As Elon Musk Attacks DEI, Tesla Quietly Addresses Racism Complaints

In Washington, Elon Musk has been at the forefront of Trump administration efforts to gut programs designed to promote diversity.

At the same time, Tesla, the electric car company that Mr. Musk leads, has in recent days, with little notice, tried to appease critics who have accused the company of racial discrimination.

In a little-noticed section of the company’s annual report published on Jan. 29, its board promised to monitor “how Tesla recruits, develops and retains excellent talent.”

For shareholders who have long pushed Tesla to address complaints of racism at its factory in Fremont, Calif., the generic wording seemed to represent a rare case of the company’s changing its behavior in the face of criticism.

For the first time the board was taking responsibility for how the company treats employees, some investors said. It has been accused in lawsuits of being too passive in its oversight of Mr. Musk, who runs several other companies and has been deputized by President Trump to cut government spending.

“This is something we have wanted for a long time,” said Kristin Hull, the founder of Nia Impact Capital, an investment fund based in Oakland, Calif., that has filed shareholder resolutions calling on the board to take a more active role.

Tesla acknowledged in a separate letter to stock market regulators that it was responding to criticism from Dr. Hull and other shareholders. The company, which accounted for almost half the electric cars sold in the United States last year, has been sued by the California Civil Rights Department for what the agency called “pervasive racial discrimination and harassment.” Black employees at Tesla have also filed lawsuits.

Tesla has denied that it has engaged in discrimination and is contesting the lawsuits, though, in March, it settled a case brought by a Black worker who had won a jury award against Tesla.

Workers at the Fremont factory have complained that they were subjected to racial slurs and racist images. A state agency also said workers reported being given more physically arduous work and denied transfers and promotions more often than other workers.

The company did not respond to a request for comment.

Dr. Hull said it was “ironic” that Tesla appeared to be stepping up its efforts to promote workplace equality even as Mr. Musk attacks diversity, equity and inclusion, or D.E.I., programs. He often attacks diversity efforts on X, making false and misleading claims about them.

There are also signs that Mr. Musk’s political views and his close association with Mr. Trump and other right-wing political leaders are hurting Tesla sales. Electric car buyers tend to be more liberal than Mr. Musk and his political allies. Tesla’s sales in Germany plunged 59 percent in January, compared with the same month last year, after Mr. Musk endorsed a nationalist political party.

Surveys have shown that Mr. Musk‘s politics are prompting some U.S. car buyers to choose other brands. In California, which former Vice President Kamala Harris won in November, registrations of new Teslas fell 12 percent last year, even as overall sales of electric cars and trucks rose slightly, according to the California New Car Dealers Association. California accounts for almost one-third of all the electric vehicles sold in the United States.

Dr. Hull said that while the Tesla board was vague about how the directors would monitor working conditions, it established a legal obligation to shareholders.

“Is it concrete enough or detailed enough? No,” she said. “But it is much more than we expected from Tesla.”

Nia Impact will withdraw a resolution it planned to present at Tesla’s next annual meeting calling on the board to “report to investors about how and how often the compensation committee reviews the company’s human capital management practices,” Dr. Hull said.

Two other investors, Amalgamated Bank and Proxy Impact, cosponsored the proposal. Both firms push companies to be more inclusive in their hiring.

“Acknowledging the need for more disclosure from the compensation committee about human capital management is a good first step, and we look forward to more explicit information,” Michael Passoff, the chief executive of Proxy Impact, said in an email.

The pledge by Tesla’s board to pay closer attention to human resources was a direct response to Nia Impact’s resolution, according to a letter that Xuehui Cassie Zhang, Tesla’s associate general counsel, sent to the Securities and Exchange Commission last month.

After receiving the proposed resolution, the letter said, management and members of the board decided to include “additional disclosures on the compensation committee’s oversight of the company’s human capital management practices.” The letter asked regulators for permission to exclude the resolution from the shareholder meeting, arguing that “the company has already substantially implemented the proposal.”

Tesla opposed similar proposals in previous years.

Ms. Zhang did not respond to a request for comment.

Her letter noted that the compensation committee’s charter already called for it to oversee “how the company recruits, develops and retains diverse talent.”

However, the annual report did not mention diversity, referring only to the goal of recruiting “excellent” talent.

Dr. Hull said she equated excellence with diversity, but added, “I’d like to know more about what Tesla sees as ‘excellent.’”