Norway's sovereign wealth fund, the world's largest, has announced its intention to vote against Tesla CEO Elon Musk's proposed compensation package, potentially worth $1 trillion, at an upcoming annual general meeting. This decision comes as a surprise, given the broad investor support for the package and the laws in Texas, where Tesla is headquartered, allowing Musk to vote his large stake. However, the Norwegian fund's stance highlights a critical concern: the excessive size of the compensation deal and the potential dilution of other investors' holdings.
Critics argue that the pay deal is excessive and could give Musk too much unchecked power. Despite this, the package is likely to pass due to the broad investor support and Musk's significant voting power. The fund, which is Tesla's seventh-biggest owner with a 1.12% stake, has a history of voting against Musk's previous compensation plans, indicating a consistent stance on executive compensation.
The Norwegian wealth fund's decision to vote against the package is a bold move, as it is the largest investor to publicly declare its position. This move has sparked a debate on the fairness and size of executive compensation, with proxy advisers ISS and Glass Lewis urging shareholders to reject the plan. The fund's concerns include the total size of the award, dilution, and the lack of mitigation of key person risk, which are consistent with their views on executive compensation.
The compensation package, which could grant stock worth up to $1 trillion over 10 years, is subject to deductions, making the value to Musk slightly lower. Tesla argues that the CEO would earn 'nothing' unless the company's market value grows substantially, and the maximum award is only paid if the group reaches several milestones, most notably a market value of $8.5 trillion. However, the fund's decision to vote against the package and its concerns about the overall size and dilution of the award have raised questions about the fairness and sustainability of such large compensation packages in the tech industry.
