BREAKING: South Korea’s National Pension Service (NPS) has just announced its support for Elon Musk’s record-breaking $1 trillion pay package, a decision that comes as Tesla shareholders prepare for a crucial vote on Thursday, September 14, 2023. This endorsement from the world’s third-largest pension fund, which manages over $910 billion in assets, further escalates the ongoing debate among global investors regarding Musk’s compensation plan.
The NPS, which holds about 0.18% of Tesla, has not disclosed the reasoning behind its support for this controversial plan. The decision places the NPS at odds with significant international investors, including Norway’s sovereign wealth fund, which has publicly urged shareholders to reject Musk’s deal, labeling it “excessive” and “misaligned with shareholder interests.”
The vote is set against a backdrop of heated contention, as Tesla shareholders must decide on Musk’s compensation package that could grant him 424 million additional shares, potentially increasing his ownership stake from 15% to 25% if ambitious performance goals are achieved. This performance-based award is structured into 12 tranches, each linked to escalating operational and market cap milestones, starting at a $2 trillion valuation and reaching as high as $8.5 trillion by 2035.
Tesla’s current valuation is approximately $1.5 trillion, making these targets particularly ambitious. To unlock the full pay package, Tesla’s adjusted EBITDA must soar from around $16 billion last year to an astonishing $400 billion. The plan emphasizes not only market performance but also operational successes, including increased production of electric vehicles and advancements in self-driving technology.
Supporters of Musk, such as Baron Capital, which owns about 0.4% of Tesla, argue that his leadership is crucial for the company’s innovation and long-term growth. “The company’s success is inseparable from Musk,” they stated, urging shareholders to back the proposed pay plan.
Conversely, critics highlight concerns about the concentration of power and the feasibility of the financial targets set forth in the proposal. Norway’s Norges Bank Investment Management has already cast its vote against Musk’s remuneration, citing fears of the plan’s potential to dilute shareholder value.
In a surprising twist, while endorsing Musk’s pay package, the NPS has indicated it will oppose a separate proposal allowing Tesla to utilize company funds to invest in Musk’s AI venture, xAI. The NPS expressed that this investment lacks clarity on whether it would significantly enhance shareholder value. Additionally, the fund plans to reject proposals aimed at incorporating sustainability metrics into executive compensation and the appointment of two new directors, citing concerns over their potential impact on shareholder interests.
As the deadline approaches for Tesla’s critical vote, the stakes have never been higher for Musk, Tesla investors, and the broader market. The outcome of this vote could reshape the landscape of executive compensation and corporate governance in the tech sector.
Stay tuned for live updates as the situation develops, and be sure to share your thoughts on this contentious issue. What do you think about Musk’s ambitious pay plan?
