Tesla directors get softer support, shareholder proposal gains traction

(Reuters) -Electric carmaker Tesla Inc on Wednesday reported lower support than usual for two directors at its recent shareholder meeting, and greater support for a call to review the company’s use of mandatory arbitration after a court decision in favor of a temporary employee who accused Tesla of racial discrimination.

The votes indicated growing shareholder dissatisfaction at the company.

In a securities filing Tesla said support for a shareholder resolution on how it handles arbitration matters rose to 46% of votes cast at its annual meeting last week, from 27% for a similar proposal in 2020. Both directors up for election this year also received less support than any did last year.

The nonbinding resolution on arbitration had asked Tesla’s board to study the impact of its use of mandatory arbitration to resolve workplace complaints of harassment and discrimination. The issue drew more focus after a jury award of $137 million to a Tesla contract worker last week over workplace racism.

Tesla had opposed the resolution, arguing arbitration can benefit both parties of a dispute. The company did not immediately comment on the shareholder vote.

Other technology companies have scaled back or eliminated mandatory arbitration including Uber Technologies Inc and Google parent Alphabet Inc. In April, nearly half of Goldman Sachs Group Inc shareholders voted in favor of examining the bank’s use of mandatory arbitration.

Kristin Hull, CEO of Nia Impact Capital who filed the resolution, called the higher support this year “a huge improvement as we educate folks on why this matters for building an innovative team with a diverse and inclusive company culture.”

Tesla CEO Elon Musk owns 23% of Tesla’s shares, according to its proxy statement, meaning the measure would have passed aside from his votes, Hull said.

Another measure tied to racial issues won a majority of support, with 57% of votes cast. Filed by Calvert Research and Management the measure asked Tesla to report in detail on its diversity and inclusion efforts. Tesla had opposed the measure, citing current and future reporting plans.

Wednesday’s filing showed among the two company directors up for re-election last week, James Murdoch received support from 70% of votes cast, and Kimbal Musk, Elon Musk’s brother, received support from 80% of votes cast.

Directors at large U.S. companies typically receive 90% support or more. At Tesla, “the director nominees in question should do some heavy thinking about the quality of their oversight and how they/the company can better communicate that to the market,” said corporate governance consultant Francis Byrd of Alchemy Strategies Partners.

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