Tesla's stock price plunged more than 5% in after-hours trading on Tuesday, following the disclosure that Norges Bank Investment Management, Norway's sovereign wealth fund, had rejected Elon Musk's proposed $1 trillion (£767 billion) pay package. The move triggered a sharp decline in Musk's net worth, which fell by about $17.5 billion in a single day.
Major Investor's Rejection Sparks Market Drop
Norges Bank Investment Management was the first significant institutional investor to publicly oppose the proposed remuneration, citing concerns over its size and potential dilution. The fund, which manages Norway's $1.9 trillion (£1.4 trillion) sovereign wealth fund, stated: 'While we appreciate the significant value created under Mr Musk's visionary leadership, we are concerned about the total size of the award, dilution, and lack of mitigation of key person risk — consistent with our views on executive compensation.'
The rejection sent shockwaves through Tesla's stock, leading to a 5% decline during Tuesday's after-hours trading. As a result, Musk's wealth, heavily tied to his stake in Tesla, decreased by approximately $17.5 billion (£13.4 billion), bringing his net worth down to around $460 billion (£353 billion), according to Bloomberg's Billionaires Index.
Norges Bank owns a 1.2% stake in Tesla, making it the sixth-largest institutional investor behind giants like Vanguard and BlackRock. Other smaller public pension funds and New York City retirement systems also opposed Musk's pay package, aligning with recommendations from proxy advisory firms such as Institutional Shareholder Services and Glass Lewis.
Upcoming Vote on Tesla's Compensation Plan
Tesla's annual shareholder meeting is scheduled for this week, where investors will vote on multiple proposals, including Musk's controversial pay package. The plan would grant Musk an additional 12% stake in Tesla, contingent on meeting ambitious operational targets such as achieving an $8.5 trillion (£6.5 trillion) valuation over 10 years, delivering 20 million vehicles annually, and deploying one million robotaxis.
Alongside these proposals, shareholders will also vote on the re-election of Tesla board members and a proposal urging the board to invest in the xAI startup. Musk currently holds a nearly 15% stake in Tesla. The proposed rewards are designed to motivate Musk's continued leadership and align his incentives with Tesla's long-term growth.
Historical Context and Legal Battles
In 2024, Norges Bank opposed a different proposal related to a 2018 pay package that a Delaware judge later rescinded. Although the proposal received majority support, the judge upheld her ruling to cancel the package. Tesla is currently awaiting a decision on its appeal in the Delaware Supreme Court.
Musk's Defence and Future Outlook
In a recent letter to shareholders, Tesla Chair Robyn Denholm defended the $1 trillion pay proposal, stating it is crucial to keep Musk committed to Tesla's long-term vision. She stressed that Musk's continued leadership is essential as Tesla aims to establish itself as a global leader in AI-driven mobility and automation. Denholm explained that the plan is designed to retain and motivate Musk for an additional seven and a half years, aligning his incentives with the company's growth and shareholder value. She warned that if the compensation is denied, Tesla risks losing the 'time, talent, and vision' of Musk.
In a recent message on X, Musk defended his leadership, stating: 'Tesla is worth more than all other automotive companies combined. Which of those CEOs would you prefer to run Tesla? It won't be me.' Musk's recent filings indicate he warned the board that he might leave if his voting power was not increased, highlighting the high stakes surrounding the proposal.
The upcoming shareholder vote will determine whether Musk's lucrative compensation plan moves forward. With mounting opposition from major investors and legal questions hanging over previous agreements, the outcome could significantly influence Tesla's strategic direction and Musk's role at the company.
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