Norway’s sovereign wealth fund opposes ratification of Elon Musk’s US$56 billion pay package at Tesla

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Elon Musk

8th June 2024 – (Hong Kong) Norway’s sovereign wealth fund, with assets totalling US$1.7 trillion, has declared its decision to vote against the ratification of Tesla CEO Elon Musk’s US$56 billion pay package, which is scheduled for a shareholder vote next week. This comes after a Delaware judge invalidated the package earlier this year.

As the eighth-largest shareholder of Tesla, according to LSEG data, the fund holds significant influence. Musk’s pay package, initially approved in 2018, was deemed unfair to shareholders and nullified by a judge, who referred to the amount as an “unfathomable sum.”

While acknowledging the significant value generated under Musk’s leadership since 2018, the fund, operated by Norges Bank Investment Management (NBIM), remains concerned about the overall size of the award, its structure based on performance triggers, dilution, and the lack of mitigation of key person risk.

The fund had previously voted against the pay package in 2018 and expresses its commitment to engaging in constructive dialogue with Tesla on this matter and others.

Additionally, the fund announces its support for a shareholder proposal urging Tesla to adopt a policy concerning freedom of association and collective bargaining. This move aligns with labour unions seeking to exert influence over the U.S. automaker. Notably, Tesla has faced ongoing industrial action in Sweden, with mechanics being on strike since October 27, resulting in one of the country’s longest labour disputes.

Norway’s wealth fund, which owns 0.98% of Tesla’s shares worth $7.7 billion, has consistently criticized excessive CEO pay. In 2022, it voted against over half of the U.S. CEO pay packages exceeding $20 million, citing a misalignment with long-term shareholder value creation.

Furthermore, the fund supports the proposal to transfer Tesla’s state of incorporation from Delaware to Texas. This vote aligns with Musk’s request following the invalidation of his pay package by the Delaware judge.

Lastly, the fund expresses its intention to vote for the election of Kimbal Musk, Elon Musk’s younger brother, to Tesla’s board of directors. The fund had previously voted in favour of Kimbal Musk’s election in 2018.