A hot potato: There is growing concern over the payout Elon Musk has requested for his involvement with Tesla in 2018. Shareholders in Norway consider the deal excessive and motiveless. They are still in talks but are ready to vote against the substantial multibillion-dollar compensation package.
Tesla shareholders are preparing for their annual meeting scheduled for June 13, and many are eager to express their opposition to Musk’s extremely rich payout proposed in 2018. One of the wealthiest men in the world wants $56 billion for his significant involvement with Tesla and the results achieved by the company. The Government Pension Fund of Norway says that’s way more than it is willing to pay.
Also known as the Oil Fund, the organization collects the surplus wealth produced by Norwegian petroleum income and is managed globally by the Norwegian Central Bank. The fund recently voted against the Tesla proposal, confirming the decision taken on the matter when the board ratified the original deal.
The Oil Fund appreciates the great value created since 2018 under Musk’s watch. However, it is concerned about the enormous size of the award, the performance triggers involved, and the lack of risk mitigation for key personnel. The organization continues to talk with Tesla on the topic but is ready to vote against the compensation package during the upcoming shareholder meeting.
The crux of the argument is this: Musk agreed to defer “performance-based compensation” during his leadership of Tesla until the carmaker achieved $650 billion market capitalization. Tesla was valued at $53 billion at the time of the deal and reached an all-time high of $1.24 trillion in 2021. However, Tesla’s market cap now hovers at around $556 billion.
Norway’s Oil Fund is part of a growing group of shareholders unwilling to pay Musk since Tesla is the S&P500’s worst-performing stock this year, down by 28 percent. A Delaware judge shot down the $56 billion award in January, ruling the award “excessive.” The judge sided with an investor, saying Tesla approved the award illegally due to Musk’s close relationships and influence over the company’s board members. Oil Fund and others believe that the compensation package should be no more than $46 billion according to current performance.
Many shareholders don’t want to drown Musk in (even more) money, but Tesla’s administration is still trying to push the deal. Tesla chairwoman Robyn Denholm said last week that investors should ratify the award ASAP, or Musk could lose interest in Tesla and abandon the company.
“Elon’s unique contributions have built Tesla from a company that was, in 2018, a loss-making, ambitious company with significant hurdles and challenges to overcome into what it is today – a company that is literally changing the world by driving so many critical initiatives that are making our planet more sustainable while at the same time delivering hundreds of billions of dollars of value to all of you who invested in Tesla’s dream,” Denholm attested. “These contributions should be respected.”
