Norway’s sovereign wealth fund plans to reject $1 trillion Tesla CEO pay day

Norway’s sovereign wealth fund said on Tuesday at an annual general meeting that it would vote against Elon Musk’s $1 trillion compensation package. Investors in Tesla will vote on the package on November 6.

The package is considered one of the largest-ever CEO compensation agreements. The Norwegian wealth fund, the world’s largest, is the first to disclose its decision on how it plans to vote.

Musk threatens to exit Tesla if compensation package gets rejected 

Baron Capital said on Monday it would back Musk’s pay package. Other Tesla investors, including BlackRock, Vanguard, and State Street, have yet to reveal their voting plans on the package.

There has been mounting pressure from Tesla’s board on shareholders to approve the plan. The company’s chair, Robyn Denholm, warned last week that Musk would exit the electric car manufacturer if the deal is rejected. 

The package is expected to grant shares worth up to $1 trillion over a decade. The cost of the stock at the time of the award will also be deducted, which will reduce Musk’s value to $878 billion.

Norges Bank Investment Management stated on its website that, although it appreciates the significant value created under Musk’s visionary leadership, the bank remains concerned about the total size of the award and potential dilution. The financial institution also expressed concern about the lack of mitigation of key person risk, consistent with its views on YouTube executive compensation.

Norges Bank Investment Management is Tesla’s seventh-largest shareholder, holding a 1.12% stake worth approximately $17 billion. The bank also voted against Musk’s previous compensation plan, which drew a sharp response from the CEO, turning down an invitation to a conference in Oslo. 

Musk has faced hurdles from various groups aiming to block record payouts in the past, but these efforts have failed. There was a $56 billion compensation plan for 2018 that investors reapproved last year, though legal challenges remain.

The Norges Bank Investment Management also revealed on Tuesday that it would vote against two out of three Tesla directors who are up for reelection. NBIM said it won’t back board veterans Kathleen Wilson-Thompson and Ira Ehrenpeis, but will support Joe Gebbia, who joined in 2022.

The Norwegian fund also revealed that it would not back Tesla’s proposed general stock compensation plan. The initiative is intended for all employees and can also be used by the board to benefit Musk.

Musk’s divisive compensation package 

The EV manufacturer said Musk will benefit nothing from the compensation plan unless the firm’s market value grows significantly. The company also stated that its CEO will not receive any compensation unless the maximum award is paid, provided the group reaches several milestones, such as attaining a market value of $8.5 trillion, nearly a six-fold increase.

However, an analysis by research firm Equila, which consulted with more than a dozen experts in executive pay, company valuations, robotics, and automotive trends, Musk’s performance goals could still help him earn billions of dollars without meeting most of those targets. The analysts also found that the CEO could collect more than $50 billion by achieving a few of the board’s simpler goals, which would not necessarily revolutionize Tesla’s products or business.

A spokesperson for the Tesla board stated that the proposed pay package is worth zero to Musk unless and until the shareholders see the value of the firm nearly double, and it also meets an operational milestone. The board also requires Musk to remain a Tesla executive for at least seven and a half years before he can collect any stock compensation.

Musk revealed that the package is not about compensation, but about him having enough influence over Tesla to ensure safety if the company builds millions of robots. The board said in the proposal that the CEO is motivated by more than just conventional forms of compensation.

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