By Terje Solsvik
OSLO (Reuters) -Norway’s sovereign wealth fund, the world’s largest, said on Tuesday it would vote against ratifying Tesla CEO Elon Musk’s proposed compensation package, containing shares worth up to $1 trillion, at an annual general meeting this week.
Investors in the electric-vehicle maker will decide on November 6 whether to approve the package, likely the largest-ever CEO compensation agreement, which critics have called excessive.
So far, the Norwegian wealth fund is the largest outside Tesla investor to say how it plans to vote. The next-largest to do so, Baron Capital, on Monday said it would back Musk’s pay package.
The company’s largest institutional investors, including BlackRock, Vanguard and State Street, have yet to disclose their voting plans.
Proxy advisers ISS and Glass Lewis have both urged shareholders to reject Musk’s compensation plan, arguing it would be too large, deliver high payouts even if the CEO only meets some goals and could dilute the holdings of other investors. Both also opposed a shareholder vote last year on a 2018 $56 billion package for Musk that passed with overwhelming support from Tesla’s army of mom-and-pop investors.
Despite some opposition, Musk’s enormous pay package will almost certainly pass, given broad investor support and the fact that a new law in Texas, where Tesla moved its headquarters last year, allows him to vote his large stake, giving him about 13.5% of Tesla’s voting power.
PRAISING VALUE CREATION, BUT CONCERNED WITH OVERALL SIZE
Tesla’s board is pushing for shareholders to approve the plan, with Chair Robyn Denholm warning last week that Musk could leave the company if the deal is rejected.
While the package could grant stock worth up to $1 trillion over 10 years, the cost of those shares at the time of the award will be deducted, making the value to Musk slightly lower, at up to $878 billion, according to a Reuters analysis.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk – consistent with our views on executive compensation,” Norges Bank Investment Management said on its website.
The fund, Tesla’s seventh-biggest owner with a 1.12% stake worth $17 billion, also voted “no” to Musk’s previous compensation plan, drawing a sharp response from the CEO, who turned down an invitation to a conference in Oslo.
Various groups have tried and failed to block record payouts to Musk, including a $56 billion compensation plan for 2018 that investors reapproved last year, though legal challenges remain.
NBIM on Tuesday also said it would vote against two out of three Tesla directors who are up for reelection, declining to back board veterans Kathleen Wilson-Thompson and Ira Ehrenpreis while supporting Joe Gebbia, who joined in 2022.
The $2.1 trillion Norwegian fund also said it would vote against Tesla’s proposed general stock compensation plan, which is intended for all employees and can also be used by the board to benefit Musk.
Tesla says its CEO would earn “nothing” unless the company’s market value grows substantially and that the maximum award is only paid if the group reaches several milestones, most notably a market value of $8.5 trillion, a near six-fold increase.
(Reporting by Terje Solsvik; additional reporting by Nick Carey in London; Editing by Joe Bavier, Thomas Derpinghaus and Sharon Singleton)
