Another obstacle has appeared in the $56 billion compensation payment to Tesla CEO Elon Musk.
The Norges Bank Investment Management, one of the world’s largest sovereign wealth funds and Tesla’s eighth-largest shareholder, has opposed the $56 billion compensation payment.
Musk’s $56 billion compensation, the largest in U.S. corporate history, is currently at risk.
According to the Financial Times (FT), the Norges Bank Investment Management expressed concern about the size and structure of the compensation decided to be paid to Musk in a statement on June 8. They also expressed concern that even such a huge compensation could fail to mitigate the key-person risk.
Key-person risk is associated with the volatility of a critical figure who holds a company’s fate. Tesla’s Musk is often mentioned as a typical key-person risk. Musk’s every word has shaken Tesla.
The Norges Bank Investment Management opposition significantly blows Musk, demanding huge compensation.
As of the end of last year, the Norges Bank Investment Management owns about 1% of Tesla’s total shares, worth $8 billion.
The Norges Bank Investment Management had previously opposed the massive compensation package proposed for Musk in 2018.
In 2018, when Tesla was struggling with mass production, the company promised to reward Musk handsomely if he succeeded in mass production and the stock price rose. They agreed to give a $56 billion compensation package, including a massive stock option.
Tesla’s shareholders will vote on June 13 on whether to pay Musk a $56 billion compensation package.
Previously, a Delaware court sided with the plaintiff, opposing the payment, stating that such compensation is of a size that is difficult to comprehend.
The Norges Bank Investment Management has reaffirmed its opposition. Two major shareholder advisory firms, ISS and Glass Lewis, advised shareholders to oppose Musk’s massive compensation package.
This stance is not unique to Musk; in 2023, the Norges Bank Investment Management also voted against the compensation plans for executives at Apple, Alphabet (the parent company of Google), and the French luxury conglomerate LVMH.
Earlier this year, Nicolai Tangen, CEO of the Norges Bank Investment Management, criticized “corporate greed is soaring to unprecedented levels” and that “it is becoming very costly from the shareholders’ perspective.”
Meanwhile, the Norges Bank Investment Management announced that it supports Musk’s plan to move the corporate registration from Delaware to Texas after the Delaware court ruling.
The Norges Bank Investment Management also supported a shareholder proposal to protect Tesla’s union rights, which the company opposed.
