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Apr 02, 2024

SEC declines Tesla request over excluding deep-sea mining proposal

Group behind resolution concerned by ecosystem loss

The SEC has declined to give Tesla the go-ahead to omit a shareholder proposal regarding concerns about the impact of deep-sea mining as used to extract materials for vehicle batteries.

The proposal, filed by As You Sow, requests that Tesla ‘commit to a moratorium on sourcing minerals from deep-sea mining, consistent with the principles announced in the Business Statement Supporting a Moratorium on Deep Sea Mining.’ The proponent adds in a supporting statement: ‘If Tesla cannot so commit, shareholders request that the board disclose its rationale and assess the company’s anticipated need for deep-sea materials.’

As You Sow states in its filing: ‘The deep sea contains many of the planet’s intact ecosystems and plays a crucial role in regulating the climate. Studies indicate that mining this underexplored and complex area for battery-related minerals will create irreversible habitat and ecosystem loss and could permanently destroy invaluable carbon storage…

‘Unlike its peers, Tesla has not supported a [deep-sea mining] moratorium, leaving shareholders concerned that the company is not addressing the serious reputational and regulatory risks of [deep-sea mining]. The supply of deep-sea minerals is also legally, technologically and financially insecure, making it expensive and risky for Tesla to incorporate deep sea-sourced minerals into its supply chain.’



‘Ordinary business’
Tesla had sought no-action relief from the SEC for omitting the proposal under Rule 14a-8(i)(7) on the grounds that it ‘inextricably deals with matters relating to the company’s ordinary business operations’.

‘By requesting [that Tesla] ‘commit to a moratorium on sourcing minerals for deep-sea mining’, the proponent’s proposal implicates core matters involving the company’s business and operations – (i) the company’s selection of suppliers and (ii) the source and types of raw materials used in the company’s products – which are fundamental to management’s ability to run the company on a day-to-day basis and therefore cannot, as a practical matter, be subject to direct stockholder oversight,’ Tesla argued.

The company also wrote: ‘Despite the proponents’ attempt to frame the proposal as focused on a social policy issue by invoking, among other matters, concerns about environmental, reputational and regulatory risks, the proposal fails to present an issue of broad societal impact that transcends the matters of the company’s product offerings and its supplier relationships (ie, the company’s ordinary business).

‘The environmental and reputational risks and aspects of the proposal are, at best, secondary to the proposal’s ultimate design to micromanage the source of the raw materials used in [Tesla’s] products and the specific suppliers from which the company may purchase.’

The SEC did not agree, writing: ‘In our view, the proposal transcends ordinary business matters and does not seek to micromanage the company.’

A request for comment from Tesla was not returned immediately. The company published its 2023 proxy statement on April 6 and held its AGM on May 16.

As You Sow has also filed a proposal on the topic this year with General Motors (GM). The resolutions are part of the shareholder advocacy group’s biodiversity program, which it says is a response to growing shareholder concern about ‘the systemic risks posed by biodiversity loss and looming ecosystem collapse’.

Unlike with Tesla, the proposal filed with GM does not ask for a commitment to a moratorium, but rather asks that the company ‘publicly disclose [its] policies on the use of deep sea-mined minerals in its production and supply chains.’ 

A spokesperson for GM said in a statement earlier this year: ‘We’ll respond to As You Sow’s proposal in our proxy, which will be filed in April. I can confirm… that GM does not source material from undersea mining.’

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...