Norway's oil fund to vote against Musk's $56 bln Tesla pay award

By Clive McKeef

Top 10 shareholder of carmaker says it is 'concerned' about size of package

The world's largest sovereign wealth fund has said it will vote against ratifying Elon Musk's $56 billion pay award at Tesla, as the largest remuneration package in U.S corporate history comes under shareholder scrutiny, the Financial Times and CNBC reported on Saturday.

Norway's $1.7 trillion oil fund, the eighth largest shareholder in Tesla, according to LSEG data, and which owns 1.5% of all the world's listed stocks, said on Saturday that it was "concerned" about the size of the pay package, its structure, and how it fails to mitigate "key person risk".

Tesla (TSLA) shareholders will vote on the award on Thursday. Musk's pay, the largest for a chief executive in corporate America, was approved in 2018, but voided by a judge earlier this year, who said the amount was unfair to shareholders, calling it an "unfathomable sum".

The Norwegian fund owns about 1 per cent of Tesla, worth about $8 billion at the end of 2023, and voted against the pay package when it was first proposed in 2018, and said its stance had not changed.

Both ISS and Glass Lewis, the two largest proxy advisers, have also recommended shareholders reject Musk's pay package.

See: Elon Musk's pay package 'outsized,' proxy adviser says, urging shareholders to say no

See also: America's top pension fund to vote against Elon Musk's $56 billion pay package, CEO says

The oil fund has taken an increasingly active line against pay packages, particularly in the U.S., where it has voted against more than half of all awards of more than $20 million. Last year, it voted against pay deals at some of its biggest holdings including Apple (AAPL), Google owner Alphabet (GOOGL) and LVMH (FR:MC).

The fund said it appreciated "the significant value generated under Mr. Musk's leadership since the grant date in 2018".

Still, "we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key person risk," Norges Bank Investment Management (NBIM), the operator of the fund said.

"We will continue to seek constructive dialogue with Tesla on this and other topics," NBIM added.

However, it said it would vote in favor of Tesla moving its incorporation from Delaware to Texas, a move that was proposed as a result of Musk's anger at the judge's pay decision.

The pay package - which was subject to Musk increasing Tesla's share price significantly - was awarded in 2018 when the electric carmaker was struggling to produce vehicles at scale.

The Norwegian fund also said it would vote in favour of a shareholder proposal backing trade union rights, which Tesla opposes. The vote comes as Tesla continues to face industrial action in Sweden, with its mechanics on strike since Oct. 27, in one of the country's longest labor disputes.

Tesla has previously said that the pay award has driven "more than $735 billion in value creation" and expressed confidence that its shareholders would "honor the deal they approved in 2018".

See also: 'This is obviously not about the money.' Tesla on why investors should back Elon Musk's $56 billion pay award.

-Clive McKeef

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06-08-24 1008ET

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