A growing number of investors have announced they will vote against the $56 billion pay package Tesla’s board of directors wants to give CEO Elon Musk – though the South African-born executive insists he has lined up enough support for the proposals approval during a shareholder’s meeting this week. What happens if the plan is rejected? Musk already has fired a warning shot.
Tesla CEO Elon Musk’s pet Cybertruck project hasn’t generated the expected response.
Norges Bank Investment Management, which operates Norway’s $1.7 trillion sovereign wealth fund, will vote against the $56 billion pay package the Tesla board of directors has proposed for CEO Elon Musk.
The announcement marks the latest investment group to reject the Tesla proposal which aims to reverse a decision by a Delaware court earlier in the year. Judge Kathaleen McCormick in January voided the board’s original payout, calling it “unfathomable.”
But CEO Musk now claims to have lined up enough support to win what is believed to be the largest payout to a corporate executive in business history.
Opposition grows
Norges Bank, which handles the $1.7 trillion wealth fund for Norway, is voting “no” on Musk’s pay package.
The Norwegian management group operates the world’s largest wealth fund and is the eighth-largest Tesla shareholder, with a 0.98% stake in the EV maker. It joins other high-profile investors refusing to back the payout to Musk, including CalPERS, Glass Lewis and Institutional Shareholder Services.
Also known as ISS, the latter group issued a report last month declaring that “the total award value remains excessive, even given the company’s success.” It also said the planned payout “failed to achieve the board’s other original objectives of focusing CEO Musk on the interests of Tesla shareholders, as opposed to other business endeavors.”
Questions about Musk’s focus on Tesla have mounted of late, in part due to his preoccupation with some of his other businesses, including SpaceX, Neuralink and his rapidly expanding AI operations. Musk has also been faulted for his increasingly caustic posts on X, the former Twitter, which he acquired in October 2022.
Musk levels a threat
Tesla Chair Robyn Denholm is calling on shareholders to approve the pay package, insisting it will be “motivation” to keep him at Tesla.
The $56 billion payout is just one of several topics facing Tesla shareholders this week. The company’s board also wants investors to approve a proposal that would move the company’s state of incorporation from Delaware to Texas – where it believes it would face a friendlier court system.
Not on the ballot, however, is Musk’s demand that he be given the equivalent of a 25% voting stake in Tesla. That’s nearly double his current, 13% holdings in the automaker. When he announced that demand in January, Musk warned that he otherwise would “prefer to build products outside of Tesla.” That was a direct reference to the new AI ventures he has started up separately from the automaker.
The proposal kicked off what influential analyst Dan Ives, of Wedbush Securities, described as a “firestorm.” But Ives warned that losing the new AI business operations “would clearly be a big negative for the Tesla story.”
Separately, in what many observers have taken as a clear threat, Musk last week told tech giant NVIDIA to redirect delivery priorities for thousands of chips originally booked by Tesla to X and xAI instead.
Robyn Denholm, the Tesla board chair, last week weighed in by saying Musk needs “motivation,” warning that if the $56 billion pay package is rejected the CEO just might leave the automaker entirely.
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Musk’s reputation taking a hit – and hurting Tesla, too
The Tesla shareholder’s meeting takes place on June 13, less than three weeks before the automaker reports second-quarter vehicle deliveries. The automaker surprised investors when Q1 numbers were released. They fell short of already weak expectations, dragging down Tesla’s margins and earnings with them. The dip was enough to drag down the entire EV sector, despite increases by a number of U.S. and global competitors.
Whether deliveries will rebound for the current quarter is a matter of debate. Bloomberg reported that Tesla sales in Europe dropped to a 15-month low in April. And there are signs that some potential buyers in the U.S. have begun shopping elsewhere in response to Musk’s vocal and increasingly conservative posts on X. The social media site itself has seen an exodus of users and advertisers alike.
Musk expects payout to win approval
Despite the opposition of major shareholders like Norges Bank Investment Management, ISS and Glass Lewis, Musk tweeted over the weekend that “roughly 90%” of retail shareholders now have voted to approve the compensation package.
Collectively, those investors account for about 45% of the shares not held by corporate insiders, according to Bloomberg. Even with the opposition of some big institutions, that suggests the payout could fly, especially since some large institutional investors, such as ARK Invest, are planning to vote in favor.
But the support of ma-and-pa investors may not actually carry the tide. Broadbridge, a firm that processes voting for many corporations, notes that only 30% of such small investors actually participate in corporate elections.
Even if the deal doesn’t win approval, Musk is expected to remain the world’s richest man, with a net worth estimated by Forbes on June 7 at $210.6 billion.
All Musk needs to do is say he will step down as CEO if he doesn’t get the pay he wants.