Norway's sovereign-wealth fund rejected Tesla Chief Executive Elon Musk's new $1 trillion pay package, becoming the first major investor to disclose its decision.
Norges Bank Investment Management, the arm of the central bank which manages the $1.9 trillion fund, raised concerns Tuesday over the size of the remuneration package.
"While we appreciate the significant value created under Mr. Musk's visionary role, 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," it said in a statement.
Tesla shares dropped 5.2% on Tuesday.
On Thursday, Tesla will host its annual shareholder meeting and announce the results of voting on several proposals including Musk's compensation package, which offers him an additional 12% stake in Tesla if he grows the company to an $8.5 trillion valuation over the next decade, nearly eight times its current valuation. At that level, the proposed award would be valued at slightly more than $1 trillion.
With a 1.2% stake in Tesla, the fund is the sixth-largest institutional investor behind others such as Vanguard and BlackRock, according to FactSet. It is the first major institutional investor to disclose how it voted.
Shareholders will also vote on the re-election of board members and a shareholder proposal that asks Tesla's board to invest in Musk's artificial intelligence startup, xAI.
Smaller public pension funds, such as the American Federation of Teachers and various New York City retirement systems, have also publicly opposed the pay package, as have major proxy advisory firms Institutional Shareholder Services and Glass Lewis.
Other Tesla shareholders have come out in favor of the proposal, including Morgan Stanley's Counterpoint Global fund and Florida's public pension fund. Charles Schwab, which has a stake in Tesla of around 0.6%, said on Tuesday that it would vote in favor of the package. "We firmly believe that supporting this proposal aligns both management and shareholder interests, ensuring the best outcome for all parties involved," it said in a statement.
Musk, who is Tesla's largest shareholder with a voting stake of around 15%, can also vote on the proposal.
The proposed deal would allow Musk, already the world's wealthiest person, to receive installments of shares if Tesla hits a series of market capitalization and business milestones, which include the delivery of 20 million Tesla vehicles, putting a million robotaxis into service and reaching a three-month average of 10 million subscribers for Tesla's Full Self-Driving service.
Last year, the wealth fund opposed a separate proposal to ratify a 2018 pay package for Musk that had been canceled by a Delaware judge.
That proposal passed with 72% support, though the judge upheld her decision to rescind the package. Tesla is now awaiting a decision on its appeal in the Delaware Supreme Court.
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