In a significant development, Norway’s sovereign wealth fund, the world’s largest, said it would oppose ratifying Tesla Chief Executive Elon Musk’s proposed $1 trillion compensation plan, citing concerns about excessive size, shareholder dilution, and the risks tied to Musk’s dominant role at the company.
The announcement comes ahead of Tesla’s annual shareholder meeting on Thursday, wherein investors will vote on several resolutions, including Musk’s mammoth compensation package.
The proposal, which would grant him an additional 12% stake if Tesla’s valuation reaches $8.5 trillion within a decade, is believed to be the largest CEO pay deal ever considered.
The outcome will determine whether Musk, already one of the world’s richest individuals, could secure stock awards valued at up to $1 trillion.
While Tesla’s board argues that the plan is crucial to retaining Musk and incentivising long-term growth, critics have described it as excessive and potentially damaging to shareholder interests.
Fund cites concerns over dilution and governance
“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, which manages Norway’s $2.1 trillion fund, said in a statement on Tuesday.
NBIM, Tesla’s seventh-largest shareholder with a 1.12% stake worth about $17 billion, has consistently opposed Musk’s expansive pay packages.
It also voted against the CEO’s previous $56 billion compensation plan, which led to a tense exchange after Musk declined an invitation to speak at a conference in Oslo.
The fund said it would also vote against two of the three Tesla directors up for re-election and oppose the company’s broader stock compensation proposal for employees, which could indirectly benefit Musk.
Proxy firms have urged shareholders to reject the plan
Influential proxy advisory firms ISS and Glass Lewis have both advised shareholders to reject the “mega performance equity award.”
ISS said the sheer size of the grant raises “unmitigated concerns” about its structure and potential impact on shareholder value, even though it is linked to ambitious performance targets.
Glass Lewis echoed those concerns, describing the proposed plan as “a significant cause for concern” and warning that it could substantially dilute existing shareholders if Tesla issues new shares to meet the award terms.
According to a Reuters analysis, after adjusting for the cost of the awarded shares, the plan could be worth around $878 billion to Musk.
Other investors/ institutions which are opposing the package
Apart from the NBIM, the New York State retirement fund, California Public Employees’ Retirement System (CalPERS)- the largest public pension fund in the US, as well as the American Federation of Teachers have also, in recent days, declared they will oppose the plan.
CalPERS’ Drew Hambly, said in a statement that the plan “is larger than pay packages for CEOs in comparable companies by many orders of magnitude” and “would further concentrate power in a single shareholder.”
With 5 million shares, it is one of the most influential shareholders of the automaker.
On the other hand, the New York State Comptroller Thomas DiNapoli has urged fellow shareholders to reject the plan, citing an “alarming lack of board independence.”
Meanwhile, Cathie Wood’s ARK Invest, the State Board of Administration of Florida, Altreides Management, and Wedbush Securities have backed the plan.
Dan Ives, managing director at Wedbush, and known Tesla bull, has said the proposed package would help keep Musk focused on Tesla’s “autonomous and robotics future,” which he views as critical to the company’s long-term success.
Musk defends plan, criticizes opponents
Musk has fiercely defended the compensation proposal, dismissing critics at proxy firms as “corporate terrorists.”
Speaking during Tesla’s recent earnings call, he said, “I just don’t feel comfortable building a robot army here and then being ousted because of some asinine recommendations from ISS and Glass Lewis, who have no clue.”
Tesla’s board maintains that Musk will earn nothing unless the company’s value multiplies nearly eightfold, creating enormous returns for investors.
But governance experts warn that Musk could still reap substantial rewards without achieving all milestones, raising questions about fairness and accountability in one of corporate America’s most closely watched pay disputes.
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