(Nov 4): The world’s largest sovereign wealth fund voted against Tesla Inc’s unprecedented stock award to chief executive officer Elon Musk in the biggest show of opposition yet by a major shareholder.
“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,” Norway’s Norges Bank Investment Management (NBIM) said in a notice on its website. The fund NBIM oversees is Tesla’s ninth-largest holder, according to data compiled by Bloomberg.
While the vote is a meaningful blow to Tesla’s proposal to grant Musk stock potentially worth US$1 trillion, the carmaker overcame the Norway fund’s opposition to an earlier compensation package that was re-approved last year. That award was voided by a Delaware court, leading Tesla’s board to arrange another payout while it appeals the ruling.
The new compensation package will be the focal point of Tesla’s annual meeting slated for Nov 6, with the chair of the board having suggested Musk’s future with the company is at stake. During negotiations with a committee of directors that constructed the award, the CEO warned he may leave Tesla unless he acquires at least a 25% voting interest and is paid for past performance.
“I’ve had the conversations with him directly,” Tesla chair Robyn Denholm said of Musk in an interview last week. “There’s no question in my mind that if we don’t get this across, there is a high probability” he would back away from the company or become less engaged.
Tesla shares fell as much as 2.9% before the start of regular trading on Tuesday. The stock has risen 16% this year, roughly in line with the advance in the S&P 500 Index.
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Tesla’s board aims to incentivise Musk to keep leading the company by setting a series of performance milestones that must be achieved to earn more tranches of stock. If paid out in full, the award would hand Musk shares equal to 12% of the company.
The proxy advisers Institutional Shareholder Services and Glass Lewis have urged shareholders to reject the pay plan for Musk, citing concerns with its magnitude and its potential to dilute other shareholders’ ownership. California Public Employees’ Retirement System, the largest public pension plan in the US, said last week it was planning to vote against the award.
NBIM also is against a shareholder proposal for Tesla to invest in Musk’s artificial intelligence startup xAI, and opposes reelecting Ira Ehrenpreis and Kathleen Wilson-Thompson to the carmaker’s board of directors. The one director up for reelection that the fund backs is Joe Gebbia, the co-founder of Airbnb Inc.
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“Shareholders should have the right to seek changes to the board when it does not act in their best interest,” the fund wrote in explaining its votes on Ehrenpreis and Wilson-Thompson. The fund didn’t provide rationale for its vote against the xAI investment, or its vote for Gebbia, who’s been on Tesla’s board since 2022.
Musk lashed out against NBIM CEO Nicolai Tangen over the fund’s opposition to re-ratifying the Tesla CEO’s compensation last year. In messages that were made public via freedom of information request, Musk refused Tangen’s invitation to a dinner in Oslo, writing that he needed to “make amends”.
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