Amid the dazzling lights of Wall Street, a fresh controversy brews involving one of its most charismatic figures—Elon Musk. The issue? His $56 billion pay package from Tesla, initially approved back in 2018, has come under scrutiny again. As Tesla shareholders gear up for a crucial vote, Norway’s colossal sovereign wealth fund has thrown a wrench into the works by announcing its opposition to the package.
Norway’s sovereign wealth fund is no lightweight in the investment world, holding an astonishing $1.7 trillion in assets. As Tesla’s eighth-largest shareholder, owning 0.98% (or $7.7 billion) of Tesla stock, its intentions carry significant weight. Their decision to vote against Musk’s pay package was highlighted in a recent report from Reuters.
The Norwegian management, Norges Bank Investment Management (NBIM), which oversees the fund, has raised concerns. NBIM acknowledged Musk's substantial contributions since the grant date in 2018 but said, “we remain concerned about the total size of the award, the structure given performance triggers, dilution, and the lack of mitigation of a key person risk.”
This vote emerges from historical currents swirling back to 2018 when Tesla first announced Musk's startling compensation plan. Designed as an all-or-nothing bet, Musk would garner the full package only if Tesla hit specific, ambitious goals—each a milestone on an arduous road. To Musk’s credit, he met these goals, reaching the pinnacle of the pay package.
However, not everyone is pleased. In April 2024, Tesla filed to have shareholders approve the astonishing pay deal once more, sparking further debate. Tesla Chairperson Robyn Denholm went on record in the filing saying, “Elon Musk has not been paid for any of his work for Tesla for the past six years… That strikes us, and the many stockholders from whom we already have heard, as fundamentally unfair.”
Earlier in 2024, Judge Kathaleen McCormick in the Delaware Court of Chancery added fuel to this corporate cauldron by voiding Musk’s pay package. The judge's decision strongly countered the previous approvals, raising questions about the magnitude and fairness of $56.8 billion tag, initially valued around a $2.6 billion grant date. Despite hitting every target, the court saw fit to nullify the agreement.
In contrast, some heavyweight backers still lend their support. Billionaire investor Ron Baron insists Tesla’s faith should remain with Musk. He pointed out that “when the contract was signed, [Tesla's] market value was $53 billion. It got as high as a trillion, and it’s now $550 billion. I think in the next ten years, we’ll make 4-5 times our money again in Tesla.”
The case continues to unfurl, promising to be a defining moment for corporate governance and executive compensation. The shareholder vote will be telling, revealing whether boots-on-the-ground investors back Musk’s haul or align with institutional titans like Norway's wealth fund. Whatever the outcome, a broader dialogue on leadership, valuation, and fairness in the stratospheric world of high-stakes enterprise will endure.
