Tesla CEO's compensation package faces opposition from major investors

Biểu tượng Tesla tại cửa hàng ở Washington, DC, Mỹ. (Ảnh: AFP/TTXVN)

Tesla logo at a store in Washington, DC, USA. (Photo: AFP/TTXVN)

Norway's sovereign wealth fund Norges Bank Investment Management (NBIM), the sixth-largest outside investor in electric carmaker Tesla, said on November 4 it would vote against ratifying a proposed compensation deal for CEO Elon Musk, which could be worth as much as $1 trillion.

On its website, NBIM said that while it recognized the significant value created under Mr. Musk’s visionary leadership, it was concerned about the overall size of the compensation package, the potential for dilution, and the lack of risk protection given the company’s reliance on one individual. NBIM stressed that this view was consistent with its general policy on executive compensation.

NBIM previously voted against another compensation plan proposed by Mr. Musk, which drew a strong backlash from the CEO. Mr. Musk declined an invitation to attend a conference in Oslo after that incident.

NBIM also said it would vote against two of Tesla’s three directors up for reappointment. Specifically, it refused to support two veteran board members, Kathleen Wilson-Thompson and Ira Ehrenpreis, while still voting for Joe Gebbia, who joined in 2022. Notably, both Wilson-Thompson and Ehrenpreis are members of Tesla’s compensation committee.

NBIM, which manages $2.1 trillion in assets, also said it would vote against Tesla's proposed stock-based plan, which would be available to all employees but could also be used by the board to benefit Mr. Musk.

Corporate governance experts say that although NBIM's opposition was expected, their drastic actions are complicating the situation. Specifically, the fund's outspoken criticism of the compensation package and its announcement that it would vote against the compensation package for two board directors has made the outcome of the November 6 vote more difficult to predict. More notably, this is also a sign that a similar wave of opposition may come from other investors in Europe. According to Mr. Francis Byrd, a partner at consulting firm Alchemy Strategies Partners, European investors are more likely to be affected by NBIM's decision. He explained that this is because they often incorporate environmental, social and governance (ESG) principles and concerns into their investment philosophy.

Still, Mr. Byrd and several other advisers believe Tesla’s proposals will be approved at the meeting, as top investors have so far supported the company. With a 1.12% stake, NBIM is the only outside investor in Tesla’s top 10 to publicly announce its intention to vote ahead of the meeting. In addition, law in Texas, where Tesla moved its headquarters last year, allows Mr. Musk to use his own large stake to vote, giving him 15.3% of the voting power, including restricted stock granted in August.

After NBIM, the next major investor to announce its intention to vote is Schwab Asset Management. A spokesman for Schwab Asset Management told Reuters via email on November 4 that they would support Mr. Musk's performance bonus package, calling it a deal that "aligns the interests of both management and shareholders."

Schwab Asset Management is Tesla’s 15th-largest outside investor, with a 0.56% stake as of June. Another firm backing Mr. Musk’s compensation proposal is Baron Capital, which owns 0.39% of Tesla. Tesla’s largest institutional investors, including BlackRock, Vanguard, and State Street, have yet to announce their intentions.

Among other major European investors in Tesla, representatives for London-based Legal & General Investment Management and Paris-based Amundi Asset Management declined to comment. Each holds about 0.6% of Tesla.

Tesla's board is pushing shareholders to approve the compensation package for Musk. Chairman Robyn Denholm has warned that Musk could leave the $1.5 trillion company if the plan is rejected. Tesla has defended the plan by emphasizing that it is a purely performance-based arrangement, meaning Musk will receive nothing unless he delivers significant growth in the company's market capitalization. The maximum bonus will only be triggered when Tesla hits a number of ambitious milestones, the biggest of which is a market capitalization of $8.5 trillion — nearly six times its current value.

Source: https://vtv.vn/goi-luong-thuong-cua-ceo-tesla-vap-phai-su-phan-doi-tu-nha-dau-tu-lon-100251105110201867.htm