While Gov. Gregg Abbott welcomed Tesla to the Lone Star state with a cheerful tweet last week, one of the electric vehicle (EV) manufacturer’s investors blasted the company for its inability to provide more extensive diversity, equity, and inclusion (DEI) information.
“They have been unable to share with us how DEI is linked to their overall corporate strategy, and they have been unable to explain to us how accountability for DEI occurs within the organization both at the board level and management level,” said Kimberly Stokes, corporate engagement strategist with Calvert, a socially responsible investor. “In addition to that, they have not provided us with the diversity statistics in a form that’s as granular as we expect, which would be in the form of an EEO-1 report.”
An EEO-1 report is a breakdown of a company’s workforce by race and gender, collected by the United States Equal Employment Opportunity Commission annually.
“What’s most important to us is really understanding how companies are thinking about diversity and understanding how companies more generally are thinking about human capital management because it’s really the talent within these organizations that is going to allow companies to achieve the goals that they set out,” Stokes told Dallas Express. “For a company like Tesla, where innovation is key to future success, we know that diversity equity and inclusion is a necessary element to having continued innovation.”
Tesla published in a December 2020 DEI report that its leadership is 83% male and 59% white, all while promoting itself in media reports as having a majority-minority workforce. Tesla’s report did not indicate whether its leadership statistics include its board of directors and did not include a formal copy of its EEO-1 report.
“What we ask companies to provide is a link or a table that depicts their full EEO-1 report,” Stokes said in an interview. “The EEO-1 report breaks down into ten different job categories and provides a much more granular look at a company’s workforce composition. In addition to that, each of those job categories are broken down by both gender and within gender by ethnicity. So, it does provide significantly more detail than what Tesla provided in their 2020 DEI report. “
When Calvert followed up with a request for more details, Tesla reportedly said it would consider it.
“But they did not do it,” Stokes alleges.
In relocating its headquarters to Texas, Tesla could potentially be evading the new legislation in California. Under Assembly Bill (AB) 979, publicly-held companies headquartered in California are required to include at least one director from an underrepresented community by December 31, 2021, two directors from underrepresented communities for corporations with more than four board members, and a minimum of three directors for corporations with more than nine board members by 2022.
Gov. Gavin Newsom signed AB 979 into law in November 2020; however, Texas has no such law on its books.
“As shareholders, ultimately, we want Tesla to perform well,” Stokes said. “Based on research, diversity, equity and inclusion are critical factors in strong company performance. We want companies to provide us with standardized DEI data to aid us in accurately and fairly evaluating and assessing a company’s performance.”
It was widely reported that Tesla has ten board of directors, including Hiromichi Mizuno, the former chief investment officer of Japan’s $1.5 trillion pensions, and Kathleen Wilson-Thompson, an executive at Walgreens.
As previously reported in Dallas Express, Tesla CEO Elon Musk, who is a native of South Africa, announced he would be locating some of Tesla’s operations to Texas from California during an annual shareholders meeting in Austin, which include plans to build a brand-new factory near the Austin Bergstrom International Airport and the Colorado River.
“Our concern with Tesla is a concern with workers whatever state they are in or whatever jurisdiction,” Stokes said.
Tesla did not respond to requests for comment. Electrek reported that Tesla eliminated its media relations department last year.
“We took a look at the top 100 holdings last year, and at that time, only 18 companies were providing EEO1 data,” Stokes said. “We engaged with the 82 companies that were not, and Tesla was one of those companies. As of now, over 70 of the 100 companies are providing the information. So, that’s a clear indicator that, just even looking across sectors, Tesla is now in the minority of those top 100 companies that we own that has chosen not to provide that information.”
Other companies within the top 100 holdings include Ford Motor Company, Kia Corporation, Renault SA, SUBARU Corp, Toyota Motor Corp., and Volkswagen AG.
“There’s a groundswell of support for diversity equity and inclusion metrics,” Stokes said. “I am referring to an increase in shareholder proposal and shareholder engagement around diversity equity and inclusion at Tesla and at a number of other companies.”
Several Calvert funds have filed shareholder resolutions asking the company to provide more quantitative data about its diversity, equity, and inclusion (DEI) efforts.
“It’s a mechanism that shareholders can use to voice concern to companies that they invest in,” Stokes said. “It gives the other shareholders the ability to vote their proxies either for or in support of the shareholder resolution or against it. One would think that if there were a majority or a large number of shareholders that supported the resolution, that the company has an obligation, not necessarily an enforceable obligation, but an obligation to shareholders to consider what the majority are supporting.”
Although there are no consequences for a company’s non-compliance to a shareholder resolution, the Securities and Exchange Commission (SEC) is considering rulemaking around human capital management, including diversity, equity, and inclusion.
“There is a possibility that sometime in the future this information will be mandated by the SEC and would have to be provided in audited financial statements,” Stokes added. “So, I think it’s better for companies to be proactive and include more information around diversity, equity, and inclusion, as well as other human capital management metrics ahead of any potential regulatory decisions.”