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IN TODAY’S EDITION
1️⃣ Norway vs Elon Musk? |
2️⃣ A bishop leads a rally in Armenia |
3️⃣ Unicorns going global |
Hi Intriguer. Swiss tennis legend Roger Federer gave an endearing commencement address at Dartmouth over the weekend. It’s worth a look but you’re all busy folks, so here are the two points that really grabbed me:
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“It’s only a point” – Federer reached the very top of his game but, even still, he only ever won an average of 54% of the points he played, and
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“Life is bigger than the court” – His success was anchored by – and driven towards – an urge to serve something bigger (the foundation he started at age 22 has now helped educate three million kids).
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So… take some comfort that even the greats lose every second point, and that something initially small can still change the world. How’s that relevant to Intrigue? Um… Federer speaks four languages.
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Today’s briefing takes us to Norway, where the world’s biggest sovereign wealth fund is objecting to history’s biggest pay package.
THE HEADLINES
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UN Security Council endorses Biden’s Gaza ceasefire.
The Council has passed a resolution calling on Hamas to adopt the US president’s hostages-for-ceasefire plan for Gaza, with 14 votes in favour and one abstention (Russia). The resolution says Israel has already accepted the plan, which involves an initial six-week truce and hostage release, followed by negotiations to end the conflict. Hamas has released a statement welcoming the resolution, though it’s unclear if the group has actually endorsed the deal. Israel’s response to the deal has also been mixed.
Four US college tutors stabbed in China.
The four college instructors were in China for an exchange program with a local university when they were attacked by an unknown assailant. Authorities in China have declined to answer questions about the attacker, though they say none of the victims are in life-threatening conditions.
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Another international judge resigns from Hong Kong court.
Former Canadian Supreme Court jurist Beverley McLachlin has announced she’s stepping down from Hong Kong’s top court, just days after two UK judges announced their own departure from the court. McLachlin has previously defended the court’s independence, and says she’s stepping down to spend more time with her family when her term ends in July.
Baltimore shipping channel reopens after bridge collapse.
The port’s main shipping lane reopened to its original capacity yesterday (Monday) after a ship struck the Francis Scott Key Bridge in March. Officials say they hope to rebuild the bridge by 2028.
TOP STORY
Norway’s sovereign wealth fund to vote against biggest pay package in history for Tesla CEO Musk
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Norway’s $1.6T wealth fund announced on Saturday it’ll vote against a $56B pay package for Tesla CEO Elon Musk ahead of this week’s shareholder meeting.
But before we get to Norway, we need to start in California.
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Back in 2018, Tesla’s board and shareholders approved a 100% performance-based compensation package for Elon Musk – ie, he’d receive no salary or bonuses, but if he managed to hit 12 escalating market cap and revenue milestones, Tesla would pay Musk share options worth 12% of the company.
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At the time, some described these milestones – like growing Tesla from a $50B to a $650B company – as a “stunt” and “laughably impossible”. But love or hate the guy, he hit them way faster than expected, unlocking his entire pay by 2022.
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So Tesla became the world’s most valuable carmaker, Musk’s $56B pay deal became the biggest in history, and Musk became the richest person on earth for a time (Tesla investors and employees did well, too).
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But… there was a heavy metal drummer who owned nine Tesla shares and felt Musk was getting too much. So he sued Tesla, and a Delaware judge sided with him in January: ie, Tesla’s board had only agreed to Musk’s “unfathomable sum” because its members were cosy with Musk, and that’s unfair to shareholders.
So Tesla is now putting Musk’s pay package – and his plan to move Tesla’s corporate home from Delaware to Texas – to a shareholder vote this Thursday.
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Those in favour argue that:
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Musk did his part (creating ~$735B in value in six years), so Tesla shareholders should honour their 2018 commitment, and
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The package is necessary to keep Musk (“not a typical executive”) focused on Tesla (“not a typical company”).
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Those against (including Norway’s wealth fund) have voiced concerns around:
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The total size and structure of the package, and
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Tesla’s “key person risk” (ie, it’s too reliant on one person – Musk).
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So then, what’s up with Norway’s sovereign wealth fund?
Interestingly, Norway’s position is neither new (it opposed the package back in 2018); personal (it’s also opposed packages at Apple and Google); nor unique (pension funds out of California and New York say they’ll also oppose the deal).
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As for Norway, it founded its fund in 1990 to invest the surplus cash from its North Sea oil and gas reserves. It’s now the world’s largest sovereign fund, and it owns ~1.5% of all listed companies across 72 countries (including 1% of Tesla).
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And as you might expect, Norway’s fund has approached its global investments in a very, well… Norwegian way: speaking out on executive pay, environment, labour relations, unethical behaviour, and so on.
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By way of one example, around half of all Norwegian workers belong to unions (that’s relatively high), and Norway’s fund is now backing a union-friendly proposal at Tesla’s shareholder meeting this Thursday.
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So when you see it all in that context, Thursday’s shareholder showdown is less a dramatic Norway-Musk fight, and simply more of Norway being Norway.
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Who’ll win? Members of the public own the biggest chunk of Tesla shares, at around 43% (among the highest for a big company). And Musk claims 90% of them have backed his pay package to date. But big institutional investors hold a similar stake, and many of those boardrooms haven’t yet revealed their cards.
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Even if Musk wins, more litigation is likely to follow.
INTRIGUE’S TAKE
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We don’t write about Musk because we’re fans (or haters) but because major tycoons – like world leaders – have an ability to shape world events. That’s why world leaders clear their calendars to meet the guy.
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Meanwhile, Norway doesn’t have the world’s largest oil and gas reserves, but it does arguably have the best-managed reserves. And when you combine endowments with governance, you get influence.
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In this case, that influence is in the hands of a like-minded US ally and a founding member of NATO, an alliance whose current chief (Jens Stoltenberg) was actually instrumental in establishing Norway’s sovereign wealth fund.
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But not all major sovereign wealth funds will reflect values so familiar (if not always popular) for folks in the US. In fact, the world’s second and third-largest sovereign funds today hail from a US rival (China). Those and other funds will have their own interests to pursue, well beyond CEO pay.
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Also worth noting:
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Tesla has indicated it plans to appeal against the judge’s ruling from January. Procedurally, that can’t happen until the judge rules on the case’s lawyer fees (the ones who helped the metal drummer sue Musk are seeking $5.6B).
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Tesla has been Norway’s top-selling car brand for the past three years.
MEANWHILE, ELSEWHERE…
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🇬🇧 United Kingdom: Prime Minister Rishi Sunak is due today (Tuesday) to unveil his party’s pitch ahead of the July 4th elections, promising to boost the economy, cut taxes, and curb migration. The rival Labour party, which has a significant lead in the polls, has dismissed the announcement as being “littered with unfunded commitments”.
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🇦🇲 Armenia: A local archbishop is leading a renewed four-day rally to push Prime Minister Nikol Pashinyan out of office, after weeks of protests appeared to lose momentum. The protests tap popular anger over territorial losses and concessions to neighbouring Azerbaijan, though the government’s hold on power still looks stable.
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🇦🇺 Australia: Prime Minister Anthony Albanese has urged protesters to “turn the heat down” after someone vandalised the US consulate in Sydney with pro-Palestinian graffiti. Two other similar incidents have occurred at the US consulates in Sydney and Melbourne since April.
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🇺🇸 United States: Southern and central towns in the US territory of Puerto Rico have been without power for over a week, with local authorities now issuing an emergency food request. The island has been plagued by power outages since Hurricane María hit in 2017.
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🇮🇱 Israel: Chipmaker Intel has reportedly paused plans to build a $25bn factory in Kiryat Gat (30km from the Gaza border). Intel has neither confirmed nor denied the report, but says its decisions are based on “business conditions” and that Israel remains a key manufacturing and R&D site.
EXTRA INTRIGUE
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Here’s what people around the world have been googling
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Folks in 🇦🇷 Argentina were searching for ‘Argentina vs Ecuador’ as the two football (soccer) teams faced off in a friendly ahead of the region-wide Copa América, which kicks off in Atlanta on June 20th.
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Traders in 🇲🇾 Malaysia were looking up ‘Bursa Malaysia’ (Malaysia stock exchange), as a stable political scene and returning foreign capital helped drive a small-cap index to a decade high.
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And techies in 🇰🇪 Kenya were googling ‘Apple Intelligence’ as CEO Tim Cook announced Apple’s “next chapter in AI” (including a partnership with OpenAI).
CHART OF THE DAY
Credits: Bloomberg.
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Venture capitalist Aileen Lee coined the term ‘unicorn’ in 2013 to refer to startups hitting that rare and coveted $1B valuation mark. She crunched the data and found there were 39 US unicorns at the time. Fast forward a decade, and it seems those mystical creatures of commerce are now soaring everywhere, with significant numbers across Asia, Europe, the Americas, Israel, and beyond. But as you’ll see above, they’ve also kept charging in the US, which is still home to more unicorns than the rest of the world combined.
DAILY POLL
If you were a Tesla shareholder, would you vote for Musk’s pay deal? |
Yesterday’s poll: Do you think the UN Security Council should have more permanent members?
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🟨🟨⬜️⬜️⬜️⬜️ 🇺🇳 Yes, this country deserves a seat (tell us who!) (26%)
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🟩🟩🟩🟩🟩🟩 👎 No, it would just risk further gridlock (66%)
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⬜️⬜️⬜️⬜️⬜️⬜️ ✍️ Other (write in!) (8%)
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Your two cents:
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👎 M.G: “Though primarily symbolic, the UNSC would be even less effective with more members.”
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🇺🇳 M.N: “The Security Council specifically should be expanded to include representation-by-population per continent, with each continent represented at the same weight (so that country super majorities are prevented).”
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✍️ W.W: “It’s not the number of members, it’s the veto power of a hand full of members that is the problem.”
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🇺🇳 R.N: “Brazil, India and Japan all deserve a seat in their own right. That leaves the question of permanent African representation.”
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✍️ O: “I think it should have no permanent members as the vested political interests of these nations have often overridden the humanitarian goals and (I would argue) the moral authority of the body.”
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