World's Largest Sovereign Wealth Fund Moves to Block Musk's Massive Compensation: "We Will Vote Against"

Norwegian Sovereign Wealth Fund: "We Will Vote Against the Plan"
ISS and Glass Lewis Express Opposition
Stock Price Drops More Than 4% Amid Negative Sentiment

The world's largest sovereign wealth fund, Norway's Government Pension Fund Global, has announced its opposition to a massive compensation package worth $1 trillion (approximately 1,400 trillion won) for Elon Musk, CEO of Tesla. This stance directly challenges the recommendation of Tesla's management and Musk's threat to step down as CEO if the proposal is rejected. As the possibility of Musk's resignation is being discussed in the event the compensation plan fails, concerns over 'Musk risk' are growing among investors.

Elon Musk, CEO of Tesla, attended the opening ceremony of Tesla's new electric vehicle factory (Gigafactory) held in Gruenheide, Germany, on March 22, 2022 (local time). Photo by Reuters Yonhap News

According to Germany's dpa news agency and others on November 4 (local time), the Norwegian sovereign wealth fund stated it will vote against Musk's stock compensation plan at Tesla's annual shareholders' meeting scheduled for November 6. Norges Bank Investment Management (NBIM), which manages Norway's Government Pension Fund Global, released a statement saying, "We recognize the significant value created under CEO Musk's vision, but we are concerned about the overall size of this compensation, the potential dilution of shares, and the lack of mechanisms to mitigate key person risk," adding, "This is consistent with our long-standing position on executive compensation."

Established in the late 1990s to manage profits from the oil and gas sector, Norway's sovereign wealth fund manages approximately $2 trillion (about 2,800 trillion won). It invests in around 9,000 companies worldwide and is one of Tesla's top 10 shareholders, holding a 1.1% stake in the company.

The fund has consistently opposed proposals it considers to offer excessive CEO compensation. It also voted against Musk's compensation package in both 2018 and last year.

In addition to Norway's sovereign wealth fund, the world's largest proxy advisory firms, Institutional Shareholder Services (ISS) and Glass Lewis, have also expressed opposition to the latest compensation proposal. Several labor unions and corporate watchdog groups in the United States have recently launched an opposition campaign through a website called "Take Back Tesla."

Musk has strongly pushed back against this criticism. During a conference call following the third-quarter earnings announcement on October 22, he referred to ISS and Glass Lewis as "corporate terrorists." He also posted on X (formerly Twitter), "Tesla is worth more than all other car companies combined," and questioned, "So, which CEO among those companies would you want to run Tesla? It would not be me."

Previously, at the end of last month, Tesla's board of directors warned shareholders that "Musk may leave the company if the compensation package is not approved," urging them to support the plan. The proposed package would allow Musk to receive approximately 425 million shares of Tesla common stock in 12 tranches through 2035 if he achieves predetermined management goals. If this plan is approved, Musk's current stake of about 13% would rise to over 25%. However, this compensation will only be granted if Tesla meets key management indicators, such as market capitalization, at each stage.

With negative sentiment rising ahead of the shareholders' meeting to vote on Musk's massive compensation package, Tesla's stock price declined on the day. On the New York Stock Exchange, Tesla closed at $444.26, down 5.15% from the previous day.