Hey everybody, welcome back to the Elon Musk Podcast.
This is a show where we discuss the critical crossroads, the
Shape, SpaceX, Tesla X, The Boring Company, and Neuralink.
I'm your host Will Walden, Tesla's 8th largest shareholder.
Norway's $1.7 trillion sovereign wealth fund announced on
Saturday that it will vote against ratifying Elon Musk's
$56 billion pay package. The decision is part of a
broader shareholder vote scheduled for next week.
Now. The Norwegian fund, which holds
a .98% stake in Tesla valued at $7.7 billion, has been a vocal
critic of excessive CEO compensation.
Now, Norwich Bank Investment Management, or NBIM, which
manages the fund, acknowledges the significant value created
under Musk's leadership since 2018, but expressed concerns
about the pay packages, total size, the structure dilution and
the lack of mitigation of key person risk, they said.
We will continue to see constructive dialogue with Tesla
on this and other topics. Additionally, the fund plans to
support a shareholder proposal urging Tesla to adopt a policy
of freedom of association and collective bargaining, signaling
support for labor unions seeking influence over the automaker.
Now, the original pay package approved in 2018 was invalidated
early this year by a Delaware judge who deemed the amount
unfair to shareholders. Judge Kathleen McCormick of the
Delaware Court of Chancery described the compensation as an
unfathomable sum and criticized Tesla's board for failing to
disclose adequately the close relationships between the
approving directors and Musk. Now the package, reportedly the
largest ever for ACEO of a publicly traded company, came
under scrutiny for its excessive size and the ease with which
Tesla could achieve the performance benchmarks tied to
Musk's compensation. The Norwegian sovereign wealth
fund also voted against the package in 2018 and has
consistently opposed high CEO pay packages that do not align
with long term shareholder value.
Now, if approved, Musk's compensation would remain the
largest for a chief executive in the United States.
Now, Tesla's board of directors has urged shareholders to
reaffirm the package, which includes no salary or cash
bonus, but offer stock options contingent on Tesla's market
value rising to $650 billion / 10 years from 2018.
Tesla is currently valued at approximately $571.6 billion.
Now, in a recent interview with Financial Times, Tesla board
chair Robin Denholm defended the package, stating that Musk's
deserves the pay due to the company's impressive revenue and
stock price targets being met. However, proxy advisory firm
Glass Lewis has advised shareholders to reject the
package, citing its excessive size and the potential negative
impact of Musk exercising his stock options.
Glenn Lewis also highlighted Musk's numerous other ventures,
which includes serving as chief technology officer and executive
chairman at X or Twitter, CEO of SpaceX, founder of Neurolink and
the Boring Company, and CEO of artificial intelligence firm
XAI. These roles, the firm argued,
could detract from his focus on Tesla.
Musk has been Tesla's CEO since 2008 and has played a crucial
role in transforming the company into the most valuable automaker
by market capitalization. Under his leadership, Tesla
reversed a $2.2 billion loss in 2018 to achieve a $15 billion
profit and increase vehicle production sevenfold, according
to the Vote Tesla campaign. And despite Tesla's
accomplishments, the company is facing some challenges,
including a decline in sales volume reported in the first
quarter of this year, the first such decline in nearly four
years. This decline comes amid waning
consumer interest in EVs, and as the vote approaches, Musk and
his supporters, including Robin Denholm, are working to persuade
shareholders to reauthorize the 2018 P package.
The main argument centers around the premise that the original
deal should be honored, billionaire investor Ron Barron
said on CNBC. We said as Tesla as a company,
Elon, if you perform, this is what you're going to get.
How can you go back and renege on that, especially when all of
the directors and all the shareholders approved it?
It's crazy. Similarly, investor Kathy Wood
took to Twitter, expressing how can shareholders renege on his
pay package after Elon and shareholders already have taken
and overcome the risks associated with Tesla's rise to
producing the top selling car in the world.
However, not all influential voices are in favor.
Marcy Frost, head of the California Public Employees
Retirement System, stated the pension manager would vote
against the package, deeming it not commensurate with Tesla's
performance. Musk responded by accusing
CalPERS of breaking the deal, stating shame on them, they have
no honor and beyond. Tesla Musket faced criticism of
legal battles over his management practices at Twitter
and other ventures. After acquiring Twitter in 2022,
Musk fired senior leaders, depriving them of severance
payments intended to stabilize the company during the
transition. And these former Twitter execs,
including Prague Grawell, have since sued Musk, claiming he has
failed to honor financial commitments, and the lawsuit
condemns. Under Musk's control, Twitter
has become a scofflaw, stifling employees, landlords, vendors
and others. And Musk's approach to financial
commitments has also been controversial.
In March, a Silicon Valley bakery complained about a
canceled Tesla order for 4000 pies, to which Musk responded by
promising to resolve the issue. And he wanted to make sure
everything was right and dependable.
Historical disputes over employee composition at Tesla
further complicate Musk's narrative. 2009 Tesla Co founder
sued the company after being pushed out in denied stock
options. More recently, Jerome Jalen left
Tesla in 2021 under contentious circumstances regarded unvested
shares. Now, despite the issues, Musk
has significantly contributed Tesla's success, achieving
milestones that seemed improbable to outsiders.
However, as the vote nears, the question remains whether
shareholders will uphold the pay package or deem it excessive in
light of Musk's other commitments and the company's
challenges. Hey, thank you so much for
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I'll see you tomorrow.