April 21, 2023

By email: [email protected]

Robyn M. Denholm
Ira Ehrenpreis
Board of Directors
Tesla, Inc.
1 Tesla Road
Austin, TX 78725

Dear Ms. Denholm and Mr. Ehrenpreis,

We are a group of long-term investors holding over $1.5 billion in Tesla shares. We each initially added
Tesla to our portfolios because we saw Tesla as a true leader in producing products and services
essential for our transition to a sustainable and green economy. Over time, however, we have grown
increasingly concerned with governance and leadership issues at the company.

We are concerned that the Board of Directors is failing to adequately represent the interests of Tesla’s
shareholders. The Board’s meager oversight of CEO Elon Musk and other critical aspects of corporate
strategy, including the company’s approach to human rights and labor rights, exposes the company to
substantial legal, operational, and reputational risks, thereby jeopardizing its long-term value. The Board
has allowed the CEO to be overcommitted at a time when the company faces critical challenges,
including increased competition, regulatory scrutiny, and a stock slide. Therefore, we urge the Board to
announce the following:
• A means to ensure Tesla has a CEO that dedicates adequate time and attention to the company
– either a policy that limits the CEO’s outside commitments or a CEO succession plan.
• A plan to overhaul the composition of the Board, including rolling off directors with close ties to
the CEO.

We request a meeting with the Board to discuss our concerns and requested remedies by May 25, 2023.

The Board has failed to ensure that the CEO is appropriately focused on Tesla.
Corporate boards can and should intervene if a chief executive appears to be distracted or overly
focused on other ventures. Yet, the Board has permitted Elon Musk to run multiple companies, leading
to an inability to address the multiple strategic and competitive issues facing Tesla. Mr. Musk is the
founder, CEO, and chief engineer of SpaceX; the CEO and product architect of Tesla, Inc.; the founder of
The Boring Company; the co-founder of Neuralink and OpenAI; and the owner and CEO of Twitter, Inc.
As of April 3, 2023 Tesla had lost $582.4 billion in market capitalization since Mr. Musk first disclosed his
stake in Twitter on April 4, 2022. 1

Meanwhile, Tesla is increasingly losing market share in the high-performance EV market as legacy
automakers launch comparable EV models at similar or lower price points. Several equally comparable

1 https://ycharts.com/companies/TSLA/market_cap; https://www.forbes.com/sites/dereksaul/2022/12/15/elon-musk-has-
now-sold-229-billion-in-tesla-shares-since-buying-twitter-and-dragged-down-teslas-market-cap-by-700-billion-in-the-
process/?sh=60bc83c168b6
EV models are due to launch in 2023, and more are coming, 2 including Nissan, Hyundai, Jeep, and
Mercedes. 3 Tesla shareholders need their CEO to be focused exclusively on solving the issues their
company is currently facing.

Reports from workers and regulators point to a toxic culture at Tesla factories.
There is ample evidence of poor human capital management at Tesla. Since the start of 2021, the
company has faced the following:
• a lawsuit filed by the California Department of Fair Housing and Employment alleging that
“Tesla’s Fremont factory is a racially segregated workplace where Black workers are subjected to
racial slurs and discriminated against in job assignments, discipline, pay and promotion creating
a hostile work environment.”;4
• a class action lawsuit by 15 former or current Black employees alleging a hostile work
environment at Tesla’s Fremont factory;5
• at least eight lawsuits alleging sexual harassment filed by former or current employees;6
• an Occupational Safety & Health Administration complaint filed by workers at the Austin, Texas
“Gigafactory” alleging unsafe working conditions and falsified certificates of completion for
required safety training;7
• a complaint with the Department of Labor’s Wage and Hour Division alleging wage theft at the
Austin Gigafactory;8
• a jury verdict that awarded a former worker $137M (later reduced to $3.2M) over racial
discrimination and a hostile work environment at the Fremont factory; 9 and
• a complaint with the National Labor Relations Board, accusing Tesla of retaliatory termination of
union-organizing employees in its Buffalo, NY plant. 10

It is also of note that Tesla workers are bound by mandatory arbitration, and the company is believed to
also use non-disclosure agreements. 11 As a result, investors cannot know the full scope of harassment
and discrimination claims raised by employees.

Poor workplace equity practices are linked to lower returns.12 Tesla’s human capital management
challenges seem to be driving higher than average rates of costly and disruptive employee turnover.
Both Tesla and SpaceX were cited in a study by MIT Sloan School of Management Review for having
attrition rates 3 standard deviations higher than industry average. The study also concluded that
workers are 3.8 times more likely to leave Tesla than Ford. 13 Research suggests that direct replacement

2 https://www.consumerreports.org/cars/hybrids-evs/why-electric-cars-may-soon-flood-the-us-market-a9006292675/
3 https://www.kbb.com/best-cars/electric-cars-coming-in-2023/
4 https://calcivilrights.ca.gov/wp-content/uploads/sites/32/2022/02/TeslaPR2.10.22.pdf
5 https://www.reuters.com/business/autos-transportation/tesla-hit-by-new-lawsuit-alleging-racial-abuse-against-black-

workers-2022-07-01/
6 https://www.businessinsider.com/spacex-and-tesla-workers-are-still-raising-sexual-harassment-issues-2022-5
7 https://www.theguardian.com/technology/2022/nov/14/tesla-texas-construction-workers-gigafactory-lawsuit-labor-

violations
8 https://www.reuters.com/legal/litigation/tesla-hit-with-complaints-wage-safety-violations-texas-plant-2022-11-15/
9 https://www.reuters.com/legal/jury-orders-tesla-pay-32-mln-black-ex-worker-us-race-bias-case-2023-04-03/
10 https://www.bloomberg.com/news/articles/2023-02-16/tesla-tsla-fires-unionizing-workers-after-labor-campaign-complaint-

alleges#xj4y7vzkg Except as noted above, the matters cited in this paragraph appear to be pending at this time.
11 https://www.hrdive.com/news/tech-workers-at-tesla-intel-say-ndas-have-silenced-them/532024/
12 https://www.asyousow.org/our-work/social-justice/workplace-equity
13 https://sloanreview.mit.edu/article/toxic-culture-is-driving-the-great-resignation/
costs can reach as high as 50%-60% of an employee’s annual salary, with total costs associated with
turnover ranging from 90% to 200% of annual salary. 14

Tesla appears to be embracing a broader culture of being “above the law.”

In addition to the allegations detailed above, Tesla currently faces three criminal probes by the US
Department of Justice and investigations by the National Highway Traffic Safety Administration and the
California Department of Vehicles over Tesla’s Autopilot system. 15 Instead of working to address
problems with regulators, CEO Musk has made derogatory tweets and comments, fueling tensions. 16

Tesla is exposed to significant human rights risks that have not been meaningfully addressed.
It is unclear if Tesla’s Board made a strategic decision or was aware of the human rights implications of
the company’s decision to open a showroom in Urumqi, China. Human rights abuses in Urumqi are
sufficiently disturbing and well-documented that the US has put in place sanctions, yet Tesla chose to
expand its business footprint there. 17

With increased public attention on child labor and forced labor in supply chains, and the ever-expanding
promulgation and enforcement of the governing regulatory framework, Tesla’s sourcing policies and
practices expose the Company to significant material risk.

Despite Tesla’s claims that it prohibits its suppliers from using child labor, 18 it continues to source cobalt
from the Democratic Republic of the Congo, where child labor is pervasive. A February 2023 report by
NYU and the Geneva School for Economics and Management echoes that “it is virtually impossible to
separate the flow of artisanal and small-scale mined cobalt from the larger supply of industrially mined
cobalt.” 19 Apart from assurances, Tesla has not demonstrated its cobalt is free from child labor. Tesla
was sued in 2019 for links to child labor in cobalt mining, and the case is currently on appeal. 20

Tesla also faces material risks from forced labor in the Xinjiang Uygur Autonomous Region (XUAR),
where forced labor and other human rights abuses of the Uyghur and other Muslim-minority groups
have been well-documented. 21 Most recently, Tesla was mentioned in a report published by Sheffield
Hallam University, which concluded Tesla’s supply chain in China, and those of other major automakers,
have been “substantially tainted with forced labor.” 22 The Senate Finance Committee recently opened
an inquiry into whether Tesla and other automakers have been using parts or materials produced with
forced labor in China’s XUAR. 23 There is growing momentum in the US to prioritize the enforcement of
import bans on goods produced with forced labor. For example, the recently enacted Uyghur Forced

14 www.shrm.org/hr-today/trends-and-forecasting/special-reports-and-expert-views/documents/retaining-talent.pdf
15 https://www.motortrend.com/news/tesla-autopilot-full-self-driving-fsd-safety-department-of-justice-doj/
16
https://twitter.com/elonmusk/status/1278764736876773383; https://www.npr.org/2022/06/04/1102327987/elon-musk-
sec-tweets-lawsuit-power
17 Tesla criticised for opening showroom in Xinjiang despite human rights abuses | Xinjiang | The Guardian
18 https://www.sec.gov/Archives/edgar/data/1318605/000156459022022992/tsla-pre14a_20220804.htm
19https://static1.squarespace.com/static/5b6df958f8370af3217d4178/t/63e2dc7bad25b047da9100d7/1675811964 954/NYU+C

BHR+Cobalt+Mining_FINAL+Feb7.pdf
20 https://www.internationalrightsadvocates.org/cases/cobalt
21www.ohchr.org/sites/default/files/documents/countries/2022-08-31/22-08-31-final-assesment.pdf;

https://www.aspi.org.au/report/uyghurs-sale
22 https://acrobat.adobe.com/link/track?uri=urn%3Aaaid%3Ascds%3AUS%3A69ce4867-d7e7-4a6a-a98b-

6c8350ceb714&viewer%21megaVerb=group-discover
23 https://www.wsj.com/articles/tesla-gm-among-car-makers-facing-senate-inquiry-into-possible-links-to-uyghur-forced-labor-

11671722563
Labor Prevention Act (UFLPA) exposes Tesla to financial risk, as parts produced in whole or in part, in the
XUAR are presumed to be tainted by forced labor. 24

The Tesla Board lacks sufficient independence and accountability mechanisms.

We believe that Tesla’s current governance structure - specifically its staggered elections, supermajority
voting requirements, board composition, and director compensation practices - is one of the primary
causes of its poor oversight. It has been reported that several of Tesla’s directors have close personal
relationships with Elon Musk, some dating back decades. In addition to his brother Kimbal Musk, CEO
Elon Musk has long-standing friendships with directors Ira Ehrenpreis and James Murdoch. 25 Over the
years, Tesla directors have received exceptionally high compensation for their work, getting paid
millions in stock options compared to the average director pay of $300,000 annually. We are concerned
that these close personal ties and extraordinary pay reduces the Boards’ objectivity, independence, and
ability to prioritize the needs of Tesla and its shareholders.

Tesla needs a Board that will ensure that the CEO is focused on addressing its challenges.
Due to the Board’s failure to restrict the CEO’s outside commitments and ensure he is focused on
solving the many challenges the company faces, we have lost confidence in its members. Without a
fulltime CEO and a Board willing to provide meaningful oversight, we are concerned that Tesla will not
be prepared to effectively navigate the increasingly competitive environment for EV sales, the evolving
global regulatory landscape, shifting consumer preferences, ongoing supply chain challenges, and
investors’ expectations.

While each signatory to this letter will act independently regarding proxy voting, we are aligned in our
belief that board oversight and director independence are relevant to director re-election voting
decisions.

As we indicated, we request a meeting with the Board to discuss our concerns and requested remedies by
May 25, 2023. For correspondence, please reach out to [email protected].

Sincerely,

Amalgamated Bank NYC Comptroller’s Office

AP7 (Sjunde AP-fonden) PensionDanmark
Sisters of St. Joseph of Carondelet, Albany SHARE
Province
Sisters of the Good Shepherd
Friends Fiduciary Corporation
SOC Investment Group
Investor Advocates for Social Justice
Socially Responsible Investment Coalition
NEI Investments
The Dominican Sisters ~ Grand Rapids
Nia Impact Capital
Tulipshare Ltd.
Nordea Asset Management
United Church Funds

24 https://www.cbp.gov/trade/forced-labor/UFLPA
25 https://www.cnn.com/2022/11/17/business/elon-musk-board-friends