TSLA Stock Shareholder Proposals Elicit Controversy Ahead of Annual Meeting

The Tesla (NASDAQ:TSLA) shareholder meeting, rebranded as the Cyber Roundup, takes place today. While it doesn’t start until after close of markets, much of Wall Street is bracing for it. The verdict of the proposed TSLA stock split is on everyone’s minds.

It isn’t the only reasons tensions are high, though. Many other proposals are on the table regarding potential changes at Tesla. Two members of the board of directors may be on their way out. MarketWatch reports multiple proxy advisory firms have recommended that shareholders vote against the reelection of Ira Ehrenpreis and Kathleen Wilson-Thompson. This would require going against Tesla’s leadership.

Also on the table is an item co-filed by SOC Investment Group and SHARE, two groups focused on corporate accountability. Item 11 asks that Tesla’s board of directors “adopt and publicly disclose a policy on its commitment to respect the rights to freedom of association and collective bargaining in its operations.”

Let’s take a closer look at these shareholder items and what they may mean for TSLA stock.

TSLA Stock: Board Member Reelection

The two aforementioned advisory firms are Glass Lewis & Co and Institutional Shareholder Services (ISS). MarketWatch notes, “as members of the company’s nominating and governance committee, they did not implement a shareholder proposal that a majority of Tesla’s shareholders approved last year.”

The firms see this as grounds for both members’ removal even though Tesla is asking investors to vote for their reelection. As MarketWatch states:

“The successful proposal asked to declassify the board — reorganize all board members to one class, with each director subject to election every year. Instead, Tesla is proposing that the term a director serves be reduced from three years to two years, instead of one.”

Tesla noted if Proposal 2 was met with sufficient shareholder approval, the board of directors would be divided into two classes with two-year terms. Glass Lewis found this response to be insufficient. In a report, it described it as “a failure on the part of the nominating and corporate governance committee to fulfill its obligations to shareholders.”

ISS stated, “Investors would benefit from additional information to understand how the company is managing and mitigating associated risks.” These proposals relating to human capital management follow many worker lawsuits filed against Tesla.

Inside Item 11

Item 11 centers on the need for a collective bargaining resolution from Tesla. SOC Investment Group Research Director Richard Clayton spoke to InvestorPlace about the proposal. “Going forward, over the past five or six years, it’s become increasingly common for shareholders to express concern about an interest with respect to how a company interacts with and manages its workforce,” he noted.

Clayton isn’t hopeful the proposal will receive sufficient shareholder support. “We’ll see what happens if we do get a high level of support for this resolution,” he states. “But I wouldn’t be particularly optimistic that this board is going to suddenly get religion and start responding to significant shareholder votes in the way we want.”

However, there may be better days ahead. Clayton also predicts that in the near future, “companies are going to be subject to new reporting requirements around the relationship with the workforce and workforce investments.” This is also an important factor for investors to note. As Clayton sees it, how a company interacts with its workers will do much to determine its success.

It is unclear how TSLA stock investors feel about this proposal going into the meeting. If Clayton’s assessment is correct, though, more pro-worker policies could help boost TSLA stock in the future. Investors should pay close attention to these proposals.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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