Tech Beetle briefing GB

Why Norway’s Sovereign Wealth Fund Is Rejecting Elon Musk’s $1 Trillion Tesla Pay Deal

Essential brief

Key facts

Norway’s sovereign wealth fund will vote against Elon Musk’s $1 trillion Tesla pay package due to concerns over size, dilution, and key person risk.

The package would significantly increase Musk’s Tesla stake if the company’s value grows to $8.5 trillion in 10 years, potentially making him the world’s first trillionaire.

Tesla’s chair argues the deal is crucial to retain Musk as CEO amid company challenges like declining sales and market uncertainties.

Major shareholder advisory groups and pension funds also recommend rejecting the pay deal, reflecting divided investor sentiment.

Tesla faces sales declines in key markets and factory shipment drops, complicating its growth outlook and Musk’s leadership retention.

Highlights

Norway’s sovereign wealth fund will vote against Elon Musk’s $1 trillion Tesla pay package due to concerns over size, dilution, and key person risk.

The package would significantly increase Musk’s Tesla stake if the company’s value grows to $8.5 trillion in 10 years, potentially making him the world’s first trillionaire.

Tesla’s chair argues the deal is crucial to retain Musk as CEO amid company challenges like declining sales and market uncertainties.

Major shareholder advisory groups and pension funds also recommend rejecting the pay deal, reflecting divided investor sentiment.

Norway’s sovereign wealth fund, the largest national wealth fund globally, has announced it will vote against Elon Musk’s proposed $1 trillion pay package at Tesla’s upcoming annual shareholder meeting.

Despite acknowledging Musk’s significant value creation as Tesla’s visionary leader, the fund expressed concerns about the sheer size of the award, potential shareholder dilution, and the risks associated with over-reliance on a single key individual.

Holding a $17 billion stake, making it Tesla’s seventh-largest shareholder, the fund’s opposition signals a major challenge for Musk’s unprecedented incentive plan.

The package would reward Musk with new shares if Tesla’s market value grows from approximately $1 trillion to $8.5 trillion over the next decade, potentially increasing his ownership from nearly 16% to over 25%.

This would elevate Musk’s net worth beyond $2 trillion, making him the world’s first trillionaire.

Tesla’s chair, Robyn Denholm, has emphasized the importance of the deal to retain Musk as CEO, warning that losing him could jeopardize significant company value.

This is not the first time the Norwegian fund has opposed Musk’s compensation; it also voted against his previous $56 billion pay deal in 2023, which was later approved by shareholders but struck down by a Delaware court.

The fund’s CEO, Nicolai Tangen, even invited Musk to a dinner in Oslo to discuss such matters, but Musk declined following the fund’s opposition.

Other major shareholders and advisory groups, including Glass Lewis and ISS, have also recommended rejecting the new package.

Some large pension funds, such as the American Federation of Teachers and California Public Employees’ Retirement System, have voiced similar opposition.

Musk, Tesla’s largest individual shareholder, retains voting rights on the proposal.

Tesla is currently facing challenges, including a 13% drop in global vehicle deliveries in the first half of the year, partly due to Model Y redesign disruptions and the expiration of a $7,500 US government tax credit.

European sales have also declined sharply in countries like Sweden, Denmark, Norway, and the Netherlands, though France has seen modest gains.

Additionally, shipments from Tesla’s Shanghai factory fell by about 10% year-over-year in October.

These factors add complexity to Tesla’s efforts to secure Musk’s leadership amid a shifting market landscape.

The fund’s opposition highlights broader concerns about executive compensation and corporate governance in the context of Tesla’s future growth and stability.