Just days before Tesla shareholders were set to vote on an unprecedented compensation package for CEO Elon Musk, one of the electric vehicle maker's largest and most powerful institutional shareholders rejected the proposal, CNBC reported.
After large oil reserves were discovered in the North Sea in 1969, the Norwegian government took a cautious approach, aware that the resources could create domestic economic volatility, and established an investment fund. Norway's sovereign wealth fund is operated by Norges Bank Investment Management.
Originally called the "petroleum fund," it is strictly managed with an eye on sustainability and ethics. The fund avoids investments based on poor ethical practices, bad environmental policies, and unsustainable development, among other things.
As of January, NBIM was Tesla's seventh-largest shareholder, per Reuters.
According to CNBC, NBIM issued a statement Tuesday, saying it had voted against Musk's proposed compensation package, which could be worth $1 trillion. It was not the first time Norway's wealth fund voted down a pay package for Musk.
"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," the statement read.
Though it made sense that Norway's stringent and vigilant investment arm rejected the package, other authoritative sources have advised investors to vote "no."
Advisory firms such as Institutional Shareholder Services and Glass Lewis urged investors to reject the package, the latter stating that it "warrant[ed] significant concern" and could undermine the stock's fundamentals and dilute share value.
Unlike most publicly traded companies, Tesla is classed as a "meme stock." Meme stocks are more deeply influenced by social media activity and other factors unrelated to a company's fundamentals, which enables floods of support from retail traders.
Musk has also feuded with NBIM over previous votes against proposed compensation packages.
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The government 🏛️ High-profile rebukes from massive investors and proxy advisory firms could signal trouble for Tesla's underlying fiscal viability. This conflict, coupled with Tesla's worldwide sales challenges, could discourage drivers from making their next car an EV.
For his part, Musk has repeatedly implied that if Tesla shareholders overwhelmingly vote "no" on the deal, he'd leave the company — an assertion that might not necessarily be a negative development for investors.
The vote is slated for Thursday.
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