Norway’s sovereign wealth fund to vote against biggest pay package in history for Tesla CEO Musk


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.

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.

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.

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).

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. 

Those in favour argue that:

  • Musk did his part (creating ~$735B in value in six years), so Tesla shareholders should honour their 2018 commitment, and
  • The package is necessary to keep Musk (“not a typical executive”) focused on Tesla (“not a typical company”).

Those against (including Norway’s wealth fund) have voiced concerns around:

  • The total size and structure of the package, and
  • Tesla’s “key person risk” (ie, it’s too reliant on one person – Musk).

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).

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).

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.

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.

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.

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.

Even if Musk wins, more litigation is likely to follow.

INTRIGUE’S TAKE

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.

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.

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.

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.

Also worth noting:

  • 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).
  • Tesla has been Norway’s top-selling car brand for the past three years.
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