. I recommend voting in advance. To enhance corporate governance and long-term value, vote Against Murdoch, Kimbal Musk, Two-Yr Terms, Auditor; FOR all other items, including Elect Each Director Annually.
Tesla, Inc. designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. Most shareholders do not vote. Reading through 70+ pages of the proxy takes time but your vote could be crucial. Below, how I voted and why.
If you have read these posts related to my portfolio and proxy proposals for the last 25 years and trust my judgment, skip 7 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.
I voted with the Board’s recommendations 10% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).
Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.
Tesla 2021: ISS Rating
From the Yahoo Finance profile page: Tesla, Inc.’s ISS Governance QualityScore as of September 26, 2021, is 10. The pillar scores are Audit: 9; Board: 10; Shareholder Rights: 10; Compensation: 10.
Tesla 2021: Board Proposals
Tesla shareholders are urged by Institutional Shareholder Services to reject two board members standing for re-election on concerns about excessive compensation.
- What’s happening: ISS wants investors to vote against James Murdoch and Elon Musk’s younger brother, Kimbal. They’re standing for re-election at Tesla’s shareholder meeting on Oct. 7. Directors have received “outlier levels of pay without a compelling rationale” and there’s no explanation as to why the size of option awards is so much larger than at peer companies, the proxy group said.
- What it means: Proposals opposed by Tesla are unlikely to be passed, even if they win a majority of votes, the WSJ said. Shareholder supermajorities are needed for major changes without support from Elon Musk and other insiders. That means almost 90% of shareholders would have to vote against him and his allies to overrule them.
Egan-Jones Proxy Services recommends For all. I am going with ISS on this one.
Vote: AGAINST James Murdoch and Kimbal Musk
2. Reduce Director Terms to Two Years
Egan-Jones writes: “We believe that staggered terms for directors increase the difficulty for shareholders of making fundamental changes to the composition and behavior of a board. We prefer that the entire board of a company be elected annually to provide appropriate responsiveness to shareholders. We recommend a vote AGAINST this Proposal.
3. Eliminate Applicable Supermajority Voting Requirements
Last year 56% of Tesla shares voted for my shareholder proposal to eliminate supermajority voting requirements. Both ISS and Glass Lewis supported. If the board had not included this proposal, they would have incurred the wrath of proxy advisors and shareholders.
However, notice the Board takes no position on the measure. That probably means Elon Musk and his inner circle are voting against it. Without this measure obtaining a 67% approval rating, none of the proposed bylaw amendments on the proxy will pass. This is essentially a sneaky way to look like they want to increase the frequency of board elections without actually doing it.
Egan-Jones writes: Contrary to supermajority voting, a simple majority standard will give the shareholders equal and fair representation in the Company by limiting the power of shareholders who own a large stake in the entity, therefore, paving way for a more meaningful voting outcome. As such, we recommend a vote FOR this Proposal.
4. Ratify Auditor
Egan-Jones recommends Against since PricewaterhouseCoopers LLP has been the auditor for 16 years, so its independence is compromised.
Tesla 2021 Shareholder Proposals
5. Elect Each Director Annually
The proposal is from me (James McRitchie) so, of course, I voted in favor. Almost 90% of S&P 500 and Fortune 500 companies have adopted this important proposal topic since 2012. Annual elections are widely viewed as a corporate governance best practice. The annual election of each director makes directors more accountable, and thereby contributes to improved performance and increased company value.
This proposal should also be evaluated in the context of our Company’s overall corporate governance as of the date of this submission: Shareholders cannot call special meetings, act by written consent or nominate directors through proxy access. At our 2020 annual meeting, 56% of shares were voted in favor of eliminating supermajority voting requirements.
Our Company’s technology is second to none. Our Company’s corporate governance should meet the same high standards.
Egan-Jones Proxy Services: This proposal should also be evaluated in the context of our Company’s overall corporate governance as of the date of this submission: Shareholders cannot call special meetings, act by written consent or nominate directors through proxy access. At our 2020 annual meeting, 56% of shares were voted in favor of eliminating supermajority voting requirements.
6. Reporting on Diversity and Inclusion Efforts
The proposal is from Calvert Research and Management. Calvert cites several studies on the benefits of inclusion. Yet, “Tesla has not fully released meaningful information allowing investors to determine the effectiveness of its human capital management programs related to workplace diversity. Shareholders may become concerned that Tesla’s disclosures are insufficient as they do not disclose adequate information for investors to gain a solid understanding of the company’s recruitment, hiring, retention, and promotion practices and progress across various ethnic groups and by gender without more granular data across each of these areas.”
Egan-Jones writes: a company’s success depends upon its ability to embrace diversity and to draw upon the skills, expertise, and experience of its workforce. As such, we believe that the adoption of this proposal is in the best interests of the Company and its shareholders.
7. Reporting on Employee Arbitration
The sponsor, Nia Impact Capital argues “mandatory arbitration limits employees’ remedies for wrongdoing, reduces employee willingness to report discrimination, and prevents their learning about shared concerns. It may enable further discrimination, reduce workforce effectiveness, and create brand, legal and human capital risks. It masks from investors true workplace conditions.
Egan-Jones believes the proposal “is unnecessary and will not result in any additional benefit to the shareholders.” I disagree, especially given that arbitration is most frequently used to hide cases of sexual harassment and discrimination.
8. Oversight of Human Capital Management
This was submitted by the Comptroller of the City of New York. It requests an independent board-level committee for strategic oversight of human capital management. It argues that Tesla’s weak labor-management practices may pose risks to the company’s growth strategy. Egan-Jones agrees. “We believe that the adoption of the proposal will enhance the Company’s response to human capital management. Accordingly, we recommend a vote FOR this Proposal.”
9. Reporting On Human Rights
The Sisters of the Good Shepherd New York Province request an independent, third-party report assessing the extent to which Tesla is effectively fulfilling its responsibility to respect human rights and engage in responsible sourcing practices. They cite a number of troublesome practices.
Egan-Jones agrees. Adoption of a more comprehensive human rights policy, coupled with implementation, enforcement, independent monitoring, and transparent, comprehensive reporting will assure shareholders of the Company’s global leadership.
Tesla 2021 CorpGov Recommendations
Proxy Insight had not reported any votes in advance of the meeting when I last checked.
In looking up a few funds in our Shareowner Action Handbook, the only vote in advance of the meeting I would find was that of Norges Bank. They voted Against Murdoch and #8 Oversight of Human Capital Management; For all other items.
- Directors: AGAINST James Murdoch and Kimbal Musk
- Two Year Terms: AGAINST
- Eliminate Supermajority Provisions: FOR
- Ratify Auditor: AGAINST
- Elect Each Director Annually: FOR
- Reporting on Diversity and Inclusion Efforts: FOR
- Reporting on Employee Arbitration: FOR
- Oversight of Human Capital Management: FOR
- Reporting On Human Rights: FOR
Tesla 2021: Issues for Future Proposals
Looking at insightia for anti-shareholder provisions:
- No requirement to separate CEO and Chair
- Shareholders have no right to call a special meeting
- Shareholders have no right to proxy access
- Written consent by shareholders is prohibited
- The board is classified
- Bylaw amendments by shareholders require a supermajority vote
Tesla 2022: Mark Your Calendar
In order to be included in the proxy statement for the 2022 annual meeting of stockholders, stockholder proposals must be received in accordance with the above instructions no later than the 120th day preceding the one-year anniversary on the date on which this proxy statement is released to the Company’s stockholders, or April 28, 2022, provided that if the date of the 2022 annual meeting of stockholders is more than 30 days from the one-year anniversary of the 2021 Annual Meeting, the deadline will instead be a reasonable time before we begin to print and send our proxy materials for the 2022 annual meeting of stockholders. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Be sure to vote for each item on the proxy. Any items left blank get automatically voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.
From Global Proxy Watch — EarthBound Tesla CEO Elon Musk made headlines at the October 7 AGM when he vowed to move headquarters from liberal California to Texas, a conservative heartland. But for the governance world, the stunner was the slap-in-the-face rebuke shareowners dealt the world’s wealthiest innovator after years of near-worshipful support. A 55% majority backed Jim McRitchie’s non-binding proposal to cut director terms from three years to one while 57% voted for a Calvert one calling for annual diversity reports, according to results posted Wednesday. Musk got another sharp warning from opposition to the only two directors up for election: a formidable 29% vote against James Murdoch, scion of Rupert Murdoch’s News Corp empire, and 19% against the CEO’s brother, Kimbal Musk. ISS’s negative recommendations for the two didn’t help.
https://boardmember.com/tesla-shareholder-conflicts-may-give-insight-into-proxy-season-2022/ Also worth noting, 55% majority backed my proposal to cut director terms from three years to one. As I said at the annual meeting: “At our 2020 annual meeting, 56% of shares were voted in favor of my advisory proposal eliminating supermajority voting requirements. The Board is now letting you vote to repeal those supermajority requirements through proposal 3.
However, notice the Board takes no position on the measure. That probably means Elon Musk and his inner circle are voting against it. Without this measure obtaining a 67% approval rating, neither the Board’s proposal to move to two-year terms or mine to move to 1-year terms will pass. This is essentially a way for the Board to look like they want to increase the frequency of elections without actually doing it.”
Of course, that’s exactly what happened. Tesla’s technology is second to none. Our Company’s corporate governance should meet the same high standards.