TLDR
- Norway’s $2 trillion sovereign wealth fund will vote against Elon Musk’s proposed $1 trillion Tesla compensation package at the November 6 shareholder meeting.
- The fund, Tesla’s seventh-largest shareholder with a 1.12% stake worth $17 billion, cites concerns about the total size, dilution of other investors’ shares, and concentration of power in one person.
- Musk’s pay package would grant stock worth up to $1 trillion over 10 years, contingent on Tesla reaching a market value of $8.5 trillion and other milestones.
- Proxy advisers ISS and Glass Lewis recommend rejecting the plan, while Tesla’s board warns Musk may leave if shareholders vote no.
- The compensation package is expected to pass despite opposition, as Musk controls 13.5% of voting power and has support from retail investors and some institutional backers.
Norway’s sovereign wealth fund announced it will vote against Elon Musk’s proposed compensation package at Tesla’s annual shareholder meeting on November 6. The decision represents a direct challenge to the electric vehicle maker’s board and CEO.
The Norwegian fund, worth $2 trillion and the largest of its kind globally, holds a 1.12% stake in Tesla valued at $17 billion. This makes it Tesla’s seventh-largest investor and the biggest shareholder to publicly oppose the pay deal so far.
Norges Bank Investment Management stated it had already cast its vote against the package. The fund expressed concern about the total size of the award and its potential to dilute other investors’ holdings.
The proposed compensation plan could grant Musk stock worth up to $1 trillion over a 10-year period. According to Reuters analysis, the actual value to Musk would be slightly lower at up to $878 billion after accounting for the cost of shares at the time of award.
Tesla’s board defends the package by stating Musk would earn nothing unless the company’s market value grows substantially. The maximum award requires Tesla to reach several milestones, most notably a market value of $8.5 trillion.
This would represent a nearly six-fold increase from Tesla’s current $1.5 trillion market capitalization. Other performance targets must also be met for Musk to receive the full compensation.
Opposition Faces Uphill Battle
Despite the Norwegian fund’s opposition, the compensation package is expected to pass. Musk controls approximately 13.5% of voting power through his own stake in the company.
Texas law, where Tesla relocated its headquarters last year, allows Musk to vote his shares on his own compensation. This gives the CEO substantial influence over the outcome.
Baron Capital, another major institutional investor, has announced plans to support the pay package. Tesla’s three largest institutional investors—BlackRock, Vanguard, and State Street—have not yet disclosed their voting intentions.
Two prominent proxy advisory firms have recommended shareholders reject the plan. ISS and Glass Lewis both argue the compensation is too large and could deliver high payouts even if Musk only meets some goals.
Board Pushes for Approval
Tesla board chair Robyn Denholm has warned that Musk could leave the company if shareholders reject the deal. The threat adds pressure on investors considering their vote.
The Norwegian wealth fund also announced it would vote against Tesla’s general stock compensation plan for all employees. The fund believes this plan could be used by the board to further benefit Musk.
The fund will vote against two of three Tesla directors up for reelection. It declined to back board veterans Kathleen Wilson-Thompson and Ira Ehrenpreis while supporting Joe Gebbia, who joined in 2022.
This marks the second time the Norwegian fund has opposed Musk’s compensation. Last year, it voted against reinstating his $56 billion pay deal after a Delaware judge rescinded it.
That package was ultimately approved by Tesla shareholders with strong support from retail investors. Musk previously declined an invitation to a conference in Oslo after the fund’s opposition to his earlier pay deal.
The shareholder vote will take place on November 6, with results determining whether Musk receives what would be the largest CEO compensation agreement in history.
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