UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant 

Filed by a Party other than the Registrant 

Check the appropriate box:

 

Preliminary Proxy Statement

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6 (e) (2))

 

 

Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material Pursuant to Section 240.14a-11 (c) or Section 240.14a-12

TESLA, INC.

 

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

No fee required.

 

 

Fee paid previously with preliminary materials.

 

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


 

 

NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON AUGUST 4, 2022

Dear Tesla Stockholders:

We are pleased to inform you that our 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) will be held on Thursday, August 4, 2022, at 4:30 p.m. Central Time, both virtually via the Internet at www.meetnow.global/MJKP2QF and in person for a limited number of stockholders at Tesla’s Gigafactory Texas located at 1 Tesla Road, Austin, TX 78725. For your convenience, we will also webcast the 2022 Annual Meeting live via the Internet at www.tesla.com/2022shareholdermeeting. The agenda of the 2022 Annual Meeting will be the following items of business, which are more fully described in this proxy statement:

 

Agenda Item

  

Board Vote Recommendation

 

Tesla Proposals

 

1.

A Tesla proposal to elect two Class III directors to serve for a term of three years, subject to the approval of Proposal Two, or until their respective successors are duly elected and qualified (“Proposal One”).

FOR

 

2.

A Tesla proposal for adoption of amendments to certificate of incorporation to reduce director terms to two years (“Proposal Two”).

FOR

 

3.

A Tesla proposal for adoption of amendments to certificate of incorporation and bylaws to eliminate applicable supermajority voting requirements (“Proposal Three”).

FOR

 

 

4.

A Tesla proposal for adoption of amendments to certification of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares (“Proposal Four”).

FOR

 

 

 

5.

A Tesla proposal to ratify the appointment of PricewaterhouseCoopers LLP as Tesla’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (“Proposal Five”).

FOR

 

 

Stockholder Proposals

 

 

6.

A stockholder proposal regarding proxy access, if properly presented (“Proposal Six”).

AGAINST

 

 

7.

A stockholder proposal regarding annual reporting on anti-harassment and discrimination efforts, if properly presented (“Proposal Seven”).

AGAINST

 

 

8.

A stockholder proposal regarding annual reporting on board diversity, if properly presented (“Proposal Eight”).

AGAINST

 

 

9.

A stockholder proposal regarding reporting on employee arbitration, if properly presented (“Proposal Nine”).

AGAINST

 

 

 

10.

A stockholder proposal regarding reporting on lobbying, if properly presented (“Proposal Ten”).  

AGAINST

 

 

 

11.

A stockholder proposal regarding adoption of a freedom of association and collective bargaining policy, if properly presented (“Proposal Eleven”).  

AGAINST

 

 

 

12.

A stockholder proposal regarding additional reporting on child labor, if properly presented (“Proposal Twelve”).  

AGAINST

 

 

 

13.

A stockholder proposal regarding additional reporting on water risk, if properly presented (“Proposal Thirteen”).  

AGAINST

 


 

 

All stockholders as of close of business on June 6, 2022 are cordially invited to attend the 2022 Annual Meeting virtually via the Internet at www.meetnow.global/MJKP2QF. We will also accommodate a limited number of stockholders in person at Gigafactory Texas.

We are providing our proxy materials to our stockholders over the Internet. This reduces our environmental impact and our costs while ensuring our stockholders have timely access to this important information. Accordingly, stockholders of record at the close of business on June 6, 2022 will receive a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) with details on accessing these materials. Beneficial owners of Tesla common stock at the close of business on June 6, 2022 will receive separate notices on behalf of their brokers, banks or other intermediaries through which they hold shares.

Your vote is very important. Whether or not you plan to attend the 2022 Annual Meeting, we encourage you to read the proxy statement and vote as soon as possible. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers About the 2022 Annual Meeting and Procedural Matters” and the instructions on the Notice of Internet Availability or the notice you receive from your broker, bank or other intermediary.

Thank you for your ongoing support of Tesla.

 

 

 

 

 

Elon Musk

 

Robyn Denholm

 

 

 

 

 

 

Although we currently intend to hold the 2022 Annual Meeting on August 4, 2022 both virtually via the Internet and in person for a limited number of stockholders, we will continue to monitor public health and travel safety protocols required or recommended by federal, state and local governments. If necessary or advisable to protect our personnel and stockholders, we will change the date, time, location and/or format of the 2022 Annual Meeting and/or require specific attendance conditions or procedures. If we do so, we will publicly announce any such changes in advance, such as through a press release and/or a filing with the Securities and Exchange Commission.

 

 


 

 

 

PROXY STATEMENT

FOR 2022 ANNUAL MEETING OF STOCKHOLDERS

Table of Contents

 

 

 

Page

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on August 4, 2022

 

1

Questions and Answers About the 2022 Annual Meeting and Procedural Matters

 

1

Proposal One — Tesla Proposal for Election of Directors

 

10

General

 

10

Nominees for Class III Directors

 

10

Information Regarding the Board and Director Nominees

 

10

Proposal Two — Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Reduce Director Terms to Two Years

 

14

General

 

14

Summary of the Proposed Amendment

 

14

Reasons for the Proposed Amendment

 

15

Proposal Three — Tesla Proposal for Adoption of Amendments to Certificate of Incorporation and Bylaws to Eliminate Applicable Supermajority Voting Requirements

 

16

General

 

16

Summary of the Proposed Amendments

 

16

Reasons for the Proposed Amendments

 

17

Proposal Four — Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock

 

18

General

 

18

Summary of the Proposed Amendment

 

18

Reasons for the Proposed Amendment

 

18

Proposal Five — Tesla Proposal for Ratification of Appointment of Independent Registered Public Accounting Firm

 

20

General

 

20

Principal Accounting Fees and Services

 

20

Pre-Approval of Audit and Non-Audit Services

 

20

Proposal Six — Stockholder Proposal Regarding Proxy Access

 

21

Stockholder Proposal and Supporting Statement

 

21

Opposing Statement of the Board

 

22

Proposal Seven — Stockholder Proposal Regarding Annual Reporting on Anti-Harassment and Discrimination Efforts

 

24

Stockholder Proposal and Supporting Statement

 

24

Opposing Statement of the Board

 

25

Proposal Eight— Stockholder Proposal Regarding Annual Reporting on Board Diversity

 

26

Stockholder Proposal and Supporting Statement

 

26

Opposing Statement of the Board

 

27

Proposal Nine — Stockholder Proposal Regarding Reporting on Employee Arbitration

 

28

Stockholder Proposal and Supporting Statement

 

28

Opposing Statement of the Board

 

29

Proposal Ten — Stockholder Proposal Regarding Reporting on Lobbying

 

30

Stockholder Proposal and Supporting Statement

 

30

Opposing Statement of the Board

 

31

Proposal Eleven— Stockholder Proposal Regarding Adoption of a Freedom of Association and Collective Bargaining Policy

 

32

Stockholder Proposal and Supporting Statement

 

32

Opposing Statement of the Board

 

33

Proposal Twelve— Stockholder Proposal Regarding Additional Reporting on Child Labor

 

34

Stockholder Proposal and Supporting Statement

 

34

Opposing Statement of the Board

 

35

Proposal Thirteen— Stockholder Proposal Regarding Additional Reporting on Water Risk

 

36

Stockholder Proposal and Supporting Statement

 

36

Opposing Statement of the Board

 

37

i


 

Corporate Governance

 

38

Investor Outreach

 

38

Code of Business Ethics and Corporate Governance Guidelines

 

38

Director Independence

 

38

Board Leadership Structure

 

39

Board Role in Risk Oversight

 

39

Board Meetings and Committees

 

40

Compensation Committee Interlocks and Insider Participation

 

42

Process and Considerations for Nominating Board Candidates

 

42

Board Diversity

 

43

Attendance at Annual Meetings of Stockholders by the Board

 

43

Stock Transactions

 

43

Contacting the Board

 

44

Executive Officers

 

45

Executive Compensation

 

46

Compensation Discussion and Analysis

 

46

Compensation Committee Report

 

54

Summary Compensation Table

 

55

Pay Ratio Disclosure

 

55

Grants of Plan-Based Awards in 2021

 

56

Outstanding Equity Awards at 2021 Fiscal Year-End

 

56

2021 Option Exercises and Stock Vested

 

58

Potential Payments Upon Termination or Change in Control

 

58

Compensation of Directors

 

58

Pledging of Shares

 

60

Equity Compensation Plan Information

 

60

Certain Relationships and Related Party Transactions

 

61

Review of Related Party Transactions

 

61

Related Party Transactions

 

61

Delinquent Section 16(a) Reports

 

63

Ownership of Securities

 

64

Audit Committee Report

 

66

Other Matters

 

67

Appendix A – Amended and Restated Certificate of Incorporation of Tesla, Inc.

 

A-1

Appendix B – Amended and Restated Bylaws of Tesla, Inc.

 

B-1

 

ii


 

 

TESLA, INC.

1 Tesla Road

Austin, TX 78725

PROXY STATEMENT

FOR 2022 ANNUAL MEETING OF STOCKHOLDERS

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON AUGUST 4, 2022

The proxy statement and annual report are available at www.envisionreports.com/TSLA.

In accordance with U.S. Securities and Exchange Commission (the “SEC”) rules, we are providing access to our proxy materials over the Internet to our stockholders rather than in paper form, which reduces the environmental impact of our annual meeting and our costs.

Accordingly, if you are a stockholder of record, a one-page Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) has been mailed to you on or about       , 2022. Stockholders of record may access the proxy materials on the website listed above or request a printed set of the proxy materials be sent to them by following the instructions in the Notice of Internet Availability. The Notice of Internet Availability also explains how you may request that we send future proxy materials to you by e-mail or in printed form by mail. If you choose the e-mail option, you will receive an e-mail next year with links to those materials and to the proxy voting site. We encourage you to choose this e-mail option, which will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources. Your election to receive proxy materials by e-mail or in printed form by mail will remain in effect until you terminate it.

If you are a beneficial owner, you will not receive a Notice of Internet Availability directly from us, but your broker, bank or other intermediary will forward you a notice with instructions on accessing our proxy materials and directing that organization how to vote your shares, as well as other options that may be available to you for receiving our proxy materials.

Please refer to the question entitled “What is the difference between holding shares as a stockholder of record or as a beneficial owner?” below for important details regarding different forms of stock ownership.

QUESTIONS AND ANSWERS ABOUT THE 2022 ANNUAL MEETING AND PROCEDURAL

MATTERS

 

Although we currently intend to hold the 2022 Annual Meeting on August 4, 2022 both virtually via the Internet and in person for a limited number of stockholders, we will continue to monitor public health and travel safety protocols required or recommended by federal, state and local governments. If necessary or advisable to protect our personnel and stockholders, we will change the date, time, location and/or format of the 2022 Annual Meeting and/or require specific attendance conditions or procedures. If we do so, we will publicly announce any such changes in advance, such as through a press release and/or a filing with the SEC.

Q:

Why am I receiving these proxy materials?

A:

The Board of Directors (the “Board”) of Tesla, Inc. (the “Company,” “Tesla,” “we,” “us” or “our”) has made available on the Internet or is providing to you in printed form these proxy materials. We do this in order to solicit voting proxies for use at Tesla’s 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”), to be held Thursday, August 4, 2022, at 4:30 p.m. Central Time, and at any adjournment or postponement thereof. If you are a stockholder of record and you submit your proxy to us, you direct certain of our officers to vote your shares of Tesla common stock in accordance with the voting instructions in your proxy. If you are a beneficial owner and you follow the voting instructions provided in the notice you receive from your broker, bank or other intermediary, you direct such organization to vote your shares in accordance with your instructions. These proxy materials are being made available or distributed to you on or about       , 2022. As a stockholder, you are invited to attend the 2022 Annual Meeting and we request that you vote on the proposals described in this proxy statement.

(* Please see also the notice at the top of this section.)

1


 

Q:

Can I attend the 2022 Annual Meeting?

A:

Tesla expects to accommodate a limited number of stockholders in person at the 2022 Annual Meeting due to capacity restrictions. To maximize fairness, Tesla will conduct a random drawing to determine stockholders’ eligibility to attend in person. If you were a stockholder of record or a beneficial owner on June 6, 2022 (the “Record Date”), you may apply for this drawing at                   . The drawing will be held strictly in accordance with the rules and terms described at such website, and we will be unable to make any exceptions.

In addition, you may attend the 2022 Annual Meeting virtually via the Internet at www.meetnow.global/MJKP2QF. The meeting will begin promptly at 4:30 p.m. Central Time. If you choose to attend the 2022 Annual Meeting virtually via the Internet, we encourage you to access the meeting prior to the start time leaving ample time for log-in.  

(* Please see also the notice at the top of this section.)

Q:

Where is the 2022 Annual Meeting?

A:

The 2022 Annual Meeting will be held at Gigafactory Texas located at 1 Tesla Road, Austin, TX 78725 and virtually via the Internet at www.meetnow.global/MJKP2QF. Stockholders who are selected in the random drawing may request directions to the 2022 Annual Meeting in person by calling (512) 516-8177 or by contacting our investor relations at ir@tesla.com.

(* Please see also the notice at the top of this section.)

Q:

Will I be able to view the 2022 Annual Meeting via the Internet?

A:

Yes. You may attend the 2022 Annual Meeting virtually via the Internet at www.meetnow.global/MJKP2QF. We will also webcast the 2022 Annual Meeting live via the Internet at www.tesla.com/2022shareholdermeeting.

(* Please see also the notice at the top of this section.)

Q:

Who is entitled to vote at the 2022 Annual Meeting?

A:

You may vote your shares of Tesla common stock if you owned your shares at the close of business on the Record Date. You may cast one vote for each share of common stock held by you as of the Record Date on all matters presented. See the questions entitled “How can I vote my shares in person at the 2022 Annual Meeting?”, “How can I vote my shares virtually at the 2022 Annual Meeting?” and “How can I vote my shares without attending the 2022 Annual Meeting?” below for additional details.

As of the Record Date, holders of common stock were eligible to cast an aggregate of 1,036,390,569 votes at the 2022 Annual Meeting.

Q:

What is the difference between holding shares as a stockholder of record or as a beneficial owner?

A:

You are the “stockholder of record” of any shares that are registered directly in your name with Tesla’s transfer agent, Computershare Trust Company, N.A. A minority of our stockholders are stockholders of record. We have sent the Notice of Internet Availability directly to you if you are a stockholder of record. As a stockholder of record, you may grant your voting proxy directly to Tesla or to a third party or vote in person at the 2022 Annual Meeting as described more fully below.

You are the “beneficial owner” of any shares (which are considered to be held in “street name”) that are held on your behalf by a brokerage account or by a bank or another intermediary that is the stockholder of record for those shares. The vast majority of our stockholders are beneficial owners. If you are a beneficial owner, you did not receive a Notice of Internet Availability directly from Tesla, but your broker, bank or other intermediary forwarded you a notice together with voting instructions for directing that organization how to vote your shares. You may also attend the 2022 Annual Meeting in person (if you are eligible per our random drawing to attend in person), but because a beneficial owner is not a stockholder of record, you may not vote in person at the 2022 Annual Meeting unless you obtain a “legal proxy” from the organization that holds your shares, giving you the right to vote the shares at the 2022 Annual Meeting.

2


 

(* Please see also the notice at the top of this section.)

Q:

How can I vote my shares in person at the 2022 Annual Meeting?

A:

You may vote shares for which you are the stockholder of record in person at the 2022 Annual Meeting (if you are eligible per our random drawing to attend in person). You may vote shares for which you are the beneficial owner in person (if you are eligible per our random drawing to attend in person) at the 2022 Annual Meeting only if you obtain a “legal proxy” from the broker, bank or other intermediary that holds your shares, giving you the right to vote the shares. Even if you plan to attend the 2022 Annual Meeting, and are eligible per our random drawing, we recommend that you also direct the voting of your shares as described below in the question entitled “How can I vote my shares without attending the 2022 Annual Meeting?” so that your vote will be counted even if you later decide not to attend the 2022 Annual Meeting.

(* Please see also the notice at the top of this section.)

Q:

How can I vote my shares virtually at the 2022 Annual Meeting?

A:

In order to join, submit questions and vote virtually via the Internet at the 2022 Annual Meeting, you will need a 15-digit secure “control number” unique to you, which you may obtain as follows.

 

If you are a “stockholder of record” with shares registered directly in your name with our transfer agent, Computershare Trust Company (a minority of Tesla stockholders), you can find the control number on the Notice of Internet Availability or paper proxy card that was sent to you.

 

If you are a beneficial owner of shares held in street name, you may:

 

o

Register in advance to obtain a control number. Please ask your broker, bank or organization for a “legal proxy” for the 2022 Annual Meeting and submit a copy of it from your e-mail address with “Legal Proxy” in the subject line to legalproxy@computershare.com or by mail to Computershare at Tesla, Inc. Legal Proxy, P.O. Box 43001, Providence, RI, 02940-3001. If your request is received no later than 4:00 p.m. Central Time on July 29, 2022, you will receive a confirmation e-mail with your control number; or

 

o

Use the control number received with your voting instruction form. Please note, however, that this option is intended to be provided as a convenience to beneficial owners only, and there is no guarantee this option will be available for every type of beneficial owner voting control number. Please go to www.meetnow.global/MJKP2QF for more information on the available options and registration instructions.

Even if you plan to attend the 2022 Annual Meeting virtually via the Internet, we recommend that you also direct the voting of your shares as described below in the question entitled “How can I vote my shares without attending the 2022 Annual Meeting?” so that your vote will be counted even if you later decide not to attend the 2022 Annual Meeting.

(* Please see also the notice at the top of this section.)

Q:

How can I vote my shares without attending the 2022 Annual Meeting?

A:

Whether you hold shares as a stockholder of record or a beneficial owner, you may direct how your shares are voted without attending the 2022 Annual Meeting by the following means:

By Internet—Stockholders of record with Internet access may submit proxies by following the voting instructions on the Notice of Internet Availability until 1:00 a.m., Central time on August 4, 2022. If you are a beneficial owner of shares held in street name, please check the voting instructions in the notice provided by your broker, bank or other intermediary for Internet voting availability.

By telephone—Stockholders of record who live in the United States (or its territories) or Canada may request a paper proxy card from Tesla by following the procedures in the Notice of Internet Availability, and submit proxies by following the applicable “Phone” instructions on the proxy card. If you are a beneficial owner of shares held in street name, please check the voting instructions in the notice provided by your broker, bank or other intermediary for telephone voting availability.

By mail—Stockholders of record may request a paper proxy card from Tesla by following the procedures in the Notice of Internet Availability. If you elect to vote by mail, please complete, sign and date the proxy card where indicated and return it in the prepaid envelope included with the proxy card. Proxy cards submitted by mail must be received by the time of the meeting

3


 

in order for your shares to be voted. If you are a beneficial owner of shares held in street name, you may vote by mail by completing, signing and dating the voting instructions in the notice provided by your broker, bank or other intermediary and mailing it in the accompanying pre-addressed envelope.

Q:

How many shares must be present or represented to conduct business at the 2022 Annual Meeting?

A:

The stockholders of record of a majority of the shares entitled to vote at the 2022 Annual Meeting must either (1) be present in person or virtually via the Internet at the 2022 Annual Meeting or (2) have properly submitted a proxy in order to constitute a quorum at the 2022 Annual Meeting.

Under the General Corporation Law of the State of Delaware, abstentions and broker “non-votes” are counted as present, and therefore are included for the purposes of determining whether a quorum is present at the 2022 Annual Meeting. A broker “non-vote” occurs when an organization that is the stockholder of record that holds shares for a beneficial owner, and which is otherwise counted as present or represented by proxy, does not vote on a particular proposal because that organization does not have discretionary voting power under applicable regulations to vote on that item and has not received specific voting instructions from the beneficial owner.

Q:

What proposals will be voted on at the 2022 Annual Meeting?

A:

The proposals scheduled to be voted on at the 2022 Annual Meeting are:

Tesla Proposals

 

A Tesla proposal to elect two Class III directors listed in this proxy statement to serve for a term of three years, subject to the approval of Proposal Two, or until their respective successors are duly elected and qualified (Proposal One);

 

A Tesla proposal for adoption of amendments to certificate of incorporation to reduce director terms to two years (Proposal Two);

 

A Tesla proposal for adoption of amendments to certificate of incorporation and bylaws to eliminate applicable supermajority voting requirements (Proposal Three);

 

A Tesla proposal for adoption of amendments to certification of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares (Proposal Four);

 

A Tesla proposal to ratify the appointment of PricewaterhouseCoopers LLP as Tesla’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal Five);

Stockholder Proposals

 

A stockholder proposal regarding proxy access, if properly presented (Proposal Six);

 

A stockholder proposal regarding annual reporting on anti-harassment and discrimination efforts, if properly presented (Proposal Seven);

 

A stockholder proposal regarding annual reporting on board diversity, if properly presented (Proposal Eight);

 

A stockholder proposal regarding reporting on employee arbitration, if properly presented (Proposal Nine);

 

A stockholder proposal reporting on lobbying, if properly presented (Proposal Ten);

 

A stockholder proposal regarding adoption of a freedom of association and collective bargaining policy, if properly presented (Proposal Eleven);

 

A stockholder proposal regarding additional reporting on child labor, if properly presented (Proposal Twelve); and

 

A stockholder proposal regarding additional reporting on water risk, if properly presented (Proposal Thirteen).   

4


 

 

Q:

What is the voting requirement to approve each of the proposals?

A:

 

Proposal

 

Vote Required

 

Broker

Discretionary

Voting Allowed

Proposal One—Tesla proposal to elect two Class III directors

 

Majority of the shares present in person or represented by proxy and entitled to vote on the election of directors

 

No

Proposal Two— Tesla proposal for adoption of amendments to certificate of incorporation to reduce director terms to two years

 

66 2/3% or greater of the total outstanding shares entitled to vote

 

No

Proposal Three— Tesla proposal for adoption of amendments to certificate of incorporation and bylaws to eliminate applicable supermajority voting requirements

 

66 2/3% or greater of the total outstanding shares entitled to vote

 

No

Proposal Four— Tesla proposal for adoption of amendments to certification of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares

 

Majority of the total outstanding shares entitled to vote

 

Yes

Proposal Five—Tesla proposal to ratify the appointment of independent registered public accounting firm

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

Yes

Proposal Six—Stockholder proposal regarding proxy access, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Seven—Stockholder proposal regarding annual reporting on anti-harassment and discrimination efforts, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Eight—Stockholder proposal annual reporting on board diversity, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Nine— Stockholder proposal regarding reporting on employee arbitration, if properly presented  

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Ten— Stockholder proposal regarding reporting on lobbying, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Eleven— Stockholder proposal regarding adoption of a freedom of association and collective bargaining policy, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Twelve— Stockholder proposal regarding additional reporting on child labor, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

Proposal Thirteen— Stockholder proposal regarding additional reporting on water risk, if properly presented

 

Majority of the shares present in person or represented by proxy and entitled to vote on the subject matter

 

No

 

Q:

How are votes counted?

A:

All shares entitled to vote and that are voted in person at the 2022 Annual Meeting will be counted, and all shares represented by properly executed and unrevoked proxies received prior to the 2022 Annual Meeting will be voted at the 2022 Annual Meeting as indicated in such proxies. You may vote “FOR,” “AGAINST” or “ABSTAIN” on each of the nominees for election as director (Proposal One), and on each of Proposals Two, Three, Four, Five, Six, Seven, Eight, Nine, Ten, Eleven, Twelve and Thirteen.

5


 

With respect to the election of directors, Tesla’s bylaws provide that in an uncontested election, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter is required to elect a director. Abstentions with respect to any director nominee (Proposal One) or any of Proposals Two, Three, Four, Five, Six, Seven, Eight, Nine, Ten, Eleven, Twelve and Thirteen will have the same effect as a vote against such nominee or Proposal. Consequently, each director nominee will be elected, and each of Proposals Five, Six, Seven, Eight, Nine, Ten, Eleven, Twelve and Thirteen will be approved or ratified, as applicable, only if the number of shares voted “FOR” such nominee or Proposal exceeds the total number of shares voted “AGAINST” or to “ABSTAIN” with respect to such nominee or Proposal.

With respect to each of Proposals Two and Three, the affirmative vote of at least 66 2/3% of the total outstanding shares entitled to vote, regardless of whether such shares are present in person or represented by proxy at the 2022 Annual Meeting, is required to approve such Proposal, and with respect to Proposal Four, the affirmative vote of at least a majority of the total outstanding shares entitled to vote, regardless of whether such shares are present in person or represented by proxy at the 2022 Annual Meeting, is required to approve such Proposal. Your failure to vote or your abstention with respect to any of Proposals Two, Three and Four will have the same effect as a vote against such Proposal.

Q:

What is the effect of not casting a vote or if I submit a proxy but do not specify how my shares are to be voted?

A:

If you are a stockholder of record and you do not vote by proxy card, by telephone or via the Internet before the 2022 Annual Meeting, or in person or virtually via the Internet at the 2022 Annual Meeting, your shares will not be voted at the 2022 Annual Meeting. If you submit a proxy, but you do not provide voting instructions, your shares will be voted in accordance with the recommendation of the Board (or, if there is no recommendation of the Board on a Proposal, your shares will not be voted on such Proposal).

If you are a beneficial owner and you do not provide the organization that is the stockholder of record for your shares with voting instructions, the organization will determine if it has the discretionary authority to vote on the particular matter. Under applicable regulations, brokers and other intermediaries have the discretion to vote on routine matters, such as Proposals Four and Five, but do not have discretion to vote on non-routine matters such as Proposals One, Two, Three, Six, Seven, Eight, Nine, Ten, Eleven, Twelve or Thirteen. Therefore, if you do not provide voting instructions to that organization, it may vote your shares only on Proposals Four and Five and any other routine matters properly presented for a vote at the 2022 Annual Meeting.

Q:

What is the effect of a broker “non-vote”?

A:

An organization that holds shares of Tesla’s common stock for a beneficial owner will have the discretion to vote on routine proposals if it has not received voting instructions from the beneficial owner at least ten days prior to the 2022 Annual Meeting. A broker “non-vote” occurs when a broker, bank or other intermediary that is otherwise counted as present or represented by proxy does not receive voting instructions from the beneficial owner and does not have the discretion to vote the shares. A broker “non-vote” will be counted for purposes of calculating whether a quorum is present at the 2022 Annual Meeting, but will not be counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote with respect to a particular proposal as to which that broker “non-vote” occurs. Thus, a broker “non-vote” will not impact our ability to obtain a quorum for the 2022 Annual Meeting and will not otherwise affect the approval by a majority of the votes present in person or represented by proxy and entitled to vote of any of the Proposals.

Q:

How does the Board recommend that I vote?

A:

The Board recommends that you vote your shares:

 

FOR” the two nominees for election as Class III directors (Proposal One);

 

FOR” the adoption of amendments to certificate of incorporation to reduce director terms to two years (Proposal Two);

 

FOR” the adoption of amendments to certificate of incorporation and bylaws to eliminate applicable supermajority voting requirements (Proposal Three);

 

FOR” the adoption of amendments to certificate of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares (Proposal Four);

 

FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as Tesla’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal Five);

 

AGAINST” the approval of the stockholder proposal regarding proxy access (Proposal Six);

6


 

 

 

AGAINST” the approval of the stockholder proposal regarding annual reporting on anti-harassment and discrimination efforts (Proposal Seven);

 

AGAINST” the approval of the stockholder proposal regarding annual reporting on board diversity (Proposal Eight);

 

AGAINST” the approval of the stockholder proposal regarding reporting on employee arbitration (Proposal Nine);  

 

AGAINST” the approval of the stockholder proposal regarding reporting on lobbying (Proposal Ten);

 

AGAINST” the approval of the stockholder proposal regarding adoption of a freedom of association and collective bargaining policy (Proposal Eleven);

 

AGAINST” the approval of the stockholder proposal regarding additional reporting on child labor (Proposal Twelve); and

 

AGAINST” the approval of the stockholder proposal regarding additional reporting on water risk (Proposal Thirteen).

Q:

What happens if additional matters are presented at the 2022 Annual Meeting?

A:

If any other matters are properly presented for consideration at the 2022 Annual Meeting, including, among other things, consideration of a motion to adjourn the 2022 Annual Meeting to another time or place, the persons named as proxy holders, Elon Musk and Zachary Kirkhorn, or either of them, will have discretion to vote the proxies held by them on those matters in accordance with their best judgment. Tesla does not currently anticipate that any other matters will be raised at the 2022 Annual Meeting.

Q:

Can I change my vote?

A:

If you are a stockholder of record, you may change your vote (1) by submitting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the voting methods described above in the question entitled “How can I vote my shares without attending the 2022 Annual Meeting?,” (2) by providing a written notice of revocation to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Legal Department, with a copy sent by e-mail to shareholdermail@tesla.com, prior to your shares being voted, or (3) by attending the 2022 Annual Meeting and voting in person or virtually via the Internet, which will supersede any proxy previously submitted by you. However, merely attending the meeting will not cause your previously granted proxy to be revoked unless you specifically request it.

If you are a beneficial owner of shares held in street name, you may generally change your vote by (1) submitting new voting instructions to your broker, bank or other intermediary or (2) if you have obtained a “legal proxy” from the organization that holds your shares giving you the right to vote your shares, by attending the 2022 Annual Meeting and voting in person. However, please consult that organization for any specific rules it may have regarding your ability to change your voting instructions.

(* Please see also the notice at the top of this section.)

Q:

What should I do if I receive more than one Notice of Internet Availability, notice from my broker, bank or other intermediary, or set of proxy materials?

A:

You may receive more than one Notice of Internet Availability, notice from your broker, bank or other intermediary, or set of proxy materials, including multiple copies of proxy cards or voting instruction cards. For example, if you are a beneficial owner with shares in more than one brokerage account, you may receive a separate notice or voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one Notice of Internet Availability or proxy card. Please complete, sign, date and return each Tesla proxy card or voting instruction card that you receive, and/or follow the voting instructions on each Notice of Internet Availability or other notice you receive, to ensure that all your shares are voted.

Q:

Is my vote confidential?

A:

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Tesla or to third parties, except: (1) as necessary for applicable legal requirements, (2) to allow for the tabulation and certification of the votes and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy cards, which may be forwarded to Tesla management.

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Q:

Who will serve as inspector of election?

A:

The inspector of election will be Computershare Trust Company, N.A.

Q:

Where can I find the voting results of the 2022 Annual Meeting?

A:

We will publish final voting results in our Current Report on Form 8-K, which will be filed with the SEC and made available on its website at www.sec.gov within four (4) business days of the 2022 Annual Meeting.

Q:

Who will bear the cost of soliciting votes for the 2022 Annual Meeting?

A:

Tesla will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners for their reasonable expenses in forwarding solicitation material to those beneficial owners. Our directors, officers and employees may also solicit proxies in person or by other means. These directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses incurred in doing so.

Q:

What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

A:

You may submit proposals, including recommendations of director candidates, for consideration at future stockholder meetings.

For inclusion in Tesla’s proxy materials—Stockholders may present proper proposals for inclusion in Tesla’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing in a timely manner to:

Tesla, Inc.
1 Tesla Road
Austin, Texas 78725
Attention: Legal Department

with a copy sent by e-mail to shareholdermail@tesla.com.

Any correspondence that is not addressed precisely in accordance with the foregoing, including any correspondence directed to a specific individual, may not be received timely or at all, and we strongly recommend that you also send such correspondence by e-mail and verify that you receive a confirmation of receipt from Tesla.

In order to be included in the proxy statement for the 2023 annual meeting of stockholders, stockholder proposals must be received in accordance with the above instructions no later than     , provided that if the date of the 2023 annual meeting of stockholders is more than 30 days from the one-year anniversary of the 2022 Annual Meeting, the deadline will instead be a reasonable time before we begin to print and send our proxy materials for the 2023 annual meeting of stockholders. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

To be brought at annual meeting—In addition, you can find in Tesla’s bylaws an advance notice procedure for stockholders who wish to present certain matters, including nominations for the election of directors, at an annual meeting of stockholders without inclusion in Tesla’s proxy materials.

In general, Tesla’s bylaws provide that the Board will determine the business to be conducted at an annual meeting, including nominations for the election of directors, as specified in the Board’s notice of meeting or as properly brought at the meeting by the Board. However, a stockholder may also present at an annual meeting any business, including nominations for the election of directors, specified in a written notice properly delivered within the Notice Period (as defined below), if the stockholder held shares at the time of the notice and the record date for the meeting. Such notice should be delivered to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Legal Department, with a copy sent by e-mail to shareholdermail@tesla.com. The notice must contain specified information about the proposed business or nominees and about the proponent stockholder. If a stockholder who has delivered such a notice does not appear to present his or her proposal at the meeting, Tesla will not be required to present the proposal for a vote.

The “Notice Period” is the period not less than 45 days nor more than 75 days prior to the one-year anniversary of the date on which Tesla mailed its proxy materials to stockholders for the previous year’s annual meeting of stockholders. As a result, the

8


 

Notice Period for the 2023 annual meeting of stockholders will start on     , 2023 and end on     , 2023. However, if the date of the 2023 annual meeting of stockholders is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the 2022 Annual Meeting, the Notice Period will instead start 120 days prior to the 2023 annual meeting of stockholders and end on the later of (i) 90 days prior to such meeting or (ii) the 10th day following our first public announcement of the date of the 2023 annual meeting of stockholders.

This is only a summary of the advance notice procedure. Complete details regarding all requirements that must be met are found in our bylaws. You can obtain a copy of the relevant bylaw provisions by writing to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Legal Department, or to shareholdermail@tesla.com via e-mail, or by accessing Tesla’s filings on the SEC’s website at www.sec.gov.

All notices of proposals by stockholders, whether or not requested for inclusion in Tesla’s proxy materials, must be addressed precisely as prescribed in this section to be received timely or at all. We strongly recommend that you also send such correspondence by e-mail and verify that you receive a confirmation of receipt from Tesla.

Q:

How may I obtain a separate copy of the Notice of Internet Availability or the proxy materials?

A:

If you are a stockholder of record and share an address with another stockholder of record, each stockholder may not receive a separate copy of the Notice of Internet Availability or proxy materials. Stockholders may request to receive separate or additional copies of the Notice of Internet Availability or proxy materials by calling our Investor Relations department at (512) 516-8177 or by writing to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Investor Relations, or to ir@tesla.com. Upon such written or oral request, we will deliver promptly a separate copy of the Notice of Internet Availability and, if applicable, our proxy materials, to any stockholder at a shared address to which we delivered a single copy of any of these materials. Stockholders who share an address and receive multiple copies of the Notice of Internet Availability or proxy materials can also request to receive a single copy by following the instructions above.

Q:

Who can help answer my questions?

A:

Please contact our Investor Relations department by calling (512) 516-8177 or by writing to Tesla, Inc., 1 Tesla Road, Austin, TX 78725, Attention: Investor Relations, or to ir@tesla.com via email.


9


 

 

MANAGEMENT PROPOSALS

PROPOSAL ONE

TESLA PROPOSAL FOR ELECTION OF DIRECTORS

General

Tesla’s Board currently consists of eight members who are divided into three classes with staggered three-year terms. Our bylaws permit the Board to establish by resolution the authorized number of directors, and eight directors are currently authorized. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of an equal number of directors. However, if our stockholders approve Proposal Two at the 2022 Annual Meeting, the Board will thereafter be divided into two classes with staggered two-year terms, with directors distributed as equally between them as is possible. See “Proposal Two—Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Reduce Director Terms to Two Years” below for additional detail.

In June 2022, Lawrence J. Ellison, a Class III director, determined collectively with the Nominating and Corporate Governance Committee and the Board that he will not stand for re-election to the Board when his current term ends at the 2022 Annual Meeting. The Board currently expects to reduce the number of Board seats to seven upon the expiration of Mr. Ellison’s term at the 2022 Annual Meeting, and therefore votes or proxies may not be submitted for the election of more than two board seats. The Board and the Nominating and Corporate Governance Committee will continue to frequently evaluate the optimal size and composition of the Board to allow it to operate nimbly and efficiently, while maintaining new ideas, expertise and experience among its membership.

Nominees for Class III Directors

Two candidates have been nominated for election as Class III directors at the 2022 Annual Meeting for a three-year term expiring in 2025, provided that if our stockholders approve Proposal Two, each such candidate following re-election will become a Class II director having a two-year term expiring in 2024. See “Proposal Two—Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Reduce Director Terms to Two Years” for more detail on the composition of the Board classes as approved by the Board if Proposal Two is approved.

Upon recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Ira Ehrenpreis and Kathleen Wilson-Thompson for re-election as Class III directors. Biographical information about each of the nominees is contained in the following section. A discussion of the qualifications, attributes and skills of each nominee that led the Board and the Nominating and Corporate Governance Committee to the conclusion that he or she should continue to serve as a director follows each of the director and nominee biographies.

If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the re-election of Mr. Ehrenpreis and Ms. Wilson-Thompson. Each of Mr. Ehrenpreis and Ms. Wilson-Thompson has accepted such nomination; however, in the event that a nominee is unable or declines to serve as a director at the time of the 2022 Annual Meeting, the proxies will be voted for any nominee who shall be designated by the Board to fill such vacancy. As discussed above, Lawrence J. Ellison will not stand for re-election at the 2022 Annual Meeting. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy card or when you vote by telephone or over the Internet. If you are a beneficial owner holding your shares in street name and you do not give voting instructions to your broker, bank or other intermediary, that organization will leave your shares unvoted on this matter.

The Board recommends a vote FOR the Tesla proposal for the election of Ira Ehrenpreis and Kathleen Wilson-Thompson.

 

Information Regarding the Board and Director Nominees

Background and Qualifications

The names of the members of the Board and Tesla’s proposed director nominees, their respective ages, their positions with Tesla and other biographical information as of June 10, 2022, are set forth below. Except for Messrs. Elon Musk, our Chief Executive

10


 

Officer and a director, and Kimbal Musk, a director, who are brothers, there are no other family relationships among any of our directors or executive officers.

 

Name

 

Age

 

Chair of the

Board

 

Audit

Committee

 

Compensation

Committee

 

Nominating

and

Corporate

Governance

Committee

 

Disclosure

Controls

Committee

Elon Musk

 

50

 

 

 

 

 

 

 

 

 

 

Robyn Denholm

 

58

 

X

 

X

 

X

 

X

 

X

Ira Ehrenpreis

 

53

 

 

 

 

 

X

 

X

 

 

Lawrence J. Ellison(1)

 

77

 

 

 

 

 

 

 

 

 

 

Hiromichi Mizuno

 

56

 

 

 

X

 

 

 

 

 

 

James Murdoch

 

49

 

 

 

X

 

 

 

X

 

X

Kimbal Musk

 

49

 

 

 

 

 

 

 

 

 

 

Kathleen Wilson-Thompson

 

64

 

 

 

 

 

X

 

X

 

X

 

(1)

Mr. Ellison will not stand for re-election when his current term expires at the 2022 annual meeting of stockholders.

Elon Musk is the Technoking of Tesla and has served as our Chief Executive Officer since October 2008 and as a member of the Board since April 2004. Mr. Musk has also served as Chief Executive Officer, Chief Technology Officer and Chairman of Space Exploration Technologies Corporation, an advanced rocket and spacecraft manufacturing and services company (“SpaceX”), since May 2002, and served as Chairman of the Board of SolarCity Corporation, a solar installation company (“SolarCity”), from July 2006 until its acquisition by us in November 2016. Mr. Musk is also a founder of The Boring Company, an infrastructure company, and of Neuralink Corp., a company focused on developing brain-machine interfaces. Prior to SpaceX, Mr. Musk co-founded PayPal, an electronic payment system, which was acquired by eBay in October 2002, and Zip2 Corporation, a provider of Internet enterprise software and services, which was acquired by Compaq in March 1999. Mr. Musk has also served on the board of directors of Endeavor Group Holdings, Inc. since April 2021. Mr. Musk holds a B.A. in physics from the University of Pennsylvania and a B.S. in business from the Wharton School of the University of Pennsylvania.

We believe that Mr. Musk possesses specific attributes that qualify him to serve as a member of the Board, including the perspective and experience he brings as our Chief Executive Officer, one of our founders and our largest stockholder, which brings historic knowledge, operational expertise and continuity to the Board.

Robyn Denholm has been a member of the Board since August 2014 and its Chair since November 2018. Since January 2021, Ms. Denholm has been an operating partner of Blackbird Ventures, a venture capital firm. From January 2017 through June 2019, Ms. Denholm was with Telstra Corporation Limited, a telecommunications company (“Telstra”), where she served as Chief Financial Officer and Head of Strategy from October 2018 through June 2019, and Chief Operations Officer from January 2017 to October 2018. Prior to Telstra, from August 2007 to July 2016, Ms. Denholm was with Juniper Networks, Inc., a manufacturer of networking equipment, serving in executive roles including Executive Vice President, Chief Financial Officer and Chief Operations Officer. Prior to joining Juniper Networks, Ms. Denholm served in various executive roles at Sun Microsystems, Inc. from January 1996 to August 2007. Ms. Denholm also served at Toyota Motor Corporation Australia for seven years and at Arthur Andersen & Company for five years in various finance assignments. Ms. Denholm previously served as a director of ABB Ltd. from 2016 to 2017. Ms. Denholm is a Fellow of the Institute of Chartered Accountants of Australia/New Zealand, a member of the Australian Institute of Company Directors, and holds a Bachelor’s degree in Economics from the University of Sydney, and a Master’s degree in Commerce and a Doctor of Business Administration (honoris causa) from the University of New South Wales.

We believe that Ms. Denholm possesses specific attributes that qualify her to serve as a member of the Board and as its Chair as well as the chair of each of our Audit Committee and Disclosure Controls Committee, such as her executive leadership experience and her financial and accounting expertise with international companies, including in the technology and automotive industries.

Ira Ehrenpreis has been a member of the Board since May 2007. Mr. Ehrenpreis has been a venture capitalist since 1996. He is founder and managing member of DBL Partners, a leading impact investing venture capital firm formed in 2015, and previously led the Energy Innovation practice at Technology Partners. In the venture capital industry, Mr. Ehrenpreis has served on the board, Executive Committee, and as Annual Meeting Chairman of the National Venture Capital Association (NVCA). Mr. Ehrenpreis currently serves as the President of the Western Association of Venture Capitalists (WAVC) and as the Chairman of the VCNetwork, the largest and most active California venture capital organization. In the cleantech sector, he has served on several industry boards, including the American Council on Renewable Energy and the Cleantech Venture Network (Past Chairman of Advisory Board), as the Chairman of the Clean-Tech Investor Summit for nine years, and on the Stanford Precourt Institute for Energy (PIE) Advisory Council. Mr. Ehrenpreis also serves as Chairman of the World Energy Innovation Forum. Mr. Ehrenpreis was awarded the 2018

11


 

NACD Directorship 100 for his influential leadership in the boardroom and corporate governance community. Mr. Ehrenpreis holds a B.A. from the University of California, Los Angeles and a J.D. and M.B.A. from Stanford University.

We believe that Mr. Ehrenpreis possesses specific attributes that qualify him to serve as a member of the Board and to serve as chair of each of our Nominating and Corporate Governance Committee and our Compensation Committee, including his experience in the cleantech and venture capital industries.

Lawrence J. Ellison has been a member of the Board since December 2018. Mr. Ellison is the founder of Oracle Corporation, a software and technology company, has served as its Chief Technical Officer since September 2014 and previously served as its Chief Executive Officer from June 1977 to September 2014. Mr. Ellison has also served on Oracle’s board of directors since June 1977, including as its Chairman since September 2014 and previously from May 1995 to January 2004.

We believe that Mr. Ellison possesses specific attributes that qualify him to serve as a member of the Board, including his long-term leadership of one of the most successful technology companies in the world and experience with technology product development and strategy.

Mr. Ellison will not stand for re-election when his current term expires at Tesla’s 2022 annual meeting of stockholders.

Hiromichi Mizuno has been a member of the Board since April 2020. Since January 2021, Mr. Mizuno has served as the United Nations Special Envoy on Innovative Finance and Sustainable Investments. Mr. Mizuno has also served as the representative partner and Chief Executive Officer of Good Steward Partners, LLC, a consulting firm, since March 2021. From January 2015 to March 2020, Mr. Mizuno was Executive Managing Director and Chief Investment Officer of Japan’s Government Pension Investment Fund, the largest pension fund in the world. Previously, Mr. Mizuno was a partner at Coller Capital, a private equity firm, from 2003. In addition to being a career-long finance and investment professional, Mr. Mizuno has served as a board member of numerous business, government and other organizations, currently including the Mission Committee of Danone S.A., a global food products company, and the World Economic Forum’s Global Future Council. Mr. Mizuno is also involved in academia and thought leadership, having been named to leadership or advisory roles at Harvard University, University of Cambridge, Northwestern University and the Milken Institute. Mr. Mizuno holds a B.A. in Law from Osaka City University and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University.

We believe that Mr. Mizuno possesses specific attributes that qualify him to serve as a member of the Board, including his deep understanding of international economics, financial markets and government policies.

James Murdoch has been a member of the Board since July 2017. Mr. Murdoch has been the Chief Executive Officer of Lupa Systems, a private investment company that he founded, since March 2019. Previously, Mr. Murdoch held a number of leadership roles at Twenty-First Century Fox, Inc., a media company (“21CF”), over two decades, including its Chief Executive Officer from 2015 to March 2019, its Co-Chief Operating Officer from 2014 to 2015, its Deputy Chief Operating Officer and Chairman and Chief Executive Officer, International from 2011 to 2014 and its Chairman and Chief Executive, Europe and Asia from 2007 to 2011. Previously, he served as the Chief Executive Officer of Sky plc from 2003 to 2007, and as the Chairman and Chief Executive Officer of STAR Group Limited, a subsidiary of 21CF, from 2000 to 2003. Mr. Murdoch also formerly served on the boards of News Corporation from 2013 to 2020, of 21CF from 2007 to 2019 and of Sky plc from 2003 to 2018.

We believe that Mr. Murdoch possesses specific attributes that qualify him to serve as a member of the Board, including his lengthy executive and board experience across numerous companies, extensive knowledge of international markets and strategies and experience with the adoption of new technologies.

Kimbal Musk has been a member of the Board since April 2004. Mr. Musk is co-founder and Executive Chairman of The Kitchen Restaurant Group, a growing family of businesses with the goal of providing all Americans with access to real food that was founded in 2004. In 2010, Mr. Musk became the Executive Director of Big Green (formerly The Kitchen Community), a non-profit organization that creates learning gardens in schools across the United States. Mr. Musk also co-founded Square Roots, an urban farming incubator program, in 2016, and serves as its Chairman. Previously, Mr. Musk was a co-founder of Zip2 Corporation, a provider of enterprise software and services, which was acquired by Compaq in March 1999. Mr. Musk was a director of SpaceX from 2002 until January 2022, and a director of Chipotle Mexican Grill, Inc. from 2013 to 2019. Mr. Musk holds a B. Comm. in Business from Queen’s University and is a graduate of The French Culinary Institute in New York City.

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We believe that Mr. Musk possesses specific attributes that qualify him to serve as a member of the Board, including his business experience in retail and consumer markets, his experience on the Board and his experience with technology companies.

Kathleen Wilson-Thompson has been a member of the Board since December 2018. Ms. Wilson-Thompson served as Executive Vice President and Global Chief Human Resources Officer of Walgreens Boots Alliance, Inc., a global pharmacy and wellbeing company, from December 2014 until her retirement in January 2021, and previously served as Senior Vice President and Chief Human Resources Officer from January 2010 to December 2014. Prior to Walgreens, Ms. Wilson-Thompson held various legal and operational roles at The Kellogg Company, a food manufacturing company, from July 2005 to December 2009, including most recently as its Senior Vice President, Global Human Resources. Ms. Wilson-Thompson has served on the board of directors of Wolverine World Wide, Inc. since May 2021 and McKesson Corporation since January 2022. She previously served on the board of directors of Ashland Global Holdings Inc. from 2017 to 2020 and on the board of directors of Vulcan Materials Company from 2009 to 2018. Ms. Wilson-Thompson holds an A.B. in English Literature from the University of Michigan and a J.D. and L.L.M. (Corporate and Finance Law) from Wayne State University.

We believe that Ms. Wilson-Thompson possesses specific attributes that qualify her to serve as a member of the Board, including her executive and board experience with both consumer-focused and industrial companies, as well as her expertise in managing human resources and other operations at mature companies with large workforces.

Additional Information

On October 16, 2018, the U.S. District Court for the Southern District of New York entered a final judgment approving the terms of a settlement filed with the court on September 29, 2018, in connection with the actions taken by the SEC relating to Elon Musk’s August 7, 2018 Twitter post that he was considering taking Tesla private. On April 26, 2019, this settlement was amended to clarify certain of its terms, which was subsequently approved by the Court. Mr. Musk did not admit or deny any of the SEC’s allegations, and there is no restriction on Mr. Musk’s ability to serve as an officer or director on the Board (other than as its Chair for a specified time).

See “Corporate Governance” and “Executive Compensation—Compensation of Directors” below for additional information regarding the Board.

 

13


 

 

PROPOSAL TWO

TESLA PROPOSAL FOR ADOPTION OF AMENDMENTS TO CERTIFICATE OF INCORPORATION TO REDUCE DIRECTOR TERMS TO TWO YEARS

General

We are submitting to our stockholders a vote to adopt the inclusion of certain provisions in a proposed amendment and restatement (the “Amended Certificate”) of our current certificate of incorporation to reduce the number of classes into which the Board is divided from three to two, resulting in each director’s term being reduced from three years to two years (the “Director Term Amendment”).

The Board has approved the Director Term Amendment subject to its adoption by our stockholders. Accordingly, upon the approval of this Proposal by our stockholders, we will file the Amended Certificate including the Director Term Amendment with the Secretary of State of the State of Delaware as soon as practicable following the 2022 Annual Meeting, at which time the Amended Certificate will become effective. In addition, if our stockholders also approve Proposal Three relating to amendments of our governing documents to eliminate applicable supermajority voting requirements and Proposal Four relating to an amendment of our certification of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares, the Amended Certificate we file will also include such applicable amendments. Finally, if our stockholders approve any or all of this Proposal, Proposal Three and Proposal Four, the Amended Certificate we file will also incorporate a prior certificate of amendment, effective February 1, 2017, to our certificate of incorporation to reflect the change of our corporate name from “Tesla Motors, Inc.” to “Tesla, Inc.,” which did not and does not require adoption by our stockholders. See “Proposal Three —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation and Bylaws to Eliminate Applicable Supermajority Voting Requirements” and “Proposal Four —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock” below for more information.

Summary of the Proposed Amendment

The following is a summary of the proposed Director Term Amendment, and is qualified in its entirety by reference to the full text of the Amended Certificate as set forth in Appendix A, specifically Section 5.2 thereof (with additions shown as underlined and deletions shown as struck through).

The Director Term Amendment that is proposed to be included in the Amended Certificate provides for the reduction of the classes of the Board from three to two, comprised of Class I and Class II, with: (i) directors divided between them as nearly equal in size as is practicable by the Board (including following future increases or decreases in the number of directorships); (ii) the terms of the initial Class I directors expiring at the 2023 annual meeting of stockholders and thereafter at each second annual meeting of stockholders next succeeding the most recent election at which directors of such class were elected; and (iii) the terms of the initial Class II directors expiring at the 2024 annual meeting of stockholders and thereafter at each second annual meeting of stockholders next succeeding the most recent election at which directors of such class were elected. Consequently, if the Director Term Amendment is approved, each director’s term will be reduced from three years to two years, subject to any increase to a director’s term resulting from a re-assignment of Board classes in order to maintain classes as nearly equal in size as is practicable.

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The Board has approved the following assignments of our directors to the two classes of the Board, contingent upon the adoption of the Director Term Amendment by our stockholders:

 

Name

 

Class (Next Term

Expiration following

2022 Annual Meeting) if

Amendment is

Approved (1)

 

Class (Next Term

Expiration following 2022

Annual Meeting) if

Amendment is Not

Approved (2)

 

Elon Musk

 

I (2023)

 

I (2023)

 

Robyn Denholm

 

I (2023)

 

I (2023)

 

Ira Ehrenpreis

 

II (2024)

 

III (2025)

 

Lawrence J. Ellison(3)

 

-

 

-

 

Hiromichi Mizuno

 

I (2023)

 

I (2023)

 

James Murdoch

 

II (2024)

 

II (2024)

 

Kimbal Musk

 

I (2023)

 

II (2024)

 

Kathleen Wilson-Thompson

 

II (2024)

 

III (2025)

 

 

(1)

Reflects the Board classes as approved by the Board and the next applicable term expirations following the 2022 Annual Meeting, assuming adoption of the Director Term Amendment and re-election at the 2022 Annual Meeting (if applicable).

(2)

Reflects the current Board classes and the next applicable term expirations following the 2022 Annual Meeting, if the Amended Certificate is not adopted and assuming re-election at the 2022 Annual Meeting (if applicable).

(3)

Will not stand for re-election at the 2022 Annual Meeting.

Reasons for the Proposed Amendment

Please see “Proposal Three—Tesla Proposal for Approval and Adoption of Amendments to Certificate of Incorporation and Bylaws to Eliminate Applicable Supermajority Voting Requirements—Reasons for the Proposed Amendments” below for the Board’s reasons for recommending that our stockholders approve both this Proposal and Proposal Three.

The Board recommends a vote FOR the Tesla proposal for the approval of an amendment to our certificate of incorporation to reduce director terms to two years.

 

 

15


 

 

PROPOSAL THREE

TESLA PROPOSAL FOR ADOPTION OF AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS TO ELIMINATE APPLICABLE SUPERMAJORITY VOTING REQUIREMENTS

General

We are submitting to our stockholders a vote to adopt at the 2022 Annual Meeting each of the following:

 

The inclusion of certain provisions in the proposed Amended Certificate to eliminate the current requirements that certain categories of changes to our certificate of incorporation be approved by the affirmative vote of at least 66 2/3% of the total voting power of all outstanding shares of Tesla common stock (the “Supermajority Amendment”); and

 

An amendment and restatement (the “Amended Bylaws”) of our current bylaws to eliminate the current requirements therein that certain categories of changes to our bylaws be approved by the affirmative vote of at least 66 2/3% of the total voting power of all outstanding shares of Tesla common stock.

The Board has approved the Supermajority Amendment subject to its adoption by our stockholders, and has approved the submission of the Amended Bylaws to our stockholders for their adoption.

If our stockholders approve this Proposal: (i) we will file the Amended Certificate including the Supermajority Amendment with the Secretary of State of the State of Delaware as soon as practicable following the 2022 Annual Meeting, at which time the Amended Certificate will become effective, and (ii) the Amended Bylaws will be adopted by our stockholders and become immediately effective. In addition, if our stockholders also approve Proposal Two relating to an amendment of our certificate of incorporation to reduce the terms of our directors from three years to two years and Proposal Four relating to an amendment of our certification of incorporation to increase the number of authorized shares of common stock by 4,000,000,000 shares, the Amended Certificate we file will also include such amendments. Finally, if our stockholders approve any or all of this Proposal, Proposal Two and Proposal Four, the Amended Certificate we file will also incorporate a prior certificate of amendment, effective February 1, 2017, to our certificate of incorporation to reflect the change of our corporate name from “Tesla Motors, Inc.” to “Tesla, Inc.,” which did not and does not require adoption by our stockholders. See “Proposal Two —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Reduce Director Terms to Two Years” above and “Proposal Four —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Increase the Number of Authorized Shares of Common Stock” for more information.

Summary of the Proposed Amendments

The following are summaries of the proposed Supermajority Amendment and Amended Bylaws. Each summary is qualified in its entirety by reference to the full text of the Amended Certificate as set forth in Appendix A, specifically Article IX thereof, and of the Amended Bylaws as set forth in Appendix B (in each case, with additions shown as underlined and deletions shown as struck through).

Supermajority Amendment

The Supermajority Amendment that is proposed to be included in the Amended Certificate provides for the deletion of the requirement that an affirmative vote of the holders of at least 66 2/3% of the voting power of all outstanding shares of capital stock of Tesla entitled to vote generally in the election of directors, voting together as a single class, be required to amend, alter or repeal, or adopt any provision in our certificate of incorporation inconsistent with the purpose and intent of the provisions currently therein relating to: (i) the general powers, number, elections, terms, removals, vacancies of, or newly created directorships for, members of the Board; (ii) the authority of the Board to adopt, amend or repeal our bylaws; (iii) actions by written consent of stockholders, special meetings of stockholders, and the required advance notice for director nominations and business to be brought by stockholders at meetings; and (iv) the amendment of our certificate of incorporation. Consequently, if the Supermajority Amendment is adopted, the Amended Certificate will not require that a proposed amendment, alteration, change or repeal of any provision in the Amended Certificate be subject to approval by a supermajority of our stockholders.

16


 

Amended Bylaws

The Amended Bylaws provide for the deletion of the requirement that an affirmative vote of the holders of at least 66 2/3% of the voting power of all outstanding voting securities of Tesla, voting together as a single class, be required for the stockholders of Tesla to alter, amend or repeal, or adopt any bylaw inconsistent with, the provisions currently therein relating to: (i) meetings of stockholders; (ii) the powers, number, resignations, vacancies and removals of members of the Board; (iii) indemnification; and (iv) the amendment of our bylaws. Consequently, if the Amended Bylaws are adopted by our stockholders, our stockholders will be permitted to adopt, amend or repeal the Amended Bylaws pursuant to a simple majority vote, or any other standard required by applicable laws.

Reasons for the Proposed Amendments

Tesla’s mission is to accelerate the world’s transition to sustainable energy. This mission continues to require a long-term focus that we believe will ultimately maximize value to our stockholders, and we face the risk of distractions posed by special interests that seek only short-term returns. At the same time, the Board continuously evaluates our corporate governance structure, practices and policies, and feedback from our robust stockholder engagement program through which we connect with top stockholders regularly and monitor their views on governance matters. As part of this evaluation, the Board considered recent feedback from our stockholders and reviewed the stockholder proposals we have historically received for our annual meetings of stockholders, including Proposal Six, and a stockholder proposal to vote on an advisory basis to eliminate supermajority voting in 2020, which our stockholders approved at the 2020 annual meeting of stockholders.

The Board has determined that Tesla has established enough momentum and credibility for its mission, particularly through a very successful fiscal 2021, to set its course for the foreseeable future and more effectively defend itself from opportunistic corporate raiders. In light of the current circumstances, the Board is asking our stockholders to approve this Proposal and Proposal Two, to give our stockholders a greater voice by facilitating their ability to effect changes to certain corporate and Board matters, and allowing them to vote on the performance of our directors with greater frequency.

Our Board believes in maintaining stockholder confidence through demonstrating its responsiveness to stockholder feedback and its commitment to strong corporate governance. Accordingly, the Board believes it appropriate to give this greater voice to our stockholders in approving fundamental corporate matters and in more frequently approving the Board’s performance. However, Tesla is still at a point in its development where we may experience significant short-term swings in the price of our stock that are unrelated or disproportionate to our long-term prospects. Therefore, we will continue to oppose stockholder initiatives, like Proposal Six, which create opportunities for special interests that seek only short-term returns. Likewise, the Board continues to oppose initiatives that seek to direct Tesla’s strategic business decisions and day-to-day operations in ways that are not critical to or in furtherance of Tesla’s core mission. The Board considers all reasonable stockholder viewpoints in good faith, but ultimately must consider the interests of all of our stockholders and what is best for sustainable value creation.

The Board recommends a vote FOR the Tesla proposal for the adoption of amendments to our certificate of incorporation and bylaws to eliminate applicable supermajority voting requirements.

 

 

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PROPOSAL FOUR

TESLA PROPOSAL FOR ADOPTION OF AMENDMENTS TO CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

General

We are submitting to our stockholders a vote to adopt the inclusion of certain provisions in the proposed Amended Certificate to increase the number of authorized shares of common stock by 4,000,000,000 shares (the “Authorized Shares Amendment”).

The Board has approved the Authorized Shares Amendment subject to its adoption by our stockholders. Accordingly, upon the approval of this Proposal by our stockholders, we will file the Amended Certificate including the Authorized Shares Amendment with the Secretary of State of the State of Delaware as soon as practicable following the 2022 Annual Meeting, at which time the Amended Certificate will become effective. In addition, if our stockholders also approve Proposal Two relating to an amendment of our certificate of incorporation to reduce the terms of our directors from three years to two years and Proposal Three relating to amendments of our governing documents to eliminate applicable supermajority voting requirements, the Amended Certificate we file will also include such applicable amendments. Finally, if our stockholders approve any or all of this Proposal, Proposal Two and Proposal Three, the Amended Certificate we file will also incorporate a prior certificate of amendment, effective February 1, 2017, to our certificate of incorporation to reflect the change of our corporate name from “Tesla Motors, Inc.” to “Tesla, Inc.,” which did not and does not require adoption by our stockholders. See “Proposal Two —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation to Reduce Director Terms to Two Years” and “Proposal Three —Tesla Proposal for Adoption of Amendments to Certificate of Incorporation and Bylaws to Eliminate Applicable Supermajority Voting Requirements above for more information.

Summary of the Proposed Amendment

The following is a summary of the proposed Authorized Shares Amendment, and is qualified in its entirety by reference to the full text of the Amended Certificate as set forth in Appendix A, specifically Section 4.1 thereof (with additions shown as underlined and deletions shown as struck through).

Our certificate of incorporation currently authorizes us to issue 2,100,000,000 shares, consisting of 2,000,000,000 shares of Common Stock, par value $0.001 per share, and 100,000,000 shares of Preferred Stock, par value $0.001 per share. The Authorized Shares Amendment provides for an increase in the number of authorized shares of Tesla’s common stock from 2,000,000,000 shares to 6,000,000,000 shares. The Authorized Shares Amendment would not change the total number of authorized shares of Preferred Stock.

Reasons for the Proposed Amendment

The primary purpose of the Authorized Shares Amendment is to facilitate a 3-for-1 split of our common stock in the form of a stock dividend (the “Stock Split”). As of June 6, 2022, we have 1,036,390,569 shares of common stock outstanding, and the current number of authorized shares of our common stock is 2,000,000,000, which is insufficient to effectuate the Stock Split. Our Board intends to approve the Stock Split, subject to and contingent upon stockholder approval of the Authorized Shares Amendment.

Our success depends on attracting and retaining excellent talent, not only through providing a respectful, safe, inclusive and equitable workplace, but also through offering outstanding benefits and highly competitive compensation packages. Unlike other manufacturers, we offer every employee the option of receiving equity. Since our stock split in August 2020 to June 6, 2022, our stock price has risen 43.5%. While this value appreciation has led to our employees benefiting enormously through the years, we want to make sure all employees, no matter when they join, have access to the same advantages. We believe the Stock Split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value. In addition, as retail investors have expressed a high level of interest in investing in our stock, we believe the Stock Split will also make our common stock more accessible to our retail shareholders.  

Except for shares reserved for issuance under existing equity compensation plans and shares that would be issued pursuant to the Stock Split, the Board has no current plans to issue additional shares of common stock. As such, the Authorized Shares Amendment represents a request for a proportionate increase in the number of authorized shares of common stock based on our planned Stock Split.

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While the Board has not proposed the increase in authorized shares of common stock to discourage tender offers or takeover attempts of the Company, the availability of these authorized shares for issuance may nonetheless have the effect of discouraging a merger, tender offer, proxy contest or other attempt to obtain control of the Company.

The Board recommends a vote FOR the Tesla proposal for the adoption of amendments to our certificate of incorporation to increase the number of authorized shares of common stock.


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PROPOSAL FIVE

TESLA PROPOSAL FOR RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General

The Audit Committee has selected PricewaterhouseCoopers LLP as Tesla’s independent registered public accounting firm to audit the consolidated financial statements of Tesla for the fiscal year ending December 31, 2022, which will include an audit of the effectiveness of Tesla’s internal control over financial reporting. PricewaterhouseCoopers LLP has audited Tesla’s financial statements since 2005. A representative of PricewaterhouseCoopers LLP is expected to be present at the meeting, will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate questions.

Stockholder ratification of the selection of our independent registered public accounting firm is a matter of good corporate practice. In the event that this selection is not ratified by the affirmative vote of a majority of voting power of the shares in person or by proxy at the meeting and entitled to vote on the subject matter, the appointment of the independent registered public accounting firm will be reconsidered by the Audit Committee. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of Tesla and our stockholders.

Principal Accounting Fees and Services

The following table presents fees billed for professional audit services and other services rendered to Tesla by PricewaterhouseCoopers LLP for the years ended December 31, 2020 and 2021. The dollar amounts in the table and accompanying footnotes are in thousands.

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2021

 

Audit Fees (1)

  

$

12,965

 

  

$

14,156

 

Audit-Related Fees (2)

  

 

 

  

 

184

 

Tax Fees (3)

  

 

1,456

 

  

 

2,876

 

All Other Fees (4)

  

 

103

 

  

 

62

 

 

 

 

 

 

 

 

 

 

Total

  

$

14,524

 

  

$

17,278

 

 

(1)

Audit Fees consist of fees for professional services rendered for the audit of Tesla’s consolidated financial statements included in Tesla’s Annual Report on Form 10-K and for the review of the financial statements included in Tesla’s Quarterly Reports on Form 10-Q, as well as services that generally only Tesla’s independent registered public accounting firm can reasonably provide, including statutory audits and services rendered in connection with SEC filings. The Audit Fees incurred in 2020 also include fees of $825, relating to services performed in connection with Tesla’s securities offerings, including comfort letters, consents and review of documents filed with the SEC and other offering documents.

(2)

Audit-Related Fees in 2021 consisted of fees for professional services for certain agreed upon procedures in conjunction with certain financing transactions and other attestation services.

(3)

Tax Fees in 2020 and 2021 consisted of fees related to consultation, tax planning and compliance services.

(4)

Fees for 2020 consisted of fees for a Gigafactory Berlin current state assessment and accounting research software. Other Fees in 2021 consisted of fees for accounting research software and the assessment of non-financial metrics and documentation.

Pre-Approval of Audit and Non-Audit Services

Tesla’s Audit Committee has adopted a policy for pre-approving audit and non-audit services and associated fees of Tesla’s independent registered public accounting firm. Under this policy, the Audit Committee must pre-approve all services and associated fees provided to Tesla by its independent registered public accounting firm, with certain de minimis exceptions described in the policy.

All PricewaterhouseCoopers LLP services and fees in fiscal 2020 and 2021 were pre-approved by the Audit Committee.

The Board recommends a vote FOR the Tesla proposal for the ratification of the appointment of PricewaterhouseCoopers LLP as Tesla’ s independent registered public accounting firm for the fiscal year ending December 31, 2022.

 

 

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STOCKHOLDER PROPOSALS

 

Proposals Six through Thirteen are proposals we received from our stockholders. Stockholders will vote on these proposals at our 2022 Annual Meeting if the proponents or their qualified representatives present their proposals at the 2022 Annual Meeting and submit them for a vote. Upon receiving an oral or written request, we will promptly provide the name, address, and, to our knowledge, the number of known voting securities held by the proponents of the stockholder proposals. You may request this information (1) via mail to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Legal Department with a copy sent by e-mail to shareholdermail@tesla.com or (2) via e-mail to shareholdermail@tesla.com.

 

PROPOSAL SIX

STOCKHOLDER PROPOSAL REGARDING PROXY ACCESS

Stockholder Proposal and Supporting Statement

***

Proposal Six – Shareholder Proxy Access

 

 

Resolved: Shareholders of Tesla Inc ("Company") request our Board of directors take the steps necessary to enable shareholders, without limits on group size, to aggregate their shares to equal 3% of our stock owned continuously for 3-years to enable shareholder proxy access with the following essential provision:

Nominating shareholders and unlimited groups of shareholders must have owned at least 3% of the Company's outstanding shares of common stock continuously for a period of at least 3-years.

The essential feature requested may allow employee owners to combine with institutional investors to nominate candidates.

Supporting Statement: Proxy access enables shareholders to put competing director candidates on the company ballot to see if they can get more votes than some of management's director candidates. This proposal helps ensure our Board will nominate directors with outstanding qualifications to avoid giving shareholders a reason to exercise access rights.

Proxy Access in the United States: Revisiting the Proposed SEC Rule1, a cost-benefit analysis by CFA Institute, found proxy access would “benefit both the markets and corporate boardrooms, with little cost or disruption,” raising US market capitalization by up to $140.3 billion. Governance Changes through Shareholder Initiatives: The Case of Proxy Access2 found a 0.5 percent average increase in shareholder value for proxy access targeted firms. Because of the group limits, the rule has only been used once, so actual benefits have gone unrealized.

Proxy access has been adopted by major companies, including 78% of the S&P 500. Adoption of this proposal will make our Company more competitive in its corporate governance. Two of our largest shareholders, BlackRock and Vanguard, voted in favor of 87% and 91% of shareholder proposals, respectively, to establish proxy access during the last 3.5 years.

 

1 

https://www.cfainstitute.org/-/media/documents/article/position-paper/proxy-access-in-united-states-revisiting-proposed-sec-rule.ashx

2 

https://ssrn.com/abstract=2635695

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Adding urgency to this proposal is a recent study finding directors generally do not want to monitor and are not sure they can do so effectively.1 Corporate governance expert Nell Minow offered the following: “Usually directors at least pretend to acknowledge their legal obligation to provide oversight of CEOs on behalf of shareholders.” “This acknowledgment that directors see themselves as corporate cheerleaders instead of skeptics whose job is to push back, question, and insist on better is further proof that shareholders will need to support more Engine No. 1-style challenges.”2

Eliminating group limits would allow employee-shareholders with small holdings to join in nominating groups, opening communication channels between our Board and workers. Proxy access directors nominated by such groups may be more able to effectively monitor than typical outside directors and would bring a host of additional benefits.3

Enhance Shareholder Value, Vote FOR

Shareholder Proxy Access Proposal 6

***

Opposing Statement of the Board

The Board has determined that this proposal would not serve the best interests of the Company or its stockholders, for the reasons stated below. At our 2018 annual meeting of stockholders, the stockholder proponent similarly proposed proxy access for stockholders. However, our stockholders did not approve that proposal. 

The Company already has mechanisms to promote the accountability of the Board to its stockholders. The Nominating and Corporate Governance Committee of the Board (the “Committee”) is comprised entirely of independent directors. The Committee regularly reviews the composition, size and performance of the Board and its committees, evaluates individual Board members and identifies and evaluates candidates for election or re-election to the Board. The Company has also implemented means for stockholders to recommend director candidates for the Committee’s consideration, nominate candidates at stockholder meetings and contact the Board directly.

Second, through the Committee’s efforts, the Board has steadily added independent directors to the Board. For instance, the Committee recommended to the Board Kathleen Wilson-Thompson and Lawrence J. Ellison in 2018 to further bolster the Board’s expertise in workforce management and relations and technological innovation, and Hiromichi Mizuno in 2020 to add an additional perspective on global financial markets and economics and to further increase the international exposure and global mindset on the Board with insight and influence.

Third, the version of proxy access formulated by the proponent may create an opportunity for special interests that seek only short-term returns rather than having the Company’s long-term interests in mind. This is particularly harmful for a company like ours, which is still in an early stage of development and undergoing rapid growth. Like other fast-growing technology companies, we may experience significant short-term swings in the price of our stock that are unrelated to our long-term prospects, and the proposal would allow special interests seeking only short-term returns—or even our competitors—to take advantage of such swings to disrupt the focus of the Company.

Notably, the proposal provides no safeguards against stockholders seeking to use proxy access to nominate directors who will act only in their individual interests. In fact, the proposal would not ensure that the stockholders seeking proxy access be truly invested in the Company even on a short-term basis, as it would be available to individuals who have relinquished voting and investment power over their shares and hold a net short position. Indeed, this proposal could be exploited by corporate raiders solely to effect a change of control, which should not be the purpose or outcome of any proxy access provision.

 

1 

https://corpgov.law.harvard.edu/2021/09/02/corporate-directors-implicit-theories-of-the-roles-and-duties-of-boards/

 

2 

https://valueedgeadvisors.com/2021/09/02/corporate-directors-say-its-not-their-job-to-monitor-ceo-study-bloomberg/

3 

https://www.aspeninstitute.org/publications/new-corporate-boardroom/

 

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The stockholder proponent seems to believe that our directors do not serve as effective corporate leaders and monitors. In fact, our directors and their commitment to our Company’s long-term growth have been instrumental in making decisions that might have appeared counter-intuitive to those without deep past experience with and future insight into our history and roadmap, but which have set up the Company to achieve long-term success. Some examples include the Company’s decisions to (a) manufacture all-electric vehicles (EVs) from the ground up rather than being a mere supplier of EV components, (b) establish an international network of our own stores, service centers and proprietary Supercharger stations despite regulatory hurdles and the significant capital outlay required to do so, (c) acquire SolarCity to create the world’s first and only vertically integrated sustainable energy company, (d) build Gigafactory 1, the largest lithium-ion battery factory in the world, rather than attempt to rely on existing sources as other EV manufacturers have done and (e) compensate our Chief Executive Officer only if other shareholders realize tremendous value. These decisions have contributed substantially to Tesla’s sustained growth and operational successes to date, and are a significant reason why the annualized stockholder return since our 2010 IPO until December 31, 2021 equaled 65%.

The Board recognizes that proxy access is a topic of growing interest in the investor community, and will continue to monitor and consider this topic. We have a robust shareholder engagement program through which we connect with top shareholders regularly and monitor their views on governance matters, including proxy access. At this time, however, the Board believes that the process for director nomination and stockholder communication that we have already implemented is the right approach to provide a voice to our stockholders, while promoting their long-term returns and the Company’s ultimate success in its mission. 

The Board recommends a vote AGAINST the stockholder proposal regarding proxy access.

 

 

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PROPOSAL SEVEN

 

STOCKHOLDER PROPOSAL REGARDING ANNUAL REPORTING ON ANTI-HARASSMENT AND DISCRIMINATION EFFORTS

Stockholder Proposal and Supporting Statement

***

Resolved

Shareholders request the Board of Directors of Tesla, Inc. to oversee the preparation of an annual public report describing and quantifying the effectiveness and outcomes of Company efforts to prevent harassment and discrimination against protected classes 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:

the total number and aggregate dollar amount of disputes settled by the company related to abuse, harassment or discrimination based on race, religion, sex, national origin, age, disability, genetic information, service member status, gender identity, or sexual orientation;

the company's progress toward reducing the average length of time it takes to resolve sexual harassment or discrimination complaints, either through internal processes or through litigation; and

the total number of pending harassment or discrimination complaints the company is seeking to resolve through internal processes or through litigation.

This report should not include the names of accusers or details of their settlements without their consent and should be prepared at a reasonable cost and omit any information that is proprietary, privileged, or violative of contractual obligations.

Supporting Statement

Information concerning complaints, legal disputes, and settlements (individually and in the aggregate) are of great interest, and often material to investors. The SEC has shown increased attention to human capital management issues, as demonstrated by its 2020 rulemaking, and Chairman Gensler's public comments about upcoming additional disclosure proposals arid characterization of workforce as a “key asset.” There have been several high-profile derivative suits settled recently, including at Twentieth Century Fox, Wynn Resorts, and Alphabet, alleging boards breached their duties for failing to protect employees from discrimination and harassment, injuring the companies and their shareholders.

In Tesla's 2020 Diversity Equity and Impact Report the Company states, “We insist on equitable practices not just because it's the right thing to do, but because fair processes allow our team members to bring their whole selves to work. We value and include underrepresented communities at all levels of our company.” Nevertheless, there have been numerous news reports and allegations of gender and race discrimination, harassment and retaliation at the Company. In October 2021, a California jury returned a $137 million verdict, including $130 million in punitive damages, against the Company for its racially hostile work environment. It has been reported that most Tesla workers are currently bound by mandatory arbitration agreements, so consequently there is little transparency into the extent of workforce mismanagement.

A report such as the one requested would assist shareholders in assessing whether the Company is improving its workforce management. Civil rights violations within the workplace can result in substantial costs to companies, including fines and penalties, legal costs, costs related to absenteeism, and reduced productivity. A company's failure to properly manage its workforce can damage corporate goodwill, making it more difficult to retain and recruit employees, and jeopardize relationships with customers and partners.

***

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders. Tesla’s goal is to create an environment where people love to come to work every day. We believe that it is essential to provide all employees, world-wide, with a respectful and safe working environment where all employees can achieve their potential.

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As a result, we do not tolerate discrimination, harassment, retaliation or any mistreatment of employees in the workplace or work-related situations. Our policies and practices are codified in our Code of Business Ethics as well as our Employee Guidebook. Additionally, in December 2021, we amended our Compensation Committee Charter to explicitly state that the Compensation Committee will review and oversee human capital management practices relating to our employees.

Our commitment to a safe workplace starts with training and prevention. We require every employee to review and acknowledge our Code of Business Ethics and Policy Against Discrimination & Harassment in the Workplace, and they are required to participate in an in-depth and interactive anti-harassment and anti-discrimination training. New employees receive their anti-harassment and discrimination training during new hire orientation. Collectively, this ensures that all employees understand how to create and promote a respectful workplace, assess potential situations sooner and escalate appropriately.  ​In 2021, as part of our continued commitment to providing a safe and inclusive workplace we re-doubled our efforts to educate employees and managers as part of our “Respectful Recharge” program, where employees received additional training on workplace expectations, consequences for violating Tesla’s policies and avenues to raise concerns without fear of retaliation. 

While our goal is always prevention, reported complaints of discrimination and harassment are promptly investigated and if substantiated, subject to appropriate remedial measures up to and including termination. We have a dedicated team of Employee Relations partners who conduct impartial investigations into employee concerns and support overall positive workforce engagement. We encourage employees to raise concerns internally or externally. An employee can raise concerns or complaints to any member of management, Human Resources or Employee Relations. If they prefer to report another way, the Integrity Line is available to every employee globally, 24 hours a day, seven days a week. The Integrity Line allows employees to report concerns anonymously and without fear of retaliation. Human Resources, together with Employee Relations, will ensure that employee concerns are investigated promptly and impartially in a manner appropriate to the circumstances.

We remain confident in our commitment to creating and maintaining a respectful and inclusive workplace, and the steps we have taken to prevent and address harassment and discrimination throughout our workforce. We believe that our active Board oversight, existing policies and dedicated team effectively address the issues targeted by this proposal.  

The Board recommends a vote AGAINST the stockholder proposal regarding annual reporting on anti-harassment and discrimination efforts.

 

 

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PROPOSAL EIGHT

STOCKHOLDER PROPOSAL REGARDING ANNUAL REPORTING ON BOARD DIVERSITY

Stockholder Proposal and Supporting Statement

***

Racial and Gender Board Diversity Report

Whereas: Our nation's racial reckoning and coronavirus's illumination of vast social inequities has led companies to reevaluate their diversity, equity, and inclusion policies and goals. Board diversity is one important facet, as investors and companies recognize it can be accretive to long term value creation. Board diversity requirements, including Nasdaq's 2021 ruling and California's 2018 legislation, acknowledge the value of racially and gender diverse boards.

Research indicates board diversity is an important lever to increase shareholder value, resulting in higher revenues, higher Return on Assets, a more diverse workforce, enhanced corporate governance, and improved stakeholder relations.

 

Boston Consulting Group finds companies with greater board diversity had 19 percent higher revenues than competitors.

 

International Monetary Fund finds substituting one man for one woman on a board is associated with higher Return on Assets.

 

Credit Suisse finds as the percentage of women on the board increases, so does the percentage of women in leadership.

 

The University of Toronto finds companies with greater board diversity are less prone to accounting mistakes, business controversies, and poor investment decisions.

 

Harvard Law research finds companies may be better positioned to recognize and respond to the interests of diverse stakeholders.

In response to this research, 61 percent of investors believe boards “should aim to reflect the company's customer base and the broader societies in which they operate by including directors drawn from racial and ethnic minority groups” (Institutional Shareholder Services).

Tesla does not report its current gender or racial and ethnic board composition, but Tesla's board demographics appear largely disproportionate from its customer base. Bloomberg reports the Board of Directors is comprised of 22 percent women. The demographic makeup of the United States, used here as a proxy for Tesla's customer base, is comprised of 51 percent women and 42 percent minorities.

We believe that a Board of Directors with racial and gender composition reflective of Tesla's customer base and/or regions in which it operates will more astutely minimize business risk, maximize opportunity, and increase shareholder value.

Resolved: Shareholders request that Tesla report annually on its policies and practices to help ensure its elected Board of Directors attains racial and gender representation that is better aligned with the demographics of its customers and/or regions in which it operates.

The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information.

Supporting Statement: A report adequate for investors could, with board discretion, include disclosure of:

 

Board targets aligned with customer demographics (for example, using company's country/state headquarter demographics as a proxy)

 

Progress/challenges meeting racial and/or gender board diversity targets

 

Strategies or practices deployed to increase diversity of board candidates

***

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Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders. 

Tesla is committed to Diversity, Equity and Inclusion (DEI) principles at all levels of our organization. We use a people-first and data-driven approach to champion DEI in our business and in the communities in which we operate.

In the “Process and Considerations for Nominating Board Candidates” section, our proxy statement already includes detailed disclosures about the criteria our Nominating and Corporate Governance Committee considers when nominating Board candidates. Diversity is included as one of the important factors. Two of the three directors we added in the past four years are gender, racially and/or ethnically diverse and the chairperson of our Board is a woman. In 2021 and 2022, we enhanced our disclosures by reporting the gender and racial composition of the Board in our Impact Report, and beginning in 2022 we have similarly made such disclosures in our proxy statement regarding Board diversity. In addition, to underscore our commitment to diversity and provide additional transparency, we began providing EEO-1 data for US employees in our Impact Report beginning in 2022.

The Committee conducts annual evaluations of our Board effectiveness, providing it with an opportunity to examine whether our Board members have the right composition of skills and experiences. When identifying and recommending new candidates, the Committee continues to consider opportunities to increase our Board diversity in a way that supports the current and anticipated needs of the Company.

For these reasons, we believe that the current scope of Tesla’s reporting is appropriate in that it provides stockholders with visibility into our Board demographics and the steps we have taken to successfully increase the Board’s diversity.  

The Board recommends a vote AGAINST the stockholder proposal regarding annual reporting on board diversity.

 

 

27


 

 

PROPOSAL NINE

STOCKHOLDER PROPOSAL REGARDING REPORTING ON EMPLOYEE ARBITRATION

Stockholder Proposal and Supporting Statement

***

RESOLVED:

Shareholders of Tesla, Inc. (“Tesla”) ask the Board of Directors to oversee the preparation of a publicly-disclosed report on the impact of the use of mandatory arbitration on Tesla’s brand, employees and workplace culture. The report should evaluate the impact of Tesla’s current use of arbitration on the prevalence of harassment and discrimination in its workplace, on employees’ ability to seek redress, and on consumer perceptions of Tesla as an employer. The report should be prepared at reasonable cost and omit proprietary and personal information.

WHEREAS:

A workplace that tolerates harassment and discrimination invites legal, brand, financial, and human capital risk. Companies may experience reduced morale, lost productivity, absenteeism, and challenges in attracting and retaining talent. A number of studies have found significant share value benefits associated with diverse, equitable and inclusive workplaces.

Tesla requires employees to agree to arbitrate employment-related claims. Mandatory arbitration limits employees’ remedies for wrongdoing, reduces employee willingness to report discrimination1 and, per the U.S. Equal Employment Opportunity Commission (EEOC), “can shield serial harassers from accountability and allow them to repeatedly abuse employees.”2 Arbitration also prevents class-action suits, which may allow a sense of impunity for companies with poorly implemented or managed diversity, equity and inclusion policies.

These concerns are particularly relevant to Tesla. The California’s Department of Fair Employment and Housing, which is not subject to Tesla’s arbitration provisions, announced in February 2022 that it would be suing Tesla after receiving hundreds of complaints and conducting a three-year investigation. Allegations include that employees were subjected to racial slurs; segregated and discriminated against in job assignments, pay, and promotion; and faced retaliation when they reported their experiences.3 This lawsuit joins numerous other allegations of racial or sexual harassment and discrimination at Tesla.4

Ongoing use of employee arbitration creates a long-tail risk for Tesla, particularly as the company faces a changing regulatory landscape with the passage of The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act. This Act prohibits the use of arbitration when there are claims of sexual harassment. In addition, in California, employers are not allowed to retaliate against employees that refuse to sign arbitration agreements.5

A number of companies have ceased, or never required, employees to arbitrate discrimination claims. This includes Adobe, AirBnb, Google, IBM, Intel, Microsoft, Salesforce and Uber, which have relaxed or do not use these policies, as well as Google, whose use of arbitration was identified as a key aspect of a “culture of concealment” in its $310 million misconduct settlement.6

Tesla’s valuable brand would be harmed by an association with racist, sexist, or other discriminatory behaviors. Its future success also relies on its ability to innovate, and to implement those innovations effectively. For investors to have confidence that it will be able to do this well, Tesla must also have confidence that the company has effective human capital management systems.

 

1 

https://www.hnlr.org/2020/08/forced-into-employment-arbitration-sexual-harassment-victims-are-saying-metoo-and-beginning-to-fight-back-but-they-need-congressional-help/

2 

https://www.eeoc.gov/newsroom/eeoc-chair-applauds-passage-ending-forced-arbitration-act

3 

https://qz.com/2126548/why-is-california-suing-tesla/

4 

https://www.reuters.com/business/autos-transportation/california-lawsuit-latest-accuse-tesla-discrimination-2022-02-10/

5 

https://www.jdsupra.com/legalnews/california-s-mandatory-arbitration-ban-5885483/#:~:text=On%20September%2015%2C%202021%2C%20in,to%20sign%20an%20arbitration%20agreement

6 

https://www.law.com/therecorder/2020/09/25/google-ends-mandatory-arbitration-in-310m-sexual-harassment-settlement/

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***

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders. As with the similar proposal presented by this proponent at the 2020 and 2021 annual meetings of stockholders, both of which were rejected by Tesla’s stockholders, the proponent cites inaccurate and unsupported assertions regarding arbitration and its alleged impact on workplace conditions at Tesla.

Much of the proposal has been obviated due to a recent change in the law. As the proponent recognizes, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act now prohibits employers from enforcing standard arbitration provisions for these types of claims that arise after the date of the law’s enactment. Tesla will fully comply with the new law and has already taken steps to amend the standard arbitration clause in its new hire agreement. Obviously, there is no need for Tesla to issue a report about the effects of arbitration on the existence of sexual harassment in the workplace when such claims will no longer be arbitrable, unless the employee so chooses.  

Still, Congress has not ended arbitration for other types of workplace claims, and Tesla continues to believe that arbitration remains the best method for resolving such disputes.

The proponent incorrectly asserts that there is a connection between arbitration and workplace culture. Tesla has a zero-tolerance policy for harassment of any kind, and we have always disciplined and terminated employees who engage in misconduct, including those who use racial slurs or harass others in different ways. We have a dedicated Employee Relations team that responds to and investigates all such complaints. This year, we rolled out an additional training program that reinforces Tesla’s requirement that all employees must treat each other with respect and reminds employees about the numerous ways they can report concerns, including anonymously. Above all, Tesla continues to seek to provide a workplace that is safe, respectful, fair and inclusive—all of which are vital to achieving our mission.

Contrary to what the proponent claims, Tesla’s standard arbitration provision specifically states that the parties are entitled to all remedies available in a court of law. The fact that a claim is not adjudicated by a court or does not have certain procedural aspects does not mean that legal remedies are not available through arbitration. Arbitration offers an alternative form of adjudication by an experienced jurist selected with both parties’ participation that is often quicker than a court trial, especially in jurisdictions where courts are overburdened. The overall expediency benefits both parties with a fair resolution and a speedier return to their respective priorities without miring them in lengthy litigation. The proponent fails to acknowledge that there are potential downsides to litigating matters in court, including costs associated with delays and the risk of jury verdicts that are untethered to the evidence presented and based on bias and emotion, rather than reality. Broken judicial systems may benefit plaintiff’s lawyers, but they do not benefit stockholders.

The proponent also fails to explain how arbitration prevents Tesla employees from learning about shared concerns or reduces willingness to report claims. Tesla has been built upon a culture of open communication, and employees have the right to freely discuss the terms and conditions of employment and to raise complaints internally or externally. An employee is free to publicize the results of an arbitration (as long as it excludes any trade secrets or proprietary business information), and to initiate a lawsuit by first filing a complaint in court. Arbitration does nothing to silence alleged victims.

As we pledged in our annual Impact Report, Tesla designed its workplace and policies to provide all employees with a respectful and safe working environment by not tolerating any discrimination, harassment, retaliation or any other mistreatment at work, whether based on a legally protected status or otherwise. On the other hand, the proponent’s one-size-fits-all goal appears to be that every company simply eliminate employee arbitration without considering such commitments and action. The proponent makes conclusory statements about other companies and their arbitration policies without considering or specifying how such other companies may or may not be similarly situated to Tesla.

We reiterate that Tesla, its employees and its stockholders would be better served by continuing to execute on our mission and tangible workplace goals rather than devote attention and resources to reporting on an inaccurately characterized issue for which the proponent has identified no tangible benefit to Tesla, its workers or its stockholders.  

  

The Board recommends a vote AGAINST the stockholder proposal regarding reporting on employee arbitration.

 

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PROPOSAL TEN

STOCKHOLDER PROPOSAL REGARDING REPORTING ON LOBBYING

Stockholder Proposal and Supporting Statement

***

RESOLVED: Shareholders request that the Board of Directors conduct an evaluation and issue a report (at reasonable cost, omitting proprietary information) describing if, and how, Tesla Inc.’s (“Tesla’s”) lobbying and policy influence activities (direct and through trade associations and social welfare and nonprofit organizations) align with the Paris Agreement’s goal to limit average global warming to 1.5 degrees Celsius, and how Tesla plans to mitigate risks presented by any misalignment. The evaluation should examine underlying direct and indirect lobbying activities and not rely solely on publicly stated positions to determine alignment with the Paris Agreement.

SUPPORTING STATEMENT

Recent reports highlight critical gaps between the climate commitments made by national governments and the actions necessary to prevent the worst effects of climate change.1 An April 2022 Intergovernmental Panel on Climate Change assessment makes it clear that nations are not doing enough to limit global warming2 to 1.5 degrees Celsius and that this goal is now almost entirely out of reach unless immediate and dramatic changes are implemented to limit fossil fuel use and re-envision energy, transport, and land development. Society now has just a slim chance of meeting this goal.3

Companies like Tesla have a crucial role to play in empowering policymakers to close these gaps. Investors need clear information on how companies are taking action to do so, including an assessment of the alignment between companies’ policy advocacy and both the goals of the Paris Agreement and companies’ own climate commitments and policy advocacy.4

Of particular concern is policy advocacy done by trade associations and other organizations that often present major obstacles to the implementation of climate policies. Companies may tout their own climate efforts, but often fail to account for their support for organizations and initiatives that work to block critical climate policies.

Tesla wants to “accelerate the world’s transition to sustainable energy.”5 Yet it is unclear how Tesla uses public policy engagement or other forms of lobbying to achieve this aim. Tesla’s 2020 Impact Report discusses neither its climate policy priorities, nor the policy strategies and goals that would assist Tesla in meeting its sustainable business objectives. Tesla does not appear to disclose the trade associations, business alliances, or social welfare organizations in which it participates. Tesla’s governance documents do not cover political engagement or lobbying and there is no mention of Board or executive oversight for lobbying activities in its Board Committee charters. It is therefore difficult for investors to determine if Tesla’s policy engagement aligns with the goals of the Paris Agreement and the Company’s own strategic business goals.

Corporate lobbying that is inconsistent with the goals of the Paris Agreement poses mounting systemic risks to our financial systems and infrastructure, as delays in curbing greenhouse gases increase physical risks from extreme weather, threaten regional economic stability, and heighten portfolio volatility.6 Proponents view fulfillment of the Paris Agreement as imperative because climate scenarios of 3 degrees Celsius or more are unacceptable and uninvestable.

***

 

1 

https://www.unep.org/resources/emissions-gap-report-2021

2 

https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_SummaryForPolicymakers.pdf

3 

https://www.nature.com/articles/s41586-022-04553-z

4 

https://www.politico.com/news/2021/04/20/investors-corporate-climate-lobbying-activity-483429

5 

https://www.tesla.com/ns_videos/2020-tesla-impact-report.pdf

6 

https://www.occ.gov/news-issuances/speeches/2021/pub-speech-2021-116.pdf?source=email

 

30


 

 

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders. 

The stockholder proponent purports to care about curbing the worst effects of climate change, and yet chooses to devote its attention and criticisms on one of the most well-known and successful clean energy companies in the world. From day one, Tesla’s mission has been to accelerate the world’s transition to sustainable energy, and we have made substantial and concrete strides towards our goals. In 2021, the global fleet of Tesla vehicles, energy storage and solar panels enabled our customers to avoid emitting 8.4 million metric tons of CO2e. Unlike traditional automotive manufacturers, we have based the success of our entire business upon values that align with the Paris Agreement’s goal to limit global warming.  

Our political engagement and lobbying activities reflect our mission, and are directly focused on hastening the world’s transition to zero emission vehicles and expanding and prioritizing the use of renewable energy. To this end, we file publicly available federal Lobbying Disclosure Act Reports each quarter, which provide information about expenditures for the quarter, describes the specific legislation that was the topic of communications and identifies the individual who lobbied on our behalf. A simple online search by the stockholder proponent would provide it with the answers it seeks about our political engagement and lobbying activities.  

Due to the importance public policy decisions will have on our strategies, operations and shareholder value, we have put in place certain practices and processes in order to ensure that our political engagement activities align with our mission. Our Senior Director of Government Relations and Policy directly reports to our Chief Executive Officer, and regularly reports on progress and initiatives to our Board members.  

Because our existing disclosures already provide stockholders with ample information on our lobbying activities, and the alignment of Tesla’s mission and actions to the Paris Agreement, we believe that Tesla, its employees and its stockholders are better served by continuing to execute on our mission rather than devoting attention and resources to additional reporting.  

The Board recommends a vote AGAINST the stockholder proposal regarding reporting on lobbying.

 

31


 

 

PROPOSAL ELEVEN

STOCKHOLDER PROPOSAL REGARDING ADOPTION OF A FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING POLICY

Stockholder Proposal and Supporting Statement

***

RESOLVED: the Board of Directors of Tesla, Inc. (“Tesla” or “the company”) to adopt and publicly disclose a policy on its commitment to respect the rights to freedom of association and collective bargaining in its operations, as reflected in the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work (“Fundamental Principles”). The policy should:

 

Be applicable to Tesla’s direct operations and subsidiaries globally;

 

Include a commitment to non-interference when employees exercise their right to form or join trade unions;

 

Prohibit any member of management or agent of Tesla from undermining the right to form or join trade unions or pressuring any employee from exercising this right;

 

Describe the ongoing due diligence process Tesla will use to identify, prevent, mitigate and account for any violations of these rights, including how it will remedy any misaligned practices.

SUPPORTING STATEMENT: Freedom of association and collective bargaining are fundamental human rights protected by national and international legal standards including the ILO Fundamental Principles and the UN Universal Declaration of Human Rights.

The ability of workers to organize, act concertedly, and engage in collective bargaining is an important human right that can be a net positive for companies and investors.

Despite a recent public invitation1 by the company’s CEO for labor unions to organize a vote at Tesla’s California factory without interference, Tesla does not have any formal policy commitments to respect the right to freedom of association, nor has it demonstrated how it would effectively operationalize such a commitment. While the Company’s Supplier Code of Conduct2 articulates the Company’s expectations of suppliers in this regard, it has no corresponding policies for its own operations.

In fact, the Company has been accused of limiting the exercise of fundamental labor rights through tactics of interference,3 intimidation,4 and retaliation against employees involved in unionization efforts. In 2021, the National Labor Relations Board upheld5 a 2019 ruling that Tesla illegally fired a worker involved in union organizing, and that the CEO had illegally threatened workers regarding unionization.

These allegations, against the backdrop of claims of racial discrimination and sexual harassment6 by former Tesla employees and reports of poor working conditions,7 represent material reputational, legal and operational risks to its shareholders. Allegations of interference with unionization efforts, and resulting regulatory enforcement, at other8 companies9 further demonstrate the significance of these risks.

 

1 

https://www.reuters.com/business/autos-transportation/tesla-chief-musk-invites-union-uaw-hold-vote-california-factory-2022-03-03/

2 

https://www.tesla.com/sites/default/files/about/legal/tesla-supplier-code-of-conduct.pdf

3 

https://www.theguardian.com/technology/2018/sep/10/tesla-workers-union-elon-musk

4 

https://www.theguardian.com/technology/2017/feb/11/elon-musk-in-union-spat-after-wrongly-calling-tesla-worker-a-paid-agitator

5 

https://www.nytimes.com/2021/03/25/business/musk-labor-board.html

6 

https://www.businessinsider.com/tesla-lawsuits-former-workers-claim-racial-discrimination-sexual-harassment-2022-3

7 

https://www.theverge.com/2022/4/20/23033394/tesla-shanghai-factory-sleep-eat-factory-closed-loop-covid

8 

https://www.nytimes.com/2021/03/16/technology/amazon-unions-virginia.html

9 

https://www.bnnbloomberg.ca/starbucks-workers-say-anti-union-campaign-violated-u-s-law-1.1677087

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The transition to a low-carbon future cannot come at the expense of workers’ rights. It is crucial for shareholders to understand how Tesla’s policies and practices respect fundamental labor rights. Greater transparency on these issues would help address concerns about the company’s reputation, clarify its commitment to basic human rights, enable investors to perform their own due diligence according to their fiduciary duty and protect long-term shareholder value.

We urge fellow shareholders to vote FOR this resolution.

***

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders. 

The ethical treatment of all people and regard for human rights is core to our mission of promoting a sustainable future. We endorse and base our definition of human rights on the United Nation's Universal Declaration for Human Rights (UDHR). The UDHR focuses on dignity, respect and equality, without discrimination, and recognizes the right to freedom of association and collective bargaining. Our commitment to human rights is so deeply ingrained in our values that we also require all of our suppliers to follow our Supplier Code of Conduct, which mandates our suppliers to respect the right of all workers to form and join trade unions of their own choosing, to bargain collectively, to engage in peaceful assembly, as well as respect the right of workers to refrain from such activities. Our suppliers must allow workers and/or their representatives to be able to openly communicate and share ideas and concerns with management regarding working conditions and management practices without fear of discrimination, reprisal, intimidation or harassment.

We have more than 100,000 employees worldwide, and we comply with all applicable local laws related to freedom of association and collective bargaining, and respect internationally recognized human rights in all the areas we operate. In Germany, where we have just opened Gigafactory Berlin, we have established a works council which advocates for employees and acts similarly to a union. In the US, we share information with employees on their rights under the National Labor Relations Act and we provide manager training on employee rights, including the freedom of association. These actions speak for themselves. The stockholder proponent is asking Tesla to expend resources to create and maintain a policy framework and additional administrative bureaucracy, which will not meaningfully alter Tesla’s commitment to human rights.

Along with our policies and the actions we have taken to protect our employees’ rights, we also provide our employees multiple methods to report any concerns or grievances. Tesla has been built upon a culture of open communication, and employees have the right to freely discuss their wages, benefits and terms and conditions of employment. They also have the ability to raise complaints internally or externally. We encourage employees to bring any concerns or grievances they may have to any member of management or their HR partner. We also operate an Integrity Line, which is available 24 hours a day, seven days a week, for employees to anonymously report concerns without fear of retaliation. In addition, our global Take Charge program enables employees to report issues and suggestions on safety, security and work practices, with the option to report anonymously. All issues and suggestions are responded to and tracked to closure.

A talented and engaged workforce is central to our mission to accelerate the world’s transition to sustainable energy. In order to recruit and retain this workforce, Tesla is committed to, among other things, regular and meaningful engagement with our employees, a robust culture of safety and highly competitive compensation programs. We offer wages and benefits that meet or exceed those of other comparable manufacturing jobs in the regions where we operate, and we recently increased our base pay even further. In addition, unlike other manufacturers, every single employee of our Company has the option of receiving equity, which can result in significantly higher compensation beyond our already industry-leading base compensation.

Therefore, as we believe that we have already included adequate disclosure with respect to employee rights, are actively engaged in protecting these rights, and have devoted substantial resources to creating a healthy culture, this proposal would not create additional benefits to our employees or value for our shareholders.  

The Board recommends a vote AGAINST the stockholder proposal regarding Adoption of a freedom of association and collective bargaining policy.

 

 

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PROPOSAL TWELVE

STOCKHOLDER PROPOSAL REGARDING ADDITIONAL REPORTING ON CHILD LABOR

Stockholder Proposal and Supporting Statement

***

End Child Labor in Electric Vehicle Battery Production

2022-Tesla, Inc.

Resolved: Shareholders request that the Board of Directors issue a public report, at reasonable cost and omitting proprietary information, describing if, and how, Tesla’s policies and practices governing the sourcing of battery minerals and progress towards cobalt-free battery goals will put the Company on course to eradicate child labor in all forms from its battery supply chain by 2025. Reporting is requested within one year from Tesla’s 2022 annual meeting.

Whereas: Sourcing cobalt for electric vehicle batteries from mining companies facing ongoing allegations of child labor and poor working conditions poses material risks to Tesla.1 The Democratic Republic of Congo (DRC) supplies 70% of the world’s cobalt and child labor is well documented in artisanal mines.2 The ILO recognizes cobalt mining as hazardous work and one of the worst forms of child labor, as children work with sharp tools in mines at risk of collapse.3 ILO Convention 182 calls for urgent action to eliminate these forms, and Sustainable Development Goal 8.7 calls to end all child labor by 2025; yet voluntary corporate actions have failed to eradicate hazardous child labor from cobalt mining.4

Child labor in the cobalt supply chain exposes Tesla and its investors to financial, legal, and reputational risks. In 2019, a class action lawsuit was filed against Tesla and four technology companies for allegedly “aiding and abetting in the death and serious injury of children who claim they were working in cobalt mines in their supply chain.”5 In the joint motion to dismiss, defendants did not challenge the fact that child labor is occurring in their cobalt supply chains, but argued that conduct by their suppliers is out of their control, which conflicts with Tesla’s policies that the company claims prohibit its suppliers from using child labor.6 This argument disregards and seeks to undermine corporate responsibilities for human rights impacts associated with business relationships and the power buyers have to require adherence to a zero-tolerance policy for child labor, or risk being dropped as a supplier.7 Plaintiffs filed an appeal following the 2021 court ruling..8

While Tesla reports on cobalt sourcing procedures, multistakeholder initiatives, and pilots, these disclosures fail to demonstrate that its cobalt supply chain is free of child labor. Investors will not have this assurance unless Tesla implements supplier requirements, not expectations, that are binding, enforceable, and regularly monitored for compliance with national and international laws prohibiting child labor and the company’s own policies.

As Tesla aims to phase out cobalt in its electric vehicle batteries and seeks to position itself as a socially responsible company, the company remains exposed to human rights risks in the supply chains for other critical transition minerals..9

 

***

 

1 

https://www.internationalrightsadvocates.org/s/11221-Judge-Nichols-TVPRA-Opinion-in-Apple.pdf; https://www.theverge.com/2022/2/15/22933022/cobalt-mining-ev-electriv-vehicle-working-conditions-congo

2 https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-cobalt.pdf

3 https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-manila/documents/publication/wcms_720743.pdf;
https://www.theguardian.com/global-development/2019/dec/16/apple-and-google-named-in-us-lawsuit-over-congolese-child-cobalt-mining-deaths

4 https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C182;

https://unstats.un.org/sdgs/metadata/?Text=&Goal=8&Target=8.7

5 https://www.internationalrightsadvocates.org/cases/cobalt

6 https://www.internationalrightsadvocates.org/s/Joint-Motion-to-Dismiss-by-Cobalt-Defendants.pdf

7 https://ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf

8 https://www.internationalrightsadvocates.org/cases/cobalt

9 https://www.business-humanrights.org/en/from-us/briefings/transition-minerals-sector-case-studies/human-rights-in-the-mineral-supply-chains-of-electric-vehicles/

 

34


 

 

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders.  

As we noted in response to the proposal requesting additional reporting regarding human rights that was presented by the same proponent at the 2021 annual meeting of stockholders, which was rejected by Tesla’s stockholders, Tesla’s annual Impact Report already describes how human rights values, including those related to child labor, are respected in our operations. The proponent’s justification for additional reporting on child labor appears to be based on legal proceedings that have been dismissed by the court, and the proponent uses the argument made by the defendants in their motion to dismiss to imply that Tesla, as a defendant, is not taking action to identify and eliminate child labor from its supply chain. In fact, protecting human rights is core to Tesla’s procurement strategy and the position taken in these proceedings that our actions could not have met the standard for legal causation does nothing to undermine that fact. Indeed, because Tesla recognizes the risk of human rights issues within global cobalt supply chains, we have established and implemented a supply chain due diligence management system aligned with the OECD Due Diligence Guidance for Responsible Mineral Supply Chains from Conflict-Affected and High-Risk Countries. We are one of the few downstream companies that publicly report through our Impact Report on how we follow each of the five steps set out in the Guidance, including how we identify (including through audits) and mitigate risks (for its part, the OECD has identified reporting on risk mitigation as being very weak across the industry). As stated in the Impact Report, in the event that modern slavery, child labor or human trafficking is identified in our supply chain and has not been remediated by the supplier within a reasonable time frame, Tesla will transition away from that supplier.

Based on the risk identification procedures mentioned below and described more fully in our Impact Report, Tesla does in fact disclose in our Impact Report that we have found no evidence to date of Tesla causing, contributing to or being linked to child labor, modern slavery or human trafficking in our supply chain. In fact, we can be more confident of this than other OEMs due to our unique sourcing strategy: Rather than relying on companies that typically sit between OEMs and mining companies, we source our cobalt directly from mine sites. This means we can be more confident about where our cobalt comes from and can confirm, based on best practice risk identification, that we do not source from artisanal and small-scale mining (ASM), which is typically at risk of child labor. Rather, we source our cobalt from industrial mines, where no child labor has been identified to date.

In addition, we conduct our own audits of the mine sites and refiners in our cobalt supply chain and review results from third-party industry audit programs such as the Responsible Minerals Initiative (RMI)’s Responsible Minerals Assurance Process (RMAP). In 2021, 83% of refiners and mine sites in Tesla’s battery supply chain either underwent or committed to undergo independent external sustainability audits against RMAP and responsible mining standards. This was complemented by our own audits that assessed how specific cobalt and precursor suppliers conducted due diligence on their supply chain on OECD Annex II risks, which include child labor.

In 2021, a Tesla delegation conducted an on-the-ground assessment on environmental and social conditions in the DRC. While we do not source from ASM, the trip to the DRC helped us understand the importance of ASM for local livelihoods. This is why we fund and sit on the Steering Committee of the Fair Cobalt Alliance (FCA), a multi-stakeholder initiative to support the improvement of conditions in communities impacted by ASM. One of the achievements of the FCA is the development of referral system for children engaged in mining activities, including child labor notification protocol, remediation solution packages, and guidelines for case managers on remediation steps, and trainings related to child rights. One of the reasons for this support is to show that – despite not having identified it in our supply chain – we understand that child labor is an existing challenge in the DRC that requires structural solutions.

Tesla remains confident in our efforts and commitment to ensuring child labor is not part of our supply chain, and that our publicly available policies and disclosures already provide robust and transparent information on these matters. 

The Board recommends a vote AGAINST the stockholder proposal regarding additional reporting on child labor.

 

 

35


 

 

PROPOSAL THIRTEEN

STOCKHOLDER PROPOSAL REGARDING ADDITIONAL REPORTING ON WATER RISK

Stockholder Proposal and Supporting Statement

***

WHEREAS: According to the 2021 IPCC report, climate change is intensifying the water cycle, resulting in more intense droughts globally. Climate change related water scarcity poses material risks to our company, including disruption of operations or lowered production capacity; disruption of supply chains; and political and legal risks related to competition for water resources.

Tesla’s manufacturing operations require large amounts of water. Tesla operates in California and Nevada, where water rights are contentious; in Austin, Texas, where droughts are becoming more frequent, and in water-impacted areas of Shanghai and Germany. All these regions have medium to high risk of water stress.1

Tesla’s factory location choices have caused public upset and reputational damage. Tesla recently opened a factory in Berlin-Brandenburg, an increasingly water depleted region.2 The facility, which will use as much water as a 30,000 person town, is sited on a drinking water protection zone and has raised intense public concern.3,4 Hours after authorities gave approval for Tesla to begin production, a judge ruled that the assessment of Tesla’s planned water use had not been thorough.5 Tesla’s Austin facility is the second largest factory globally; communities are raising concerns over the pressure Tesla will put on Austin’s long-term water supply.6

Increased transparency may reveal shortcomings in Tesla’s water planning, risk assessment, and siting policies. For instance, Tesla’s ability to successfully continue and expand operations at its Gigafactory in Berlin-Brandenburg may be water limited. The region’s water utility company identified water risk that could jeopardize the factory’s expansion.7,8

Peer companies GM, Ford, and Fiat Chrysler have developed water stewardship standards and report on water resource management including responding to CDP water. Tesla does not respond to CDP water requests, receiving an ‘F’ score annually since 2016.9

Tesla does report water reduction activities at certain facilities and shows that new factories will have a lower overall water withdrawal intensity than most peers. However, Tesla fails to provide facility-specific water reduction targets or use data; identify water risk at each location; assess and disclose supply chain related water risk; describe measures to reduce or avoid siting of facilities in high water risk areas; or describe its broader water risk management strategy.

RESOLVED: Shareholders request the Board assess and report its ongoing water risk exposure, and all policies and practices to reduce this risk, from siting of facilities to preparing for water supply reductions associated with climate change, using quantitative indicators where appropriate.

SUPPORTING STATEMENT: At management discretion, Proponents request reporting of:

 

Facility-specific water use and targets

 

Facility water risk assessment and policies, pre- and post-siting

 

1 

http://www.wri.org/our-work/project/aqueduct/

2 

https://www.bloomberg.com/news/articles/2022-02-22/elon-musk-dismissed-tesla-tsla-german-factory-water-issue-now-it-s-a-problem?sref=TtrRgti9

3 

https://www.reuters.com/technology/tesla-faces-day-reckoning-water-supply-planned-german-plant-2022-02-23/

4 

https://www.forbes.com/sites/mariannelehnis/2021/06/03/elon-musks-berlin-gigafactory-water-conflict-is-ongoing-could-better-water-management-put-activists-at-ease/?sh=33aa7f11476a

5 

https://www.nytimes.com/2022/03/04/world/europe/tesla-germany-assembly-plant.html

6 

www.forbes.com/sites/alanohnsman/2022/04/06/teslas-water-worries-dont-end-in-berlin-giga-texas-in-booming-austin-may-also-see-drier-times/?sh=4afe99c93d7a

7 

https://www.bloomberg.com/news/articles/2022-03-18/tesla-s-german-factory-will-exhaust-the-area-s-water-supply?sref=Ttrgti9

8 

https://www.w-s-e.de/aktuelles/news-detail?tx_news_pi1%5Bnews%5D=93&cHash=e27cc1ef3e981850fae562b1bdd1e07a

9 

https://www.cdp.net/en/responses?filters%5Bprogrammes%5D%5B%5D=Water&per_page=208queries%5Bname%5D=tesla&sort_by=project_year&sort_dir=desc

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General water scarcity identification and planning procedures

 

Supply chain water risk assessments

 

Any water related engagement with supply chain partners

 

Integration of water management into governance mechanisms

 

***

Opposing Statement of the Board

The Board has considered this proposal and determined that it would not serve the best interests of Tesla or our stockholders and would not add meaningfully to our water stewardship goals.  

First, rather than actually understanding and analyzing what we do, the stockholder proponent cites outdated articles, sensational headlines and superficial analysis as proof of Tesla’s failure in water planning, risk assessment and siting policies and, therefore, the need for Tesla to have additional reporting on water risks and policies. As we discuss in our Impact Reports, including in our most recent Impact Report published in May 2022, Tesla already focuses on reducing our water usage, and has made innovations and strides on this issue. As climate change worsens, we recognize that water scarcity is an issue that will need to be tackled by everyone. Thus, even though Tesla already withdraws less water at facilities dedicated to vehicle manufacturing per vehicle than the majority of established carmakers, our goal is to be the industry leader in low water usage per vehicle, even when taking battery cell manufacturing into account. To help achieve that goal, Tesla has implemented water-use reduction projects and has a number of additional projects underway.

Before starting construction of Gigafactory Texas, we worked with a third-party to analyze water risks and used those findings in the planning and construction of the factory, as outlined in our Impact Report. For example, Gigafactory Texas will feature a rainwater harvesting system that can store up to 500,000 gallons of rainwater collected from 1,000,000 square feet of the factory’s roof. This harvested rainwater will be treated and recycled through on-site cooling towers, potentially saving over 7,500,000 gallons of city water annually. At Gigafactory Texas, we also reuse condensation water from our conditioned air for our cooling towers in lieu of just discarding it as wastewater.

To further conserve potable water, Tesla is investigating additional ways of using reclaimed wastewater to use in the cooling tower makeup at both Gigafactory Texas and Gigafactory Berlin-Brandenburg. This could result in the conservation of an estimated 40 million gallons of potable city water each year for Gigafactory Texas alone. At the new Gigafactory Berlin-Brandenburg facilities, we implemented water usage reduction initiatives like using hybrid cooling towers, eliminating quench tanks and introducing cascade rinsing systems in the paint shop and battery can wash process for cell manufacturing. In addition to our operations, as part of our battery supply chain strategy, we are prioritizing protecting water levels and water quality in waterways affected by supplier operations.  

Additionally, Tesla is starting the process of assessing the physical climate risks for our manufacturing and other priority assets this year as part of our preparation for aligning with the Task Force on Climate-related Financial Disclosures (TFCD) framework, including impacts on water availability over the short and long term. Over time, our disclosure around water in our Impact Report will include findings from these activities.

To further validate their request for additional reporting on water risk, the proponent mistakenly applauds peer companies, who use more water per vehicle than Tesla, among other environmental metrics, simply for participating in an ESG survey, irrespective of their actual actions and results. Tesla believes it is more beneficial to our shareholders and the environment to continue to focus our efforts on actually making a substantive difference rather than simply providing an image of action. Therefore, Tesla chooses instead to continue to expend our time and resources by increasing the positive impacts of our products in parallel with increasing our environmental performance reporting in alignment with industry standards through our annual Impact Report.

For the reasons stated above, the Board does not believe implementing this proposal would add value to our stockholders.

The Board recommends a vote AGAINST the stockholder proposal regarding additional reporting on water risk.

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CORPORATE GOVERNANCE

Investor Outreach

During 2014, the Board determined to formally identify, approach and establish an active dialogue with our largest stockholders and conduct an extensive and recurring review of our corporate governance practices. We inaugurated a program of periodic investor outreach to ensure that Tesla’s Board and management understand and consider the issues that matter most to our stockholders. We have gradually expanded this program over time to include senior members of management and the Board, who have participated in hosting extended series of meetings with and preparing presentations to a broad base of investors. Through this program, we have received, and continue to periodically receive, helpful input regarding a number of stockholder-related matters, and we have adopted a number of significant changes to our corporate governance practices. Moreover, members of the Board and management from time to time seek input from our investors when considering important corporate actions, including our consideration of, and responses to, stockholder proposals that involve corporate governance and alignment with stockholder interests. For instance, in part arising from investor feedback to broaden the expertise on our Board, we added a new independent director, Hiromichi Mizuno, in early 2020 to lend his international, investment and other expertise to the Board.

We do not expect that we will always be able to address all of our stockholders’ feedback. However, we seek to optimize our corporate governance by continually refining our relevant policies, procedures and practices to align the needs of the Company with evolving regulations and best practices, issues raised by our stockholders and other factors as circumstances warrant.

Code of Business Ethics and Corporate Governance Guidelines

The Board sets high standards for Tesla’s workforce, officers and directors. Tesla is committed to establishing an operating framework that exercises appropriate oversight of responsibilities at all levels throughout the Company and managing its affairs in a manner consistent with rigorous principles of business ethics. Accordingly, Tesla has adopted a Code of Business Ethics, which was recently amended in December 2021, and which is applicable to Tesla and its subsidiaries’ directors, officers and personnel. Tesla has also adopted Corporate Governance Guidelines, which, in conjunction with our certificate of incorporation, bylaws and charters of the standing committees of the Board, form the framework for Tesla’s corporate governance. The Code of Business Ethics and the Corporate Governance Guidelines are each available on Tesla’s website at: http://ir.tesla.com/corporate. Tesla will disclose on its website any amendment to the Code of Business Ethics, as well as any waivers of the Code of Business Ethics, that are required to be disclosed by the rules of the SEC or The NASDAQ Stock Market LLC (“NASDAQ”).

Director Independence

The Board periodically assesses, with the recommendation of the Nominating and Corporate Governance Committee, the independence of its non-employee members as defined in the listing standards of NASDAQ and applicable laws. The Board undertook an analysis for each non-employee director and considered all relevant facts and circumstances, including the director’s other commercial, accounting, legal, banking, consulting, charitable and familial relationships. The Board determined that with respect to each of its current members other than Elon Musk, who is our Chief Executive Officer, and Kimbal Musk, who is Elon Musk’s brother, there are no disqualifying factors with respect to director independence enumerated in the listing standards of NASDAQ or any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each such member is an “independent director” as defined in the listing standards of NASDAQ and applicable laws.

In particular, the Board reviewed the following considerations:

 

Ira Ehrenpreis, James Murdoch, Elon Musk, Kimbal Musk and/or investment funds affiliated with them, have made minority investments in certain companies or investment funds, (i) of which other Tesla directors are founders, significant stockholders, directors, officers or managers, and/or (ii) with which Tesla has certain relationships set forth below in “Certain Relationships and Related Party Transactions—Related Party Transactions.” The Board concluded that none of these investments are material so as to impede the exercise of independent judgment by any of Messrs. Ehrenpreis or Murdoch, and that none of them has a direct or indirect interest in any transaction between Tesla and another company set forth below in “Certain Relationships and Related Party Transactions—Related Party Transactions.”

 

Lawrence J. Ellison and/or entities affiliated with him, have purchased certain Tesla products and services from Tesla. The Board concluded that such purchases were negotiated and completed through ordinary course sales processes in good faith on terms generally available to similar customers and would not impair the independent judgment of Mr. Ellison.

 

Mr. Ellison is an officer of a company from which Tesla has purchased business services. The Board concluded that such purchases were for standard offerings in the ordinary course of business pursuant to good faith contracting processes in which Mr. Ellison was neither involved nor had any material interest.

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In addition, prior to his departure from the Board in October 2021, the Board had determined that Antonio Gracias was an independent director as defined in the listing standards of NASDAQ and applicable laws.

Board Leadership Structure

Roles of Chair of the Board

Following careful deliberation, the Board appointed Robyn Denholm to serve as the independent Chair of the Board in November 2018, having considered her strong leadership, independent presence and financial and business expertise on the Board over an extended period of time. Together, Ms. Denholm and our Chief Executive Officer, Elon Musk, comprise our senior Board leadership, which the Board believes is appropriate at this time to provide the most effective leadership structure for Tesla in a highly competitive and rapidly changing technology industry. As Chair of the Board, Ms. Denholm has broad authority and oversight over the affairs of the Board, with Mr. Musk available to her as a resource in this regard. Moreover, as an independent Chair of the Board, Ms. Denholm has the authority to direct the actions of the other independent directors and regularly communicate, as their representative, with Mr. Musk.

As Chair of the Board, Ms. Denholm, among other things:

 

reviews the agenda and materials for meetings of the independent directors;

 

consults with our Chief Executive Officer regarding Board meeting agendas, schedules and materials;

 

acts as a liaison between our Chief Executive Officer and the independent directors when appropriate;

 

otherwise communicates regularly with our Chief Executive Officer;

 

raises issues with management on behalf of the independent directors;

 

annually reviews, together with the Nominating and Corporate Governance Committee, the Board’s performance during the prior year; and

 

serves as the Board’s liaison for consultation and communication with stockholders as appropriate.

Tesla also has a mechanism for stockholders to communicate directly with non-management directors (see “Corporate Governance—Contacting the Board” below).

Committees of the Board

In addition, the Board has four standing committees—the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Disclosure Controls Committee—which are each further described below. Each of the Board committees is comprised solely of independent directors, and the Board may appoint a chair to each committee. Our independent directors regularly meet in executive session and at such other times as necessary or appropriate as determined by the independent directors. In addition, as part of our governance review and succession planning, the Board (led by the Nominating and Corporate Governance Committee) evaluates our leadership structure to ensure that it remains the optimal structure for Tesla, reviews the composition, size and performance of the Board and its committees, evaluates individual Board members and identifies and evaluates candidates for election or re-election to the Board. See “Corporate Governance—Process and Considerations for Nominating Board Candidates” below for additional information.

Board Role in Risk Oversight

The Board is responsible for overseeing the major risks facing Tesla while management is responsible for assessing and mitigating Tesla’s risks on a day-to-day basis. In addition, the Board has delegated oversight of certain categories of risk to the Audit Committee and the Compensation Committee, which are comprised entirely of independent directors. The Audit Committee and the Compensation Committee respectively report to the Board as appropriate on matters that involve specific areas of risk that each Committee oversees.

Financial, Compliance and Controls Risks

The Audit Committee has scheduled periodic and annual reviews and discussions with management regarding significant risk exposures and incident metrics, including those relating to global financial, accounting and treasury matters, internal audit and controls, legal and regulatory compliance and data privacy and cybersecurity. These discussions cover the steps management has taken to monitor, control and report such exposures, as well as Tesla’s policies with respect to risk assessment and risk management.

39


 

Employee Compensation Risks

The Compensation Committee oversees management of risks relating to Tesla’s compensation plans and programs. Tesla’s management and the Compensation Committee have assessed the risks associated with Tesla’s compensation policies and practices for all employees, including non-executive officers. These include risks relating to setting ambitious targets for our employees’ compensation or the vesting of their equity awards, our emphasis on at-risk equity-based compensation, discrepancies in the values of equity-based compensation depending on employee tenure relative to increases in stock price over time and the potential impact of such factors on the retention or decision-making of our employees, particularly our senior management. Based on the results of this assessment, Tesla does not believe that its compensation policies and practices for all employees, including non-executive officers, create risks that are reasonably likely to have a material adverse effect on Tesla.

Board Meetings and Committees

During fiscal 2021, the Board held six meetings. Each director attended or participated in 75% or more of the aggregate of the total number of meetings of the Board and the total number of meetings of all Board Committees on which such director served (in each case held during such director’s relevant period of service), except for Lawrence J. Ellison, who was required to devote substantial time to an atypically high volume of critical business meetings in 2021.

Audit Committee

The Audit Committee, which has been established in accordance with Section 3(a)(58) of the Exchange Act, currently consists of Robyn Denholm, Hiromichi Mizuno and James Murdoch, each of whom is “independent” as such term is defined for audit committee members by the listing standards of NASDAQ. Ms. Denholm is the chair of the Audit Committee. The Board has determined that Ms. Denholm is an “audit committee financial expert” as defined in the rules of the SEC.

The Audit Committee is responsible for, among other things:

 

reviewing and approving the selection of Tesla’s independent auditors, and approving the audit and non-audit services to be performed by Tesla’s independent auditors;

 

providing oversight, recommendations, and under specified thresholds, approvals, regarding significant financial matters and investment practices, including any material acquisitions and divestitures;

 

monitoring the integrity of Tesla’s financial statements and Tesla’s compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

 

reviewing the adequacy and effectiveness of Tesla’s internal control policies and procedures in addition to Tesla’s risk management, data privacy and data security;

 

discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors Tesla’s interim and year-end operating results;

 

reviewing and discussing the accounting assessment of our annual Impact Report and other environmental, social and governance (ESG) disclosures; and

 

preparing the audit committee report that the SEC requires in Tesla’s annual proxy statement.

The Audit Committee held 13 meetings during fiscal 2021. The Audit Committee has adopted a written charter approved by the Board, which is available on Tesla’s website at: http://ir.tesla.com/corporate.

The Audit Committee Report is included in this proxy statement on page 66.

Compensation Committee

The Compensation Committee is currently comprised of Robyn Denholm, Ira Ehrenpreis and Kathleen Wilson-Thompson, each of whom qualifies as an independent director under the listing standards of NASDAQ. Mr. Ehrenpreis is the chair of the Compensation Committee.

The Compensation Committee is responsible for, among other things:

 

overseeing Tesla’s global compensation philosophy and policies, plans and benefit programs and making related recommendations to the Board, including by considering “say-on-pay” votes of Tesla’s stockholders;

40


 

 

reviewing and approving for Tesla’s executive officers: the annual base salary, equity compensation, employment agreements, severance arrangements and change in control arrangements and any other compensation, benefits or arrangements;

 

administering the compensation of members of the Board and Tesla’s equity compensation plans;

 

reviewing human capital management practices related to Tesla’s talent generally (including how Tesla recruits, develops and retains diverse talent); and

 

preparing the compensation committee report that the SEC requires to be included in Tesla’s annual proxy statement.

The Compensation Committee held ten meetings during fiscal 2021. The Compensation Committee has adopted a written charter approved by the Board, which is available on Tesla’s website at: http://ir.tesla.com/corporate.

The Compensation Committee Report is included in this proxy statement on page 54.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee currently consists of Robyn Denholm, Ira Ehrenpreis, James Murdoch and Kathleen Wilson-Thompson, each of whom qualifies as an independent director under the listing standards of NASDAQ. Mr. Ehrenpreis is the chair of the Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee is responsible for, among other things:

 

assisting the Board in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to the Board;

 

reviewing developments in corporate governance practices and developing and recommending governance principles applicable to the Board;

 

considering questions of possible conflicts of interest of Tesla’s directors and officers;

 

reviewing the manner in and the process by which stockholders communicate with the Board and recommending Board responses;

 

reviewing the succession planning for Tesla’s executive officers;

 

overseeing the evaluation of Tesla’s Board and management; and

 

recommending members for each Board committee to the Board.

The Nominating and Corporate Governance Committee held seven meetings during fiscal 2021. The Nominating and Corporate Governance Committee has adopted a written charter approved by the Board, which is available on Tesla’s website at: http://ir.tesla.com/corporate.

Disclosure Controls Committee

The Disclosure Controls Committee currently consists of Robyn Denholm, James Murdoch and Kathleen Wilson-Thompson each of whom qualifies as an independent director under the listing standards of NASDAQ. Ms. Denholm is the chair of the Disclosure Controls Committee.

The Disclosure Controls Committee is responsible for, among other things:

 

overseeing the implementation of and compliance with the terms of Tesla’s consent agreement with the SEC dated September 29, 2018, as amended April 26, 2019;

 

overseeing the controls and processes governing certain public disclosures by Tesla and its executive officers; and

 

reviewing and resolving certain conflicts of interest or other human resources issues involving any executive officer and ensuring appropriate disclosures, if applicable.

The Disclosure Controls Committee held six meetings during fiscal 2021. The Disclosure Controls Committee has adopted a written charter approved by the Board, which is available on Tesla’s website at: http://ir.tesla.com/corporate.

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Compensation Committee Interlocks and Insider Participation

Robyn Denholm, Ira Ehrenpreis and Kathleen Wilson-Thompson served as members of the Compensation Committee during 2021. None of such persons is or was formerly an officer or an employee of Tesla. See “Certain Relationships and Related Party Transactions—Related Party Transactions” below for certain transactions involving Tesla in which members of the Compensation Committee may potentially be deemed to have an indirect interest.

During 2021, no interlocking relationships existed between any member of Tesla’s Board or Compensation Committee and any member of the board of directors or compensation committee of any other company.

Process and Considerations for Nominating Board Candidates

The Nominating and Corporate Governance Committee is responsible for, among other things, determining the criteria for Board membership, recommending Board candidates and proposing any changes to the composition of the Board. The Nominating and Corporate Governance Committee’s criteria and process for fulfilling these duties are generally as follows:

 

The Nominating and Corporate Governance Committee regularly reviews the current composition and size of the Board, and oversees an annual evaluation of the performance of the Board as a whole and of its individual members. The Nominating and Corporate Governance Committee applies uniform evaluation processes and standards for all Board members, including in identifying, considering or recommending new candidates for the Board to fill vacancies or add additional directors and in recommending existing Board members for nomination to be re-elected at annual meetings of stockholders.

 

In carrying out the foregoing duties, the Nominating and Corporate Governance Committee consistently seeks to achieve a complementary balance of knowledge, experience and capability on the Board. While the Nominating and Corporate Governance Committee has not established specific minimum qualifications for director candidates, it considers all pertinent factors that it considers appropriate, including diversity, and believes that the Board should be comprised of directors who (1) are predominantly independent, (2) are of high integrity, (3) have broad, business-related knowledge and experience at the policy-making level in business or technology, including their understanding of Tesla’s business in particular, (4) have qualifications that will increase overall Board effectiveness and (5) meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to Audit Committee members. For example, after conducting independent director searches from time to time in which numerous highly-qualified candidates from a variety of backgrounds were considered, the Nominating and Corporate Governance Committee recommended to the Board Lawrence J. Ellison and Kathleen Wilson-Thompson in 2018 to further bolster the Board’s expertise in technological innovation and workforce management and relations and Hiromichi Mizuno in 2020 to add an additional perspective on global financial markets and economics and to further increase the international exposure and global mindset on the Board with insight and influence.

 

In evaluating and identifying candidates, the Nominating and Corporate Governance Committee has the authority to retain and terminate any third party search firm that is used to identify director candidates and has the authority to approve the fees and retention terms of any search firm.

 

With regard to any candidates who are properly recommended by stockholders (as described in more detail below) or by other sources, the Nominating and Corporate Governance Committee will review the qualifications of any such candidate, which review may, in the Nominating and Corporate Governance Committee’s discretion, include interviewing references for the candidate, direct interviews with the candidate or other actions that the Nominating and Corporate Governance Committee deems necessary or proper.

 

After completing its review and evaluation of director candidates, the Nominating and Corporate Governance Committee recommends the director nominees that it has determined to be qualified to the full Board.

It is the policy of the Nominating and Corporate Governance Committee to consider properly submitted recommendations for candidates to the Board from stockholders. Stockholder recommendations for candidates to the Board must be directed in writing to Tesla, Inc., 1 Tesla Road, Austin, Texas 78725, Attention: Legal Department, and should also be sent by e-mail to shareholdermail@tesla.com. Such recommendations must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and Tesla within the last three years and evidence of the nominating person’s ownership of Tesla stock. Such recommendations must also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for Board membership, including issues of character, integrity, judgment, diversity, age, independence, skills, education, expertise, business acumen, business experience, length of service, understanding of Tesla’s business, other commitments and the like, as well as any personal references and an indication of the candidate’s willingness to serve.

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Board Diversity

 

Diversity is one of the important factors the Nominating and Corporate Governance Committee considers when nominating Board candidates. Two of the three directors we added in the past four years are gender, racially and/or ethnically diverse and the chairperson of our Board is a woman. The Committee conducts annual evaluations of our Board effectiveness, providing it with an opportunity to examine whether our Board members have the right composition of skills and experiences. When identifying and recommending new candidates, the Committee continues to consider opportunities to increase our Board diversity in a way that supports the current and anticipated needs of the Company.

 

Board Diversity Matrix (As of June 10, 2022)

 

Female

Male

Total Number of Directors

8

Gender:

Directors

2

6

Number of Directors Who Identify in Any of the Categories Below:

African American or Black

1

Asian (other than South Asian)

1

White

1

5

 

Attendance at Annual Meetings of Stockholders by the Board

Although Tesla does not have a formal policy regarding attendance by members of the Board at Tesla’s annual meetings of stockholders, directors are encouraged to attend. Five of our directors who served at the time of the 2021 annual meeting of stockholders attended such meeting in person, and each of the other directors joined via online webcast.

Stock Transactions

Hedging, Short Sales and Rule 10b5-1 Trading Plans

Tesla has an insider trading policy that prohibits all of our directors, officers and employees from, among other things, engaging in short sales, hedging or similar transactions designed to decrease the risks associated with holding Tesla securities. This prohibition encompasses transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to Tesla securities, but not transactions designed to facilitate portfolio diversification, such as broad-based index options, futures or baskets.

In addition, two of Tesla’s current executive officers and one director have entered into Rule 10b5-1 trading plans that are effective as of the date of this filing.

Pledging of Shares

The ability of our directors and executive officers to pledge Tesla stock for personal loans and investments is inherently related to their compensation due to our use of equity awards and promotion of long-termism and an ownership culture. See “Executive Compensation—Pledging of Shares” below for more details on Tesla’s policy regarding the pledging of Tesla stock by such individuals.

Stock Ownership by Board and Management

To align the interests at the highest level of our management with those of our stockholders, the Board has instituted the following requirements relating to stock ownership under our Corporate Governance Guidelines.

Each member of the Board and our Chief Executive Officer is subject to the following minimum stock ownership requirements: (i) each director shall own shares of Tesla stock equal in value to at least five times the annual cash retainer for directors (exclusive of retainer amounts for service as a member or chair of a Board committee), and (ii) our Chief Executive Officer shall own shares of Tesla stock equal in value to at least six times his/her base salary. Each individual shall have five years from the date such person assumed his or her relevant role at Tesla to come into compliance with these ownership requirements. Each person’s compliance with the minimum stock ownership level will be determined on the date when this compliance grace period expires, and then annually on

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each December 31, by multiplying the number of shares held by such person and the average closing price of those shares during the preceding month. Our Chief Executive Officer and each of our directors is currently either in compliance with these requirements or is in the applicable period to come into compliance therewith.

Our Corporate Governance Guidelines also provide that no equity award as to which vesting or the lapse of a period of restriction occurs based solely on the passage of time that is granted to a named executive officer may vest, or have a period of restriction that lapses, earlier than six months from the date on which such vesting or lapse commences. Furthermore, our Corporate Governance Guidelines provide that no named executive officer may sell, transfer, pledge, assign or otherwise dispose of any shares of Tesla stock acquired pursuant to any stock option, restricted stock unit or other equity award granted by Tesla earlier than the date that is six months after the date on which such award vests or the period of restriction with respect to such award lapses, as applicable.

Prohibition of Equity Award Repricing

Tesla views equity-based compensation to be a key factor in incentivizing the future performance of our personnel. Consequently, the Tesla, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) provides, and Tesla’s previous 2010 Equity Incentive Plan provided, that stock options and other equity awards issued under these plans that derive their value from the appreciation of the value of Tesla’s stock may not be exchanged for other awards, repurchased for cash or otherwise be made the subject of transactions that have the purpose or effect of repricing such awards.

In addition, applicable NASDAQ rules prohibit any repricing with respect to the performance-based stock option award granted to Elon Musk in January 2018 (the “2018 CEO Performance Award”).

Contacting the Board

Any stockholder who desires to contact our non-employee directors regarding appropriate Tesla business-related comments may do so electronically at the following website: http://ir.tesla.com/corporate-governance/contact-the-board. Such stockholders who desire to contact our non-employee directors by mail may do so by writing to Tesla, Inc., 1 Tesla Road, Austin, TX 78725, Attention: Legal Department. Our General Counsel, or someone acting in his or her place, receives these communications unfiltered by Tesla, forwards communications to the appropriate committee of the Board or non-employee director, and facilitates an appropriate response. Please note that requests for investor relations materials should be sent to ir@tesla.com.

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EXECUTIVE OFFICERS

The names of Tesla’s executive officers, their ages, their positions with Tesla and other biographical information as of June 10, 2022, are set forth below. Except for Messrs. Elon Musk and Kimbal Musk who are brothers, there are no other family relationships among any of our directors or executive officers.

 

Name

 

Age

 

Position

Elon Musk

 

50

 

Technoking of Tesla and Chief Executive Officer

Zachary Kirkhorn

 

37

 

Master of Coin and Chief Financial Officer

Andrew Baglino

 

41

 

Senior Vice President, Powertrain and Energy Engineering

 

Elon Musk. For a brief biography of Mr. Musk, please see “Proposal One—Election of Directors— Information Regarding the Board and Director Nominees” above.

Zachary Kirkhorn is our Master of Coin and has served as our Chief Financial Officer since March 2019. Previously, Mr. Kirkhorn served in various finance positions continuously since joining Tesla in March 2010, other than between August 2011 and June 2013 during which he attended business school, including most recently as Vice President, Finance, Financial Planning and Business Operations from December 2018 to March 2019. Mr. Kirkhorn holds dual B.S.E. degrees in economics and mechanical engineering and applied mechanics from the University of Pennsylvania and an M.B.A. from Harvard University.

Andrew Baglino has served as our Senior Vice President, Powertrain and Energy Engineering since October 2019. Previously, Mr. Baglino served in various engineering positions continuously since joining Tesla in March 2006. Mr. Baglino holds a B.S. in electrical engineering from Stanford University.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers for 2021 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations, expectations and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or planned programs as summarized in this discussion.

The following discussion and analysis relates to the compensation arrangements for 2021 of (i) our principal executive officer, (ii) our principal financial officer, (iii) the most highly compensated person, other than our principal executive officer and principal financial officer, who was serving as executive officer at the end of our fiscal year ended December 31, 2021 and (iv) our former president of Tesla Heavy Trucking, who served in such capacity during part of 2021 (our “named executive officers”). We had no other executive officers serving at the end of our fiscal year ended December 31, 2021. Our named executive officers for fiscal year 2021 were:

 

Name

 

Position

Elon Musk

 

Technoking of Tesla and Chief Executive Officer

Zachary Kirkhorn

 

Master of Coin and Chief Financial Officer

Andrew Baglino

 

Senior Vice President, Powertrain and Energy Engineering

Jerome Guillen

 

Former President, Tesla Heavy Trucking

Mr. Guillen departed Tesla in June 2021.

Compensation Philosophy

Our mission is to accelerate the world’s transition to sustainable energy. This is a long-term mission, and our compensation programs reflect this—and our startup origins—in that they consist primarily of salary or wages and equity awards. Whereas salary or wages are intended to meet our employees’ near-term liquidity needs, we believe that equity awards are an effective tool for retaining employees long-term, as they vest incrementally over a period of time or upon the achievement of specified performance milestones intended to be achieved over the medium- and long-term. Moreover, the closing prices of our common stock on the first trading day of each of 2020, 2021 and 2022 were $86.05, $729.77 and $1,199.78, respectively (as adjusted for the five-for-one stock split effected in the form of a stock dividend in August 2020, or the “Stock Split). During periods in which our stock price and the underlying value of equity awards increase, their retention impact is even greater. We believe that the potential for such increases also creates an ownership culture that promotes holding equity, which in turn aligns the interests of our employees with the long-term interests of our stockholders. For these reasons, our goal is to provide each employee with the opportunity to participate in our equity programs, with certain cash-based bonus programs serving generally to accommodate specific incentive structures or liquidity needs. Combining salary or wages and our equity award program, we strive to offer a total level of compensation that is competitive within specific roles and geographical markets.

In particular, we believe that compensation for the individuals who are responsible for Tesla’s strategic direction and operations should motivate them to achieve sustainable stockholder value and/or tangible milestones rather than to simply remain at Tesla or maintain the status quo. Therefore, while we offer to our general employee population restricted stock units that will retain some value even if the market value of our stock decreases, we are increasingly emphasizing for our executive officers the grant of stock option awards, which have zero initial value and accumulate value, if at all, only to the extent that our stock price increases following their grant, through the applicable vesting dates and until such stock options are ultimately exercised and the underlying shares are sold. In addition, because equity awards comprise a greater proportion of our executive officers’ total level of compensation compared to comparable roles at peer companies, a sustained decrease in our stock price or failure to achieve the applicable operational milestones may result in a level of total compensation that is significantly less than that of such peer roles. Likewise, our outside director compensation program has been comprised primarily of equity awards that are entirely in the form of stock option awards, as well as relatively modest cash retainer payments that may be waived at the election of each director.

We evaluate our compensation philosophy and programs regularly and evolve them as circumstances merit with oversight by the Compensation Committee, particularly with respect to executive and director compensation. For example, if our stock price experiences significant movement over a short period of time that results in a persistent change to equity compensation, certain adjustments may be considered to align our compensation programs to their intended purposes.

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Key Factors in Determining Executive Compensation

Role of Compensation Committee in Executive Compensation

The Compensation Committee has overall responsibility for recommending to the Board the compensation of our Chief Executive Officer and reviewing and determining the compensation of our other executive officers. Members of the Compensation Committee are appointed by the Board. Currently, the Compensation Committee consists of three members of the Board: Ira Ehrenpreis (Chair), Robyn Denholm and Kathleen Wilson-Thompson, none of whom is an executive officer of Tesla, and each of whom qualifies as (i) an “independent director” under the NASDAQ Stock Market Rules and (ii) an “outside director” under Section 162(m) of the Internal Revenue Code (the “Code”). See “Corporate Governance—Board Meetings and Committees—Compensation Committee” above.

Role of Compensation Consultants

The Compensation Committee has the authority to engage and has from time to time engaged the services of outside consultants to assist in making decisions regarding the establishment of Tesla’s compensation philosophy and programs, including for executives and directors. For example, Compensia, Inc., a national compensation consulting firm (“Compensia”), was retained as compensation consultant in 2020 and 2021 to advise the Compensation Committee with respect to Tesla’s compensation program for its non-employee directors. Compensia advised the Compensation Committee on the design of the Board’s equity award program for the future period until the Compensation Committee’s and Board’s next review of the program, including a consideration of Tesla’s exceptional performance and commitment to at-risk director compensation in the form of annual stock option awards to ensure continued alignment of the interests of directors with those of Tesla’s stockholders. See “Executive Compensation—Compensation of Directors—Non-Employee Director Compensation Arrangements” below for more detail regarding the review of Board compensation during 2020 and 2021. Compensia did not provide any other services to us during 2021.

Role of Executive Officers in Compensation Decisions

Historically, for executive officers other than our Chief Executive Officer, the Compensation Committee has sought and considered input from our Chief Executive Officer regarding such executive officers’ responsibilities, performance and compensation. Specifically, our Chief Executive Officer recommends base salary increases and equity award levels for our senior personnel, and advises the Compensation Committee regarding the compensation program’s ability to attract, retain and motivate executive talent. These recommendations reflect compensation levels that our Chief Executive Officer believes are qualitatively commensurate with an executive officer’s individual qualifications, experience, responsibility level, functional role, knowledge, skills and individual performance, as well as Tesla’s performance. The Compensation Committee considers our Chief Executive Officer’s recommendations, but ultimately determines compensation in its judgment, and approves the specific compensation for all of our executive officers (other than for our Chief Executive Officer, which is approved by the Board). All such compensation determinations by our Compensation Committee are largely discretionary.

The Compensation Committee meets regularly in executive session. Our Chief Executive Officer is not present during Compensation Committee deliberations or votes on his compensation and also recuses himself from sessions of the Board where the Board acts on the Compensation Committee’s recommendations regarding his compensation. In addition, the Board has established a management committee under the 2019 Plan (the “Equity Award Committee”) to grant and administer equity awards, subject to certain maximum limits on the seniority of personnel to whom the Equity Award Committee may grant awards and the value of any individual award. For example, the Equity Award Committee is not authorized to grant awards to executive officer-level employees. Moreover, pursuant to applicable law, the Equity Award Committee may not grant awards to its members, and the number of shares of our common stock underlying awards granted by it may not exceed amounts determined by the Board from time to time. The Board has delegated to the Compensation Committee oversight authority over the Equity Award Committee.

Role of Stockholder Say-on-Pay Votes

At the 2011 annual meeting of our stockholders and at each annual meeting held every three years since, including most recently in 2020, we held triennial stockholder advisory “say-on-pay” votes on the compensation of our named executive officers for the immediately preceding fiscal years. Each time, our stockholders overwhelmingly approved the compensation of our named executive officers, with over 83% of our stockholders present and entitled to vote at each meeting voting in favor of our compensation policies for our named executive officers. Given these results, and following consideration of them, the Compensation Committee has decided to retain our overall approach to executive compensation while continuing to evaluate our practices frequently, including in response to future say-on-pay votes. Moreover, we are required to hold a vote at least every six years regarding how often to hold a stockholder advisory vote on the compensation of our named executive officers. We held our most recent such vote at the 2017 annual meeting of stockholders, at which our stockholders indicated a preference for a triennial vote. Consequently, the Board determined that we will

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hold a triennial stockholder advisory vote on the compensation of our named executive officers until they consider the results of our next say-on-pay frequency vote, which will be held at the 2023 annual meeting of stockholders.

Clawback Policy

Our Corporate Governance Guidelines sets forth a compensation recovery (“clawback”) policy with respect to any annual incentive payment or long-term incentive payment that may be received by an executive officer, where such payment would be predicated upon achieving certain financial results that were subsequently the subject of a restatement of our financial statements, and a lower payment would have been made to the executive based upon the restated financial results. In such case, the Board has the authority to seek to recover from the executive officer the amount by which such officer’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results.

Moreover, the terms of the 2018 CEO Performance Award include a clawback provision in the event of a restatement of our financial statements previously filed with the SEC. See “Executive Compensation—Compensation Discussion and Analysis—Chief Executive Officer Compensation—2018 CEO Performance Award” below.

Current Elements of Named Executive Officer Compensation

Overview and Fiscal Year 2021 Company Highlights

Our current executive compensation program, which was developed and approved by the Compensation Committee, generally consists of base salary and equity-based incentives, as well as other benefits generally available to employees. We combine these elements in order to formulate compensation packages with the goal of providing, on a total basis, competitive pay and align the interests of our named executive officers with long-term stockholder interests by tying the value of their compensation to our long-term stock price and/or the achievement of financial, operational and strategic objectives. In 2021, Tesla’s full-year accomplishments under our executive leadership included the following:

 

Total revenues of $53.82 billion, representing an increase of $22.28 billion, or 70.64% compared to the prior year;

 

Net income attributable to common stockholders of $5.52 billion and an operating margin of 12.1%, representing favorable changes of $4.80 billion and 5.8%, respectively, compared to the prior year;

 

Annual vehicle delivery and production records of 936,222 and 930,422 total vehicles, representing an increase of 87.38% and 82.53%, respectively, compared to the prior year;

 

3.99 gigawatt hours of energy storage and 345 megawatts of solar energy systems deployed; and

 

Ongoing progress in the global growth of our manufacturing capabilities, including the commencement of builds of the Model Y in Gigafactory Texas and equipment testing through the vehicle production process in Gigafactory Berlin.

Base Salary

The Compensation Committee is responsible for reviewing our Chief Executive Officer’s and other executive officers’ base salaries. The base salaries of all executive officers are reviewed and adjusted when necessary to reflect individual roles, performance and the competitive market. Because we currently do not provide cash bonuses to our executive officers, salary is the primary cash-based element of our executive officers’ compensation structure.

The following table sets forth information regarding the annualized base salary rates at the end of 2021 for our named executive officers:

 

Name

 

Ending

Fiscal 2021

Base

Salary($)(1)

 

Elon Musk

 

(2)

Zachary Kirkhorn

 

300,000

 

Andrew Baglino

 

300,000

 

Jerome Guillen

 

(3)

 

(1)

Reflects an annualized rate assuming 52 weeks each comprised of five work days.

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(2)

Mr. Musk historically earned a base salary that reflected the applicable minimum wage requirements under California law, and he was subject to income taxes based on such base salary. However, he has never accepted his salary. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary.

(3)

Mr. Guillen departed Tesla in June 2021.

Equity-Based Incentives

Our equity award program is the primary vehicle for offering long-term incentives to our named executive officers. The equity awards we have historically granted and currently grant are options to purchase shares of our common stock and restricted stock unit awards that are settled in shares of our common stock upon vesting, and we have granted to our named executive officers both awards that vest over a long-term period and awards that vest only upon the achievement of specified Tesla performance milestones, in each case subject to continued service. We are increasingly emphasizing for our named executive officers the grant of stock option awards, which have value only to the extent, if any, that our stock price increases following their grant. Accordingly, all equity awards granted to our executive officers in 2020 (the last year awards were granted to our executive officers) were in the form of stock option awards. As a result, a significant portion of our named executive officers’ total compensation is entirely at risk, depending on long-term stock price performance.

While we strive to offer a total level of compensation that is competitive within specific roles and geographical markets, we do not have an inflexible set of criteria for granting equity awards; instead, the Compensation Committee exercises its judgment and discretion, in consultation with our Chief Executive Officer and from time to time, a compensation consultant. The Compensation Committee considers, among other things, the role and responsibility of the named executive officer, competitive market factors, the amount of stock-based equity compensation already held by the named executive officer, the impact of any dramatic changes in our stock price over a short period of time and the cash-based compensation received by the named executive officer, to determine the level and types of equity awards that it approves. We generally grant one-time new hire equity awards to our employees, including executives, upon their commencement of employment with us, or upon their promotion to new positions. Additionally, as part of our ongoing executive compensation review and alignment process, we periodically grant additional equity awards to our executives. See “Executive Compensation—Grants of Plan-Based Awards in 2021” below.

The Compensation Committee meets periodically, including to approve equity award grants to our executives from time to time. We do not have, nor do we plan to establish, any program, plan or practice to time equity award grants in coordination with releasing material non-public information.

Severance and Change in Control Benefits

No named executive officer has a severance or change in control arrangement with Tesla, other than the vesting of the 2018 CEO Performance Award based solely upon the achievement of market capitalization milestones as measured at the time of a change in control of Tesla. See “Executive Compensation—Potential Payments Upon Termination or Change in Control” and “Executive Compensation—Compensation Discussion and Analysis—Chief Executive Officer Compensation—2018 CEO Performance Award” below.

Bonus

We do not currently have or have planned, and historically we have rarely entered into, any specific arrangements with our named executive officers providing for cash-based bonus awards.

Non-Equity Incentive Plan Compensation

We did not provide any non-equity incentive plan compensation to any of our named executive officers in 2021, and we do not currently have or have planned any specific arrangements with our named executive officers providing for non-equity incentive plan compensation.

Perquisites

Generally, we do not provide any perquisites or other personal benefits to our named executive officers.

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Health and Welfare Benefits

We provide the following benefits to our named executive officers on the same basis provided to all of our employees:

 

medical insurance including comprehensive transgender and fertility coverage, mental health, dental and vision;

 

adoption and surrogacy benefits;

 

confidential Employee Assistance Program counseling;

 

life insurance and accidental death and dismemberment insurance;

 

a Section 401(k) plan where, beginning in 2022, Tesla will provide a company match equal to 50% of the employee’s contribution, up to a maximum of 3% of the employee’s eligible compensation with a $3,000 annual cap;

 

an employee stock purchase plan;

 

short-and long-term disability insurance;

 

medical and dependent care flexible spending account; and

 

a health savings account.

Chief Executive Officer Compensation

Overview

Historically, in developing compensation recommendations for our Chief Executive Officer, the Compensation Committee has sought both to appropriately reward our Chief Executive Officer’s previous and current contributions and to create incentives for our Chief Executive Officer to continue to contribute significantly to successful results in the future. Each of the 2018 CEO Performance Award and the performance-based stock option award granted to our Chief Executive Officer in August 2012 (the “2012 CEO Performance Award”) is focused on this latter objective, as it solely rewards future performance.

In addition to serving as our Chief Executive Officer since October 2008, Elon Musk has contributed significantly and actively to us since our earliest days in April 2004 by recruiting executives and engineers, contributing to vehicle engineering and design, raising capital for us and bringing investors to us and raising public awareness of Tesla.

Cash Compensation

Mr. Musk historically earned a base salary that reflected the applicable minimum wage requirements under California law, and he was subject to income taxes based on such base salary. However, he has never accepted his salary. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary.

Historical Equity Compensation

Prior to stock option awards made in December 2009, Mr. Musk did not receive any equity compensation for his services for a period of five years.

In 2010 and 2011, Mr. Musk did not receive any equity grants, because the Compensation Committee believed his grants made in December 2009 already provided sufficient motivation for Mr. Musk to perform his duties as Chief Executive Officer.

In August 2012, to create incentives for continued long-term success from the then-recently launched Model S program as well as from Tesla’s then-planned Model X and Model 3 programs, and to further align executive compensation with increases in stockholder value, the Board granted to Mr. Musk the 2012 CEO Performance Award, comprised of a stock option award to purchase 26,374,505 shares (as adjusted for the Stock Split) of Tesla’s common stock, representing 5% of Tesla’s total issued and outstanding shares at the time of grant. The 2012 CEO Performance Award consists of 10 equal vesting tranches, each requiring that Tesla meet a combination of (i) the achievement of a specified operational milestone relating to development of Model X or Model 3, aggregate vehicle production or a gross margin target, and (ii) a sustained incremental $4 billion increase in Tesla’s market capitalization from $3.2 billion, Tesla’s market capitalization at the time of grant. The market capitalization conditions for all of the 10 vesting tranches and nine of the 10 operational milestones have been achieved, and therefore nine of 10 tranches under the 2012 CEO Performance Award have vested. As of the date of this filing, only one operational milestone, requiring that Tesla achieve gross margin of 30% or more for four consecutive quarters, has not been achieved and remains outstanding.

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Prior to 2018, the only additional equity awards received by Mr. Musk related to certain immaterial awards granted during 2013 pursuant to a patent incentive program that was available to our employees generally.

2018 CEO Performance Award

Early in 2017, with the 2012 CEO Performance Award heading to substantial completion after having helped Tesla grow its market capitalization to over $55 billion in just over five years, the independent members of the Board began preliminary discussions regarding how to continue to incentivize Mr. Musk to lead Tesla through the next phase of its development. In January 2018, following more than six months of careful analysis and development led by the Compensation Committee, with participation by every independent Board member, the help of Compensia and engagement with and feedback from our largest institutional stockholders, the Board granted the 2018 CEO Performance Award to Mr. Musk. Such grant was subject to approval by a majority of the total votes of Tesla common stock not owned by Mr. Musk or Kimbal Musk cast at a meeting of the stockholders to approve the 2018 CEO Performance Award. On March 21, 2018, such approval was obtained, with approximately 73% of the votes cast by such disinterested shares voting in favor of the 2018 CEO Performance Award.

The 2018 CEO Performance Award is comprised of a 10-year maximum term stock option to purchase 101,320,210 shares (as adjusted for the Stock Split) of Tesla’s common stock, divided equally among 12 separate tranches that were each equivalent to 1% of the issued and outstanding shares of Tesla’s common stock at the time of grant, at an exercise price of $70.01 per share (as adjusted for the Stock Split). Each of the 12 vesting tranches of the 2018 CEO Performance Award vests upon certification by the Board that both (i) the market capitalization milestone for such tranche, which begins at $100 billion for the first tranche and increases by increments of $50 billion thereafter and (ii) any one of the following 8 operational milestones focused on revenue or 8 operational milestones focused on profitability, has been met:

 

Total Revenue*

(in billions)

 

Adjusted EBITDA**

(in billions)

$20.0

 

$1.5

$35.0

 

$3.0

$55.0

 

$4.5

$75.0

 

$6.0

$100.0

 

$8.0

$125.0

 

$10.0

$150.0

 

$12.0

$175.0

 

$14.0

 

*

“Revenue” means total revenues as reported in Tesla’s financial statements on Forms 10-Q or 10-K filed with the SEC for the previous four consecutive fiscal quarters.

**

“Adjusted EBITDA” means (i) net income (loss) attributable to common stockholders before (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation and amortization and (v) stock-based compensation, as each such item is reported in Tesla’s financial statements on Forms 10-Q or 10-K filed with the SEC for the previous four consecutive fiscal quarters.

Any single operational milestone may only satisfy the vesting requirement of one tranche, together with the corresponding market capitalization milestone. Subject to any applicable clawback provisions, policies or other forfeiture terms, once a milestone is achieved, it is forever deemed achieved for determining the vesting of a tranche. Meeting more than 12 of the 16 operational milestones will not result in any additional vesting or other compensation to Mr. Musk under the 2018 CEO Performance Award. Except in a change in control situation, measurement of the market capitalization milestones will be based on both (i) a six calendar month trailing average of Tesla’s stock price as well as (ii) a 30 calendar day trailing average of Tesla’s stock price, in each case based on trading days only. Upon the consummation of certain acquisitions or split-up, spin-off or divestiture transactions, each then-unachieved market capitalization milestone and/or operational milestone will be adjusted to offset the impact of such transactions to the extent they could be considered material to the achievement of those milestones.

In establishing the Revenue and Adjusted EBITDA milestones, the Board carefully considered a variety of factors, including Tesla’s growth trajectory and internal growth plans and the historical performance of other high-growth and high-multiples companies in the technology space that have invested in new businesses and tangible assets. These benchmarks provided revenue/EBITDA to market capitalization multiples, which were then used to inform the specific operational targets that aligned with Tesla’s plans for future growth. Nevertheless, the Board considered each of the market capitalization and operational milestones to be challenging hurdles. For example, in order to meet all 12 market capitalization milestones, Tesla was required to add approximately $600 billion to its market capitalization at the time of the grant of the 2018 CEO Performance Award on a sustained basis, and in order to satisfy all eight revenue-based operational milestones, Tesla would have to increase revenue by more than $163 billion from its annual revenue of approximately $11.8 billion in 2017, the last fiscal year completed prior to the grant of the 2018 CEO Performance Award.

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In addition, Mr. Musk must continue to lead Tesla as our Chief Executive Officer or, alternatively, as our Chief Product Officer and Executive Chairman (with any other Chief Executive Officer reporting directly to him), at the time each milestone is met in order for the corresponding tranche to vest. With limited exceptions, Mr. Musk must hold any shares that he acquires upon exercise of the 2018 CEO Performance Award for at least five years post-exercise. There will be no acceleration of vesting of the 2018 CEO Performance award upon Mr. Musk’s termination, death or disability or a change in control of Tesla. However, in a change in control situation, the achievement of the milestones will be based solely on the market capitalization milestones, with the measurement of Tesla’s market capitalization determined by the product of the total number of outstanding shares of Tesla common stock immediately before the change in control multiplied by the greater of the last closing price of a share of Tesla common stock before the effective time of the change in control or the per share price (plus the per share value of any other consideration) received by Tesla’s stockholders in the change in control.

In the event of a restatement of Tesla’s financial statements previously filed with the SEC, if a lesser portion of the 2018 CEO Performance Award would have vested based on the restated financial results, then Tesla will require forfeiture (or repayment, as applicable) of the portion of the 2018 CEO Performance Award that would not have vested based on the restated financial results (less any amounts Mr. Musk may have paid to Tesla in exercising any forfeited awards). The 2018 CEO Performance Award also will be subject, if more stringent than the foregoing, to any current or future Tesla clawback policy applicable to equity awards, provided that the policy does not discriminate solely against Mr. Musk except as required by applicable law.

As of the date of this filing, 11 operational milestones and 12 market capitalization milestones have been achieved, of which 11 operational milestones and 11 market capitalization milestones have also been certified by our Board of Directors. Consequently, 11 of the 12 tranches under the 2018 CEO Performance Award, corresponding to options to purchase an aggregate 92,876,855 shares of Tesla’s common stock, have vested and become exercisable, subject to Mr. Musk’s payment of the exercise price of $70.01 per share and the minimum five-year holding period generally applicable to any shares he acquires upon exercise.

Realized Compensation

For purposes of the table in “Executive Compensation—Summary Compensation Table” below, we are required to report pursuant to applicable SEC rules any stock option grants to Mr. Musk at values determined as of their respective grant dates and which are driven by certain assumptions prescribed by Financial Accounting Board Accounting Standards Codification Topic 718, “Compensation–Stock Compensation” (“ASC Topic 718”). Moreover, we are required to report in “Executive Compensation—Pay Ratio Disclosure” below (i) Mr. Musk’s annual total compensation, (ii) the median of the annual total compensation of all Tesla employees qualifying for this analysis, other than Mr. Musk, in each case calculated pursuant to the methodology used for the table in “Executive Compensation—Summary Compensation Table,” and (iii) the ratio of the former to the latter.

In addition, we are required to report in “Executive Compensation—2021 Option Exercises and Stock Vested” below an amount for the “value realized” upon: (i) any exercise by Mr. Musk of a stock option, which is based on the difference between the market price of the underlying shares at the time of exercise and the exercise price of the stock option and (ii) any vesting of a restricted stock unit award, based on the market price of the award at the time of vesting. Such amount is required to be reported even if Mr. Musk does not actually receive any cash from such exercise or vesting, either because he does not also sell any shares or because he sells only a number of shares sufficient to cover the related tax liabilities resulting from the exercise or vesting.

As a result, there may be a significant disconnect between what is reported as compensation for Mr. Musk in a given year in such sections and the value actually realized as compensation in that year or over a period of time. Moreover, the vast majority of compensation in respect of past stock option grants to Mr. Musk, including the 2012 CEO Performance Award and the 2018 CEO Performance Award, were structured to be incentives for future performance with their value realizable only if Tesla’s stock price appreciated compared to the dates of the grants, and if the Company achieved applicable vesting requirements.

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To supplement the disclosures in “Executive Compensation—Summary Compensation Table,” “Executive Compensation—Pay Ratio Disclosure” and “Executive Compensation—2021 Option Exercises and Stock Vested” below, we have included the following table, which shows the total realized compensation of Mr. Musk for the last three fiscal years, as well as the ratio of Mr. Musk’s realized compensation to the median of the annual total compensation of all other Tesla employees qualifying for this analysis as reported in “Executive Compensation—Pay Ratio Disclosure.” Realized compensation is not a substitute for reported compensation in evaluating our compensation structure, but we believe that realized compensation is an important factor in understanding that the value of compensation that Mr. Musk ultimately realizes is dependent on a number of additional factors, including: (i) the vesting of certain of his option awards only upon the successful achievement of a number of market capitalization increase and operational milestone targets, including milestones that have not yet been achieved under each of the 2012 CEO Performance Award and the 2018 CEO Performance Award; (ii) the fact that Mr. Musk does not receive any cash if he does not actually sell shares and thereby reduce his investment in us, and he does not receive any cash to the extent that he sells only shares sufficient to cover income taxes with respect to his awards (including stock options exercised solely to avoid their expiration in accordance with their terms); and (iii) the then-current market value of our common stock at the times at which Mr. Musk may elect to actually sell his shares.

 

Year

  

“Total Compensation” of

CEO,

as Reported in Summary

Compensation Table

Below

($)

 

  

“Value Realized on Exercise

or Vesting of Awards” of

CEO, as

Reported in Option Exercises

and Stock Vested Table

Below

($)

 

 

Median Annual Total

Compensation of all

Qualifying Non-CEO Employees,

as reported in Pay

Ratio Disclosure

Section Below

($)

 

Total CEO Realized

Compensation

($)(1)(2)

 

Ratio of Total CEO

Realized

Compensation to

Median Annual

Total

Compensation of

all Qualifying Non-CEO

Employees

2021

 

 

 

23,452,910,177

(3)

 

40,723

 

734,762,107

 

18,043:1

2020

 

 

 

 

 

46,150

 

 

0.00:1

2019

 

23,760

(4)

 

30,483,250

(5)

 

58,455

 

23,760

 

0.41:1

 

(1)

Total CEO realized compensation” for a given year is defined as (i) the amounts reported for Mr. Musk in “Executive Compensation—Summary Compensation Table” below under the columns “Salary,” “Bonus,” “Non‑Equity Incentive Plan Compensation” and “All Other Compensation,” plus (ii) with respect to any stock option exercised by Mr. Musk in such year in connection with which shares of stock were also sold other than to satisfy any resulting tax liability, the difference between the market price of such shares at the time of exercise and the applicable exercise price of the option, plus (iii) with respect to any restricted stock unit vested by Mr. Musk in such year in connection with which shares of stock were also sold other than automatic sales to satisfy any withholding obligations related to such vesting, the market price of such shares at the time of vesting, plus (iv) any cash actually received by Mr. Musk in respect of any shares sold to cover tax liabilities as described in (ii) and (iii) above, following the payment of such tax liabilities.

(2)

Of the amounts noted, Mr. Musk has not accepted his salary in the amount of $23,760 for 2019.

(3)

Reflects the exercise of vested stock options scheduled to expire in 2022 as to which Mr. Musk paid the exercise price in cash. Of the shares received upon exercise, 42.0% were immediately sold in order to pay federal and state tax withholding from the option exercise. None of the proceeds from such sales were retained by Mr. Musk. Of the remaining shares, 94.6% were retained by Mr. Musk. The other 5.4% automatically were sold as a result of a Rule 10b5-1 trading plan put in place in September 2021.

(4)

Reflects, for 2019, the applicable minimum wage requirements under California law for part of such year. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary.

(5)

Reflects the exercise of a vested stock option award as to which Mr. Musk paid the exercise price in cash. None of the shares received upon exercise were sold in 2019.

Tax and Accounting Considerations

Sections 280G and 409A. We have not provided or committed to provide any executive officer or director with a gross-up or other reimbursement for tax amounts the executive might pay pursuant to Section 280G or Section 409A of the Code. Section 280G and related Code sections provide that executive officers, directors who hold significant stockholder interests and certain other service providers could be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of Tesla that exceeds certain limits, and that we or our successor could lose a deduction on the amounts subject to the additional tax. Section 409A also imposes additional significant taxes on the individual in the event that an executive officer, director or service provider of certain types receives “deferred compensation” that does not meet the requirements of Section 409A.

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Tax Deduction Limit. Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation greater than $1,000,000 paid in any fiscal year to certain executive officers. However, prior to the enactment of U.S. tax legislation in December 2017 (the “Tax Act”), certain types of performance-based compensation were excluded from the $1,000,000 deduction limit if specific requirements were met. Under the Tax Act, this exclusion for performance-based compensation is not available with respect to taxable years beginning after December 31, 2017, unless the compensation is pursuant to a written binding contract which was in effect on or before November 2, 2017, and which is not modified in any material respect on or after such date. Pursuant to the Tax Act, for taxable years beginning after December 31, 2017, Section 162(m) of the Code was expanded to cover additional executive officers and other employees, including the chief financial officer, so that the compensation of the chief executive officer and chief financial officer (at any time during the fiscal year), the three next most highly compensated executive officers during the taxable year and any other individual who was considered a “covered employee” for any prior taxable year that begins after 2016, will be subject to the $1,000,000 deductibility limit under Section 162(m) of the Code. Commencing with our 2018 fiscal year, to the extent that the aggregate amount of any covered officer’s salary, bonus, any amount realized from certain option exercises and vesting of restricted stock units or other equity awards, and certain other compensation amounts that are recognized as taxable income by the officer exceeds $1,000,000, we will not be entitled to a U.S. federal income tax deduction for the amount over $1,000,000 in that year, unless the compensation qualifies for the transition relief applicable to certain written binding contracts in effect on or before November 2, 2017. The Compensation Committee has not adopted a formal policy regarding tax deductibility of compensation paid to our executive officers.

Accounting Implications. We follow ASC Topic 718 for our stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all stock-based compensation awards made to employees and directors based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our named executive officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.

Compensation Committee Report

The Compensation Committee oversees Tesla’s compensation programs, policies and practices. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Respectfully submitted by the members of the Compensation Committee of the Board

 

Ira Ehrenpreis (Chair)

Robyn Denholm

Kathleen Wilson-Thompson

 

 

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Summary Compensation Table

The following table presents information concerning the total compensation of our named executive officers for each of the last three fiscal years. No disclosure is provided for fiscal years for which those persons were not named executive officers.

 

Name and Principal Position

 

Year

 

Salary

($)

 

Bonus

($)

 

Stock Awards

($)(1)

 

Option

Awards

($)(2)

 

Non-Equity

Incentive Plan

Compensation

($)

 

All Other

Compensation

($)

 

Total

($)

Elon Musk

 

2021

 

 

 

 

 

 

 

Technoking of Tesla and Chief Executive Officer 

 

2020

 

 

 

 

 

 

 

 

2019

 

23,760

(3)

 

 

 

 

 

23,760

Zachary Kirkhorn

 

2021

 

301,154

 

 

 

 

 

 

301,154

Master of Coin and Chief Financial Officer

 

2020

 

269,663

(4)

 

 

46,261,354

 

 

31,099

(5)

46,562,116

 

 

2019

 

276,058

 

 

5,019,998

 

15,947,901

 

 

 

21,243,957

Andrew Baglino

 

2021

 

301,154

 

 

 

 

 

 

301,154

SVP, Powertrain and Energy Engineering

 

 

2020

 

283,269

(4)

 

 

46,261,354

 

 

 

46,544,623

 

2019

 

301,154

 

 

 

4,779,080

 

 

 

5,080,234

Jerome Guillen(6)

 

2021

 

161,538

 

 

 

 

 

 

161,538

Former President, Tesla Heavy Trucking

 

2020

 

283,269

(4)

 

 

46,261,354

 

 

 

46,544,623

 

 

2019

 

301,154

 

 

 

7,965,058

 

 

 

8,266,212

 

(1)

This column reflects the grant date fair value computed in accordance with ASC Topic 718 of the restricted stock unit awards granted to the named executive officers, which is measured on the grant date based on the closing fair market value of our common stock. These amounts do not necessarily correspond to the actual value that may be recognized by the named executive officers, which depends, among other things, on the market value of our common stock.

(2)

This column reflects the aggregate grant date fair value computed in accordance with ASC Topic 718 of the options to purchase shares of our common stock granted to the named executive officers. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 7, 2022. These amounts do not necessarily correspond to the actual value that may be recognized by the named executive officers, which depends, among other things, on the market value of our common stock appreciating from that on the grant date(s) of the option(s).

(3)

Reflects the applicable minimum wage requirements under California law for part of 2019. Commencing in May 2019 at Mr. Musk’s request, we eliminated altogether the earning and accrual of this base salary.

(4)

Reflects a temporary reduction to base salary in response to global market conditions.

(5)

Reflects an amount corresponding to previously-accrued paid time off that was applied toward the purchase of a Tesla vehicle pursuant to a company-wide program.

(6)

Mr. Guillen departed Tesla in June 2021.

Pay Ratio Disclosure

Tesla is committed to fair and competitive compensation for our employees. Moreover, Elon Musk, the Technoking of Tesla and our Chief Executive Officer, has agreed to a compensation arrangement in the 2018 CEO Performance Award that is substantially tied to the appreciation of our market capitalization. Because equity awards are generally made available to Tesla employees, this also means that Mr. Musk’s compensation is tied to the success of Tesla employees. We are providing a ratio of (i) Mr. Musk’s 2021 annual total compensation to (ii) the median of the 2021 annual total compensation of all applicable qualifying Tesla employees other than Mr. Musk, as if all such employees were named executive officers in each case calculated pursuant to the disclosure requirements of “Executive Compensation—Summary Compensation Table” above. As we continue our international expansion, the median annual total compensation of our employees reflects differences in local compensation scales and practices abroad to a greater extent.

Mr. Musk’s 2021 annual total compensation, as reported in “Executive Compensation—Summary Compensation Table,” was $0, and the median 2021 annual total compensation of all other qualifying employees, as determined pursuant to the methodology set forth below, was $40,723. Consequently, the applicable ratio of such amounts for 2021 was 0.00:1.

Our methodology for identifying the median of the 2021 annual total compensation for each individual other than Mr. Musk was as follows:

 

We determined that as of December 31, 2021, Tesla and all our subsidiaries had 100,121 individuals qualifying for this analysis (full-time, part-time and temporary employees other than Mr. Musk, subject to the following bullet), of which approximately 42% were based outside of the U.S. and approximately 39% were production line employees.

55


 

 

 

We did not include in the population of qualifying individuals any employees of staffing agencies whose compensation is determined by such agencies.

 

We applied the requirements and assumptions required for the table in “Executive Compensation—Summary Compensation Table” for each of such individuals as if he or she was a named executive officer to calculate the total annual compensation, including base salary or wages, performance-based commission payments, and equity awards based on their grant date fair values.

 

We converted any payment earned or paid in a foreign currency to U.S. dollar using the average of the prevailing conversion rates for the month of December 2021.

 

We selected the median of all total annual compensation amounts calculated in accordance with the foregoing.

Grants of Plan-Based Awards in 2021

The following table presents information concerning each grant of an award made to a named executive officer in fiscal 2021 under any plan.

 

Name

 

Grant

Date(1)

 

 

All Other

Option

Awards:

Number of

Securities Underlying

Options(#)

 

Exercise

or

Base

Price of

Option Awards

($/Sh)

 

Grant Date Fair

Value of Stock and Option

Awards ($)

 

Elon Musk

 

 

 

 

 

 

Zachary J. Kirkhorn

 

 

 

 

 

 

Andrew Baglino

 

 

 

 

 

 

Jerome Guillen(1)

 

 

 

 

 

 

 

(1)

Mr. Guillen departed Tesla in June 2021.

Outstanding Equity Awards at 2021 Fiscal Year-End

The following table presents information concerning unexercised options and unvested restricted stock unit awards for each named executive officer outstanding as of the end of fiscal 2021.

 

 

 

 

Option Awards

 

 

Stock Awards

 

Name

 

Grant Date

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)

 

 

Option

Exercise

Price ($)