By Terje Solsvik and Ross Kerber
OSLO/BOSTON (Reuters) – Norway’s sovereign wealth fund, Tesla’s sixth-largest outside investor, said on Tuesday it would vote against ratifying a proposed pay deal for Chief Executive Elon Musk potentially worth $1 trillion.
Musk’s pay package is still seen as likely to win, given broad investor support in the past and the backing Tesla enjoys from its large retail shareholder base. Laws in Texas, where Tesla moved its headquarters last year, allow Musk to vote his own large stake, giving him 15.3% of the voting power, including the restricted shares granted in August.
The opposition from pro-administration Norges Bank Investment Management was not a surprise. But his direct criticism of compensation and planned votes against two Tesla board directors add uncertainty to the outcome of a vote scheduled for Thursday, corporate governance experts said, and underscore how other European investors may also turn against the electric vehicle maker.
PRESIDENT WARNS THAT MUSK COULD RESIGN
Tesla did not respond to requests for comment.
Tesla’s board is pushing for shareholder approval of the plan, and its chairman, Robyn Denholm, warned that Musk could leave the $1.5 trillion market capitalization firm if the deal is rejected.
“European voters are much more likely to go the Norges direction, given the overall support of ESG (environmental, social and governance) principles and concerns in its investment philosophy,” said Francis Byrd, partner at consulting firm Alchemy Strategies Partners.
Byrd and several other consultants said they expect Tesla’s recommendations to prevail at the meeting, since major investors have stuck with him so far. With a 1.12% stake in Tesla, the Norwegian firm known as NBIM is the only one of Tesla’s top 10 outside investors to have revealed its voting intentions ahead of the meeting so far.
They also noted how large American investors are under pressure from the Trump administration to apply less public pressure to companies. That could make it harder to know if there’s much opposition until the day of the meeting, said Karla Bos, an independent governance consultant in Arizona.
“Less predictability is the watchword for 2025, and certainly for complicated votes like in Tesla,” Bos said.
Schwab will support the salary package
After NBIM, the next investor to reveal their voting intentions is Schwab Asset Management. A Schwab spokesperson told Reuters by email on Tuesday that it will support Musk’s performance award as one that “aligns the interests of both management and shareholders.”
Schwab is Tesla’s 15th largest outside investor, with a 0.56% stake based on June disclosures. Another firm that supports Musk’s salary proposal is Baron Capital, which owns 0.39% of Tesla shares. Tesla’s largest institutional investors, including BlackRock, Vanguard and State Street, have not yet revealed their intentions.
Among other large European investors in Tesla, representatives from Legal & General Investment Management in London and Amundi Asset Management in Paris declined to comment. Each holds about 0.6% of Tesla shares.
Proxy advisors ISS and Glass Lewis have urged shareholders to reject Musk’s compensation plan, arguing that it would be too large, result in high payouts even if the CEO only meets a few goals, and could dilute other investors’ holdings. Both also opposed a re-ratification vote last year on a $56 billion package for Musk in 2018.
PRAISING VALUE CREATION, BUT CONCERNED ABOUT OVERALL SIZE
While this year’s package could award shares worth up to $1 trillion over 10 years, the cost of those shares will be deducted at the time of award, making the value to Musk slightly lower, at up to $878 billion, according to a Reuters analysis.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the overall size of the compensation, dilution and failure to mitigate key person risk, consistent with our views on executive compensation,” NBIM said on its website.
NBIM also voted “no” to Musk’s previous compensation plan, prompting a harsh response from the CEO, who declined an invitation to a conference in Oslo.
Tesla sales in Norway fell 50% in October, along with declines in some other European markets, amid growing competition and a backlash to Musk’s political alliance with US President Donald Trump.
NBIM also said Tuesday that it would vote against two of the three Tesla directors running for re-election, refusing to endorse veterans Kathleen Wilson-Thompson and Ira Ehrenpreis, while supporting Joe Gebbia, who joined in 2022.
Both Wilson-Thompson and Ehrenpreis sit on Tesla’s compensation committee. The same goes for board president Robyn Denholm, who is not running in this year’s election.
NBIM, which manages $2.1 trillion, also said it would vote against Tesla’s proposed general stock compensation plan, which is intended for all employees and can also be used by the board of directors to benefit Musk.
Tesla says its CEO would earn “nothing” unless the company’s market value grows substantially and that the maximum compensation is only paid if the group reaches several milestones, notably a market value of $8.5 trillion, an almost six-fold increase.
(Reporting by Terje Solsvik in Oslo and Ross Kerber in Boston; additional reporting by Nick Carey in London; Editing by Joe Bavier, Thomas Derpinghaus, Peter Henderson and Rod Nickel)
