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An Open Letter to Elon Musk

Image Credits: Ringo H.W. Chiu / AP

With four impressive quarters of earnings, sky rocketing share prices and a recent announcement of a stock split, many thought Tesla a strong contender to join the S&P this month. Those with shorts were relieved, while long term inventors like myself understood the quality of the earnings will be important criteria for future inclusion. With less than two weeks until much anticipated Battery Day-- and Tesla’s annual shareholder meeting-- I urge its Board of Directors, its CEO, and its shareholders to consider an important way Tesla could improve, making it an even stronger contender for inclusion, and worthy of future investment. May Mr. Musk take a leading stand for a diverse and inclusive workplace.

Fan or not, many credit Elon Musk for innovation after innovation, significantly disrupting the automobile industry as we know it. From residential solar panels, to the battery components, to electric vehicles, Tesla represents and leads with innovation across the renewable energy sector. What Tesla is not leading in at this time, is its treatment of employees and its ability to create a positive company culture. With recent media covering both racial and gender based discrimination, and a company policy of using mandatory arbitration as the only avenue for redress, I urge its Board of Directors to act on this aspect of the company’s growth and reduce this material risk to Tesla’s future earnings.

Last May Elon Musk tweeted: “At Space X we make spacecraft with life support systems and our Model Y car has sophisticated HVAC systems.” Yet scant breathing room seems to exist for women and other marginalized groups whose 21 pages of single-spaced case names list discrimination filings against Tesla over the last three years. As one of the most innovative companies in America, I urge Tesla to lead in ending the outdated practice of mandatory arbitration to adjudicate these cases. Often such arbitration is handled by retired judges who skew male and white, and repeatedly preside over cases at the companies that contract them-- making the practice of arbitration biased toward the corporation. Also problematic, mandatory arbitration keeps decisions secret and seals facts about company misconduct, reducing the possibility of perpetrators being held accountable.

In 2018 Attorneys General of all 50 states agreed mandatory arbitration should end for sexual harassment cases. They wrote: “secrecy requirements silence victims and protect perpetrators.” The Equal Employment Opportunity Commission concurred: mandatory arbitration “can prevent employees from learning about similar concerns by others in the workplace.” While many CEOs across the country have made bold pledges and commitments to support racial equity and to increase employee diversity, Elon Musk has not so much as re-visited his May 2017 statement sent after employees publicized their experience with racial slurs. His email advised workers to not “intentionally allow someone to feel excluded, uncomfortable or unfairly treated. Sometimes these things happen unintentionally, in which case you should apologize. In fairness, if someone is a jerk to you, but sincerely apologizes, it is important to be thick-skinned and accept that apology. If you are part of a less represented group, you don’t get a fee pass on being a jerk yourself.”

Is being thick-skinned the answer to work at Tesla? Tesla is not alone in confronting these issues. Racial and sexual bias, both conscious and unconscious, pervades the American workplace; in that Tesla is no pioneer. A 2019 Deloitte Inclusion Survey of 3000 workers in companies with more than 1000 employees found that nearly 64% felt they experienced bias or witnessed it in the previous year. Fully 63% said they experienced bias at least once a month, 70% of all surveyed workers said bias negatively impacted their productivity, and 84% said it made them feel less happy or secure in their jobs. Collaborative teamwork among diverse workers is necessary for mote widening innovation and increased production. Despite investor requests, Tesla has thus far refused to report any metrics on employee diversity.

Last year a study by the Wall St. Journal found revenue 19% higher in companies with high diversity in leadership. The 20 most diverse companies of the S&P 500 averaged an annual 5-year stock return 5.8% higher than the least diverse companies. As a top tech innovator, investors are counting on Tesla to take a look under the hood and examine its own inner workings, and not only for investors’ sake or the luster of its brand. To attract and keep valuable workers, Tesla may need to make some changes, first by eschewing required agreements that bind employees to forced, secretive mandatory arbitration. We at Nia have voiced our concerns in the form of a shareholder proposal asking the Board to evaluate the impact of secretive, forced arbitration on its company culture and its ability to attract and retain top talent. Tesla's Annual Meeting is coming up September 22. That’s also the much anticipated Battery Day. For Tesla to truly be a trailblazer, we need to see it leading in promoting racial and gender equity. May this bedrock of innovation also set a high standard for a diverse and inclusive work environment.

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