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World’s largest wealth fund to vote against Musk’s $56 billion Tesla pay package

Tesla Inc.’s eighth-largest shareholder said it will vote against next week’s planned shareholder vote to approve a $56 billion compensation package for Chief Executive Officer Elon Musk.

Norway’s $1.7 trillion sovereign wealth fund, which has criticised excessive CEO pay, announced the measures on Saturday.

The fund holds a 0.98% stake in the electric-vehicle maker, valued at $7.7 billion, according to fund data. It is the world’s largest fund by assets, holding 1.5% of the world’s listed stocks.

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Photo illustration of Elon Musk standing in front of the Tesla logo. (Getty Images/Getty Images)

Norges Bank Investment Management (NBIM), the fund’s manager, said in a statement that the fund appreciates the significant value created under Musk’s leadership since the 2018 grant date, but has “concerns about the total grant amount, the performance-linked pay structure, dilution and the lack of key person risk mitigation.”

NBIM added: “We continue to pursue a constructive dialogue with Tesla on this and other issues.”

The fund also said it would vote in favor of a shareholder proposal calling on Tesla to adopt freedom of association and collective bargaining policies, a win for labor unions that want to assert influence over the U.S. automaker.

Musk’s compensation was approved in 2018 but was voided earlier this year by a Delaware judge, who called the amount unfair to shareholders and “unfathomable.”

Judge Katherine McCormick of the Delaware Court of Chancery ruled in favor of a shareholder lawsuit seeking to void the compensation package, writing in her decision that it was excessive because it was by far the largest compensation package ever offered to a CEO of a public company.

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Tesla Supercharger

A Tesla car is plugged into a charging station in Mountain View, Silicon Valley, California. (Photo by Smith Collection/Gado/Getty Images/Getty Images)

McCormick also criticized Tesla’s board of directors for failing to adequately disclose to shareholders the relative ease with which Tesla would meet the benchmarks tied to each tranche of the compensation plan, given Musk’s close relationship with the directors who approved the compensation package, and the company’s growth at the time.

Norway’s sovereign wealth fund also voted against the package in 2018, but last year it voted against more than half of U.S. CEO pay packages worth more than $20 million, warning they were not aligned with long-term value creation for shareholders.

Musk’s compensation, if paid, will be the highest ever paid by a US corporate CEO.

Tesla’s board proposed reinstating a compensation package that would have no salary or cash bonus but would provide compensation in the form of stock options that would be granted if Tesla’s market capitalization grows by up to $650 billion over the 10 years after 2018. The company’s current market capitalization is about $571.6 billion, according to LSEG data.

Tesla has asked shareholders to reaffirm their approval of Musk’s compensation plan. Financial Times interview Earlier this month, Tesla’s executive chairman, Robin Denholm, said Musk deserved to be paid because the company had met ambitious targets for sales and stock price.

But Glass Lewis, a major U.S. proxy advisory firm, last month urged Tesla shareholders to reject the extraordinary package, citing its “excessive size,” the impact of Musk’s stock option exercise and the company’s concentrated ownership.

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Tesla Cybertruck Elon Musk Broken Window

Tesla co-founder and CEO Elon Musk responded verbally at the launch of the Tesla Cybertruck, a fully battery-powered electric vehicle. The shattered window following a demo at the Tesla Design Center in Houston on November 21, 2019, didn’t go as planned. (Photo by FREDERIC J. BROWN/AFP via Getty Images / Getty Images)

The report also noted that Musk’s “set of extremely time-consuming projects” has increased since the company acquired Twitter (now known as X). Musk, who serves as Twitter’s chief technology officer and chairman of the board, is also CEO of SpaceX and artificial intelligence company xAI, and is the founder of Neuralink and The Boring Company.

Musk has served as Tesla’s CEO since 2008 and helped turn the electric-vehicle maker into the world’s largest automaker by market capitalization. He led the company from a $2.2 billion loss in 2018 to a $15 billion profit and increased vehicle production sevenfold, according to the Vote Tesla campaign website.

The company has faced headwinds amid waning consumer interest in EVs, and Tesla reported its first sales decline in nearly four years in the first quarter.

Fox Business’ Eric Revell and Reuters contributed to this report.