Elon Musk, the CEO of Tesla and its largest investor, is attracting a major counter effort to his chummazinglylarge proposed compensation package. Norges Bank Investment Management, which manages Norway’s Government Pension Fund Global, is Tesla’s sixth-largest shareholder with a 1.16% stake in the company. Each are planning to vote against the shareholder rights package at the company’s upcoming annual meeting. This decision represents a watershed development as stakeholders continue to explore the consequences of Musk’s payoffs.
Musk’s control over Tesla is clear—currently, he owns all 15.79% of Tesla’s outstanding shares, providing him considerable sway over the electric carmaker. His proposed bonus pay-out schedule could go as high as an astounding $1 trillion over the next ten years. This eye-opening number has caused both concern and heated debate among investors and analysts. Few are still asking whether such a package would be fair or even sustainable.
This is one of the proposals headed to an upcoming vote on Musk’s outrageous compensation. Over a dozen will make it to the floor during Tesla’s annual meeting. Unsurprisingly given the controversial nature of Musk’s pay package, there has been significant divide among institutional investors and stakeholders. Critics point out that the suggested pay is out of step with best practice around executive compensation.
Norges Bank Investment Management has expressed their concerns regarding the magnitude of Musk’s compensation. They congratulated investors for the value created under Musk’s watch. On the flip side, they noted several concerns predictably related to dilution and the lack of any protections against key person risk.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk consistent with our views on executive compensation.” – Norges Bank Investment Management
Musk’s role as CEO has led some to label him as the “ultimate key man,” highlighting the critical dependency on his vision and leadership for Tesla’s success. Ron Baron, a billionaire investor, went on record promoting this idea. His point was that Tesla would not be the company it is today without Musk’s commitment and pursuit of excellence.
“Elon is the ultimate ‘key man’ of key man risk. Without his relentless drive and uncompromising standards, there would be no Tesla.” – Ron Baron
As this annual meeting gets closer and closer, all eyes are going to be focused on how shareholders react to Musk’s unprecedented compensation deal. The result would establish an important model for executive compensation arrangements, both in the technology sector and outside of it.
