As Elon Musk leads the Trump administration’s assault on initiatives by the federal government aimed at promoting diversity, equity and inclusion (DEI), and his electric car company fends off multiple discrimination lawsuits, Tesla is quietly making moves to placate critics and shareholders who have accused the company of racial discrimination.
Deep in the company’s fiscal year 2025 annual report published on Jan. 30, its board promised to monitor “how Tesla recruits, develops and retains excellent talent,” noted The New York Times, language that some investors who have pushed the company to address complaints of racism interpret as the board taking responsibility for how it treats its employees.
“This is something we have wanted for a long time,” Kristin Hull, the founder of Nia Impact Capital, an investment fund based in Oakland, California, told the Times.
For several years Hull and Nia have led a group of concerned Tesla shareholders and institutional investors trying to push the company to address alleged incidents of abuse, harassment and racial discrimination at its Fremont, California, factory and other Tesla plants, and to end the company’s practice of forced arbitration to resolve complaints.
Their concerns deepened as one racial discrimination lawsuit after another was filed against Tesla in state and federal courts over the past several years, according to Nia Capital blog posts.
They include a 2022 complaint brought by California’s Civil Rights Department on behalf of workers at Tesla’s Fremont plant alleging Black workers were subjected to pervasive discrimination and harassment including hearing racist slurs and seeing nooses and racist graffiti in common work areas, and that Tesla discriminated against them in regard to job assignments, compensation, discipline, promotion and termination.
Those workers who complained faced retaliation from Tesla, the lawsuit claims.
Last March Tesla settled a lawsuit by Owen Diaz, a former elevator operator who claimed he was subjected to racial slurs, scrawled swastikas and other racist conduct, for an undisclosed amount.
A jury had awarded Diaz $137 million in 2021, but a judge found the verdict excessive and ordered a retrial when Diaz wouldn’t accept a $15 million settlement offer.
Meanwhile, in May, the Alameda County Superior Court in Oakland certified a long-pending employee class action lawsuit on behalf of 6,000 workers at the automaker’s Fremont factory California alleging that Black workers were subjected to severe and pervasive racial harassment from 2016 to present including slurs, graffiti and nooses hung at their workstations, claims that mirror those made in an ongoing federal lawsuit filed by the Equal Opportunity Employment Commission (EEOC) in 2023.
In June yet another suit was filed alleging that Tesla supervisors repeatedly and systematically harassed and discriminated against 14 African American, Hispanic and Latino employees, who were ignored or punished by management for reporting racist incidents.
Tesla has consistently denied that it has engaged in discrimination or mistreated its minority employees, and is contesting the active lawsuits.
At the annual Tesla shareholders meeting in Austin in June, Hull stood up “among the fanboys of the CEO,” as she later recounted in a video, and said that after years of increasing allegations of harassment and discrimination in Tesla workplaces and “with few visible improvements in Tesla’s people management policies or practices to assuage our concerns,” the concerned investors she represented wanted Tesla’s board to commission an independent study to look at “the effectiveness of the company’s efforts to prevent harassment and discrimination withing this revolutionary and innovative workspace.”
The motion got only 30 percent approval from shareholders, and did not pass. But in November Nia Impact Capital and other investors submitted a resolution to the board urging it “to improve its oversight of human capital management and employee reporting practices” and to publicly disclose how it was doing so in alignment with Securities and Exchange Commission (SEC) rules.
Tesla had for years ignored such investor resolutions, so Hull and other activist shareholders were delighted to see among the disclosures included in Tesla’s 2025 annual report filed with the SEC in January the compensation committee’s admission that its oversight of human capital management practices now included “how Tesla recruits, develops and retains excellent talent.”
Hull said her reading of the statement equated excellence with diversity, and added, “I’d like to know more about what Tesla sees as “excellent.”
The company also said that it “will not tolerate certain behaviors. These include harassment, retaliation, violence, intimidation and discrimination of any kind based on any protected category or action. …Tesla aspires to do the right thing, and we are constantly looking for ways to do better.”
“This is the first time we know of that the Tesla board has responded positively to shareholder concerns,” wrote Hull, who withdrew Nia’s resolution on Feb. 10. “This commitment is a step in the right direction for Tesla’s 125,000+ global employees—and for investors who prioritize transparency and corporate responsibility.”
The board’s pledge to pay closer attention to human resources was directly prompted by the resolution submitted by Nia Capital, according to a letter that Tesla’s associate general counsel sent to the SEC last month.
Hull told the Times that while the Tesla board was vague about how the directors would monitor working conditions, it at least established a legal obligation to shareholders to do so.
“I’m a bit more cynical than the investors on this,” said Joan Heminway, a law professor at the University of Tennessee College of Law who teaches and writes about business and securities law, and published a research paper examining Musk’s impulsive and risk-taking behavior last year. “What I see is a board that is trying to respond to a complaining investor community … rather than they are really going to change their tune completely on monitoring.”
“With respect to DEI in the firm right now, they’re paying out a lot in settlements, and their business is not doing as well,” she said, noting that “Musk has become a more vocally right wing conservative and has lined up with the Trump administration” on anti-DEI policies and actions.
In January, Musk posted on X that “DEI is just another word for racism.”
Meanwhile, Tesla is “getting all these racial complaints based on what seem to be substantiated discrimination claims,” said Heminway, “and there are many people who are speaking out and saying, ‘I’m not buying another Tesla,’ or ‘I’m selling my Tesla — you know, I still want an electric car, his vision was great, but I’m not supporting this dude.’”
Tesla’s stock price took a steep 8 percent drop this week after reports that sales for the company across Europe fell about 45 percent over the last month, causing Musk’s net worth to plummet by almost $15 billion, reported Forbes. Tesla’s stock value has fallen by 25 percent since Dec. 31. The company laid off nearly 15,000 of its 140,000 workers in 2024.
Collectively Musk’s net worth has dropped by over $100 billion since December.
Some analysts say Musk’s role in the Trump administration and his giddy slashing of federal jobs and programs at DOGE (Department of Government Efficiency) may be alienating some consumers to move away from the Tesla brand.
“So maybe by disclosing stronger, positive policies, [Tesla] gets some bang for the buck out of that,” said Heminway. “What the investors want may or may not be good DEI policies. They just want the company to do well … and part of the reason they haven’t been doing well is that they have super bad human capital policies and monitoring currently. Their DEI problems have been a drag on the firm’s profits.”
What Tesla and Musk have not addressed are the major conflicts of interest that Musk has as the CEO of a company who is both benefiting from and now helping to shape numerous Trump administration policies that could impact Tesla and its competitors, she said.
In recent weeks, the White House has directed the Department of Justice to freeze action on all cases in its Civil Rights Division, including racial discrimination cases; ordered the Department of Education’s Office of Civil Rights to halt racial discrimination investigations; and dissolved the Department of Labor office overseeing federal contract compliance, effectively ending an audit of Tesla for potential workplace discrimination.
“This is a complete abdication of responsibility,” Damon Hewitt, president and executive director of the Lawyers’ Committee for Civil Rights Under Law, told CNN. “The DOJ was created to help protect Americans’ civil rights and to enforce civil rights laws. … And we all know that justice delayed can be justice denied,” he said, adding that “the pace and volume” of cases filed over the last four years “tells us there are problems all over the country that need addressing.”
On Feb. 2, organizations representing university professors and diversity officers, restaurant workers, and the city of Baltimore filed a federal lawsuit challenging the Trump administration’s anti-DEI executive orders, which was followed by a court injunction temporarily blocking the enforcement of some of the orders while a federal judge reviews the case.
At the Senate Judiciary committee hearing for her nomination as assistant attorney general on Wednesday, Harmeet Dhillon, a conservative attorney who would lead the DOJ’s Civil Rights Division if confirmed, was asked by lawmakers if she would enforce Title 7 of the Civil Rights Act of 1964, which includes protections against discrimination on the basis of race, color, religion, sex and national origin.
“If the facts support such a prosecution or a civil litigation, I certainly would do that,” she said, noting that she has a particular interest in racial discrimination in hiring.
When asked about cases involving DEI policies, Dhillon said she’d follow the Trump administration’s lead on that.
“The president and Attorney General [Pam] Bondi have made it clear that diversity, equity and inclusion as it has been applied to use racial quotas to deny people equal access to education, employment, even potentially housing and other aspects of civil life that are covered by civil rights statutes are inappropriate, so we’ll certainly be taking a close look at all of those and enforcing the law equally in favor of all Americans,” Dhillon said.
Republican Sen. Eric Schmitt of Missouri, noting that the Biden administration brought hundreds of civil rights actions “against companies like SpaceX” (led by Musk), asked Dhillon if she knew “how many actions did the Biden administration bring against DEI racial quotas?”
When she said she was not aware of any, he replied, “It’s zero. None. My friends on the other side had a system in place that needs to be fundamentally dismantled. …This cultural Marxism, a way to divide the room by race is tearing this country apart. We need to bring merit back.”
In the currently Republican-controlled federal government, Musk and his companies, which have received $38 billion in federal support over the past 20 years, according to a recent Washington Post analysis, will likely continue to benefit from a legal standpoint from his nebulous but powerful political perch as senior adviser to Trump, business law experts observe.
“My concern is that Elon Musk has the ear of the President of the United States, probably has the ear of the highest officials in the Justice Department and the Department of Education and any other department that is purveying these policy judgments on how to interpret the Constitution and federal law, so he may be able to impact the changes in policies that actually help his business to avoid liability or to avoid being held in transgression of the law in some of these suits,” said Heminway.
“What’s interesting about this is the fact that Musk is effectively on both sides of the case,” she said. “So the longer he can delay, the prosecution or the enforcement agents will just sit there and do nothing. … The federal lawsuits might not survive.”
But many discrimination lawsuits and DEI actions against Tesla were filed in state courts and with state agencies in California, “which is not ruled by conservative Republicans,” said Heminway. “They may have a better probability of success.”
