Tesla comes under pressure from NY Retirement Fund over DFEH systemic racism claims

The New York State Common Retirement Fund is now urging Texas-based electric vehicle maker Tesla to disclose how much the company is spending to settle claims related to sexual harassment and racial discrimination. The Fund’s demands were filed in a shareholder proposal last week after the California Department of Fair Jobs and Housing (DFEH) filed its high-profile racism case against Tesla.

Pursuant to the resolution outlined in the Fund’s shareholder proposal, it would be preferable for Tesla to release an annual report showing how much it has paid in settlements related to harassment and discrimination complaints. The Fund also urged Tesla to provide details on the progress it has made in reducing the time it takes to resolve grievances. The electric vehicle maker has been asked to disclose the number of pending cases it is seeking to rectify internally and through litigation.

The NY Pension Fund described its proposal in the following section:

“Shareholders call on the Tesla, Inc. Board of Directors to oversee the preparation of an annual public report describing and quantifying the effectiveness and results of the company’s efforts to prevent harassment and discrimination against protected categories of employees, including but not limited to sexual harassment and racial discrimination.

“The report should disclose the company’s progress on relevant metrics and targets, such as: (a) the total number and total dollar amount of disputes settled by the company related to abuse, harassment or discrimination based on race, religion, gender, national origin, age, disability, genetic information, military status, gender identity, or sexual orientation; (b) progress company towards reducing the average time it takes to resolve complaints of sexual harassment or discrimination, either through internal processes or through litigation; and (c) the total number of complaints of harassment or ongoing discrimination that the company seeks to resolve through internal processes or litigation.

“This report must not include the names of accusers or details of their settlements without their consent and must be prepared at reasonable cost and omit any proprietary, privileged or breach of contractual information.”

These items of information, in the Fund’s view, are important to shareholders. This is especially true since civil rights violations could easily lead to significant costs for the electric vehicle manufacturer. A good example is the $137 million jury verdict against Tesla, which was announced following a lawsuit filed by a former employee who accused the company of racial discrimination. Tesla is currently challenging the jury’s verdict of $137, which U.S. District Judge William Orrick described as “extremely high.”

The NY Pension Fund explained this in the following section:

“Information regarding complaints, disputes and settlements (individually and in aggregate) is of great interest and often important to investors. The SEC has given increased attention to human capital management issues, as reflected in its rules of 2020 and Chairman Gensler’s public comments on the upcoming additional disclosure proposals and characterization of labor as a “key asset. Several high-profile derivative lawsuits have settled recently, including at Twentieth Century Fox, Wynn Resorts and Alphabet, alleging that boards failed in their duties for failing to protect employees from discrimination and harassment, hurting companies and their shareholders.

“A report like the one requested would help shareholders assess whether the Company is improving its workforce management. Violations of civil rights in the workplace can result in substantial costs to businesses, including fines and penalties, legal fees, costs related to absenteeism, and reduced productivity. A company’s inability to properly manage its workforce can damage corporate goodwill, make it more difficult to retain and recruit employees, and jeopardize relationships with customers and partners.

The New York State Common Retirement Fund is among the company’s shareholders who decided to press Tesla following the California DFEH lawsuit. Other notable shareholders in the electric vehicle maker, such as Baron Capital, Vanguard Group Inc., BlackRock Inc., Capital Group, the California Public Employees’ Retirement System and Fidelity Investments, have so far remained silent on the matter. Tesla has also not released a response to the NY Pension Fund’s proposal, although the company has outlined its position against the DFEH racism case in a blog post posted on its website.

In its blog post, Tesla noted that the DFEH has so far declined to provide the company with specific allegations or a factual basis for its lawsuit. The electric vehicle maker also noted that over the past five years, the DFEH had been asked almost 50 times to investigate the company, but each one was shut down, with the agency having no found no fault in Tesla.

“Over the past five years, the DFEH has been approached nearly 50 times by individuals who believe they have been discriminated against or harassed to investigate Tesla. At every opportunity, when the DFEH closed an investigation, it found no misconduct against Tesla. It therefore strains the credibility of the agency to allege now, after a three-year investigation, that systematic racial discrimination and harassment somehow existed at Tesla. A narrative told by the DFEH and a handful of corporate complainants to generate publicity is not factual evidence,” Tesla noted.

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Tesla comes under pressure from NY Retirement Fund over DFEH systemic racism claims






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