Challenging the Tesla (and Texas) Assault on Shareholder Rights
Newground has filed a shareholder proposal at Tesla, Inc. (ticker symbol TSLA) which responds directly to Texas’ newly enacted SB 1057 – a heavy-handed law that gives Texas corporations (and those listed on the Texas stock exchange) the ability to override SEC Rule 14a-8 and impose much higher barriers for shareholders to file proposals.
Specifically, the new Texas law allows companies to require that an investor own $1 million of stock to be eligible to file a shareholder resolution. Remarkably, Tesla or any other company could do all this without a shareholder vote – simply by publishing a notice. Newground's proposal asks Tesla to let shareholders vote on any bylaw changes that would raise the ownership threshold above the SEC's long-standing requirement of $2000. Unless withdrawn, the proposal should appear on Tesla's proxy for a vote of all shareholders at the company's annual meeting in November.
As Newground chief executive Bruce Herbert explained to Bloomberg Law, "The premise underlying [the Texas law] is that if you’re rich you have good ideas, and if you don’t have wealth in the form of investment assets, you don’t have any good ideas."
The right to file a proposal isn’t a procedural nuisance – it’s an essential ownership right, and one of the few tools shareholders have to raise concerns and place them on management’s radar. Raising the cost of entry to $1 million will silence all but the largest institutions – and sometimes even them.
Newground worked closely with shareholder advocacy group As You Sow to draft the proposal. “This is intended to alert the company to investors’ position” on ownership minimums, said Danielle Fugere, the organization's president and chief counsel. “Shareholders want to have the ability to vote on this.”
The full text of the proposal appears below, and is also available in its original format as a downloadable PDF.
BYLAW APPROVAL
RESOLVED: Shareholders request that the Board seek shareholder approval before adopting any bylaw amendment that sets ownership thresholds or solicitation requirements for shareholder proposals above those specified in Rule 14a 8 of the Securities Exchange Act of 1934.
SUPPORTING STATEMENT
In 2025, Texas enacted SB 1057, which allows Texas-registered corporations and corporations listed on the Texas stock exchange to impose significantly higher thresholds to file a shareholder proposal than those set by the SEC under Rule 14a-8.
As pre-conditions for submitting a proposal, Tesla may now require that a shareholder or a group of shareholders must:
- Hold at least 3% of outstanding shares (in Tesla’s case, roughly $30 billion), or
- At least $1 million in company voting shares, and
- Solicit support from 67% of shareholders
Of particular concern, Tesla can impose these requirements without a shareholder vote – simply by issuing a notice. This allows management to override SEC rules and long-established shareholder rights without consent.
The $1 million ownership threshold would disqualify the vast majority of shareholders from ever submitting a proposal – even on matters involving significant material risk.
According to the Federal Reserve, in 2022 the median U.S. household retirement account held just $87,000. A $1 million ownership requirement would force such investors to concentrate 100% of their savings in a single stock – and then coordinate (aggregate) with roughly a dozen other shareholders doing the same. This is neither reasonable nor safe.
Such thresholds would exclude both individual and many institutional investors, silencing investor voices to the detriment of Tesla’s entire shareholder base.
The right to file a shareholder proposal is foundational – part of the bundle of ownership rights that ensures accountability and transparency between shareholders and their companies. Proposals have alerted boards and investors alike to emerging and material risks, offering intelligence on such things as:
- Corporate governance
- Board oversight of opioid distributors and manufacturers
- Worker health and safety
- Climate risk and water scarcity
- Online child safety
- Toxic impacts of corporate products
A preponderance of these were filed by shareholders with modest holdings – investors who would be entirely excluded under a $1 million threshold.
Shareholder proposals have consistently proven to be a low-cost, high-value tool for companies to better understand and manage material risks. As the Supreme Court noted in Citizens United (2010), corporate democracy serves as a vital safeguard for shareholder rights. This proposal maintains that safeguard.
THEREFORE, to preserve corporate democracy, to promote informed capital allocation, and to strengthen Tesla’s long-term value, we urge shareholders to vote FOR this proposal.
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Note: This material is intended for educational purposes only. As with all our public writing, blog posts do not constitute tax, financial planning, or investment advice. Likewise, they are neither an offer to sell nor solicitation to buy any investment or security.
