Tesla shares fell sharply in after-hours trading Tuesday after one of the company's most influential institutional investors rejected Elon Musk's proposed $1 trillion compensation package, raising new questions about governance, succession planning and the electric automaker's long-term direction. The decline in Tesla's stock price, which dropped more than 5% following the disclosure, reduced Musk's net worth by an estimated $17.5 billion, according to Bloomberg's Billionaires Index.
The reaction followed a filing by Norges Bank Investment Management, which manages Norway's $1.9 trillion sovereign wealth fund. The fund confirmed it will vote against Musk's pay proposal at Tesla's upcoming shareholder meeting. In a statement, Norges Bank said: "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."
Norges Bank controls roughly a 1.2% stake in Tesla, making it the company's sixth-largest institutional investor. Its opposition carries symbolic significance even if it may not be decisive on its own. Proxy advisory firms Institutional Shareholder Services and Glass Lewis have already recommended shareholders vote down the package, and several public pension funds, including those in New York City, have indicated they will do the same.
The compensation proposal would grant Musk an additional 12% ownership stake if Tesla meets aggressive milestones over the next decade. Targets include reaching an $8.5 trillion valuation, delivering 20 million vehicles annually and deploying one million robotaxis. Musk currently holds close to a 15% stake in Tesla.
Tesla's board has framed the package as necessary to maintain Musk's commitment to the company, particularly as he expands involvement in other ventures, including SpaceX, xAI and X (formerly Twitter). In a recent defense of the plan, Tesla Chair Robyn Denholm argued that retaining Musk is essential to Tesla's identity and strategy, warning of the risks of losing top leadership talent at a critical phase in the autonomous and AI-driven transition of the automotive sector. She said the proposal is designed to secure Musk's focus for "seven and a half years" ahead.
Musk has also publicly linked his willingness to remain involved to his level of control. On X, he stated: "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." Recent disclosures show he told the board that without increased voting power, he may shift his efforts elsewhere.
The shareholder vote arrives amid unresolved legal questions. Musk previously received a landmark 2018 pay award that was later struck down by a Delaware judge, who ruled the process lacked independence. Tesla is currently awaiting the results of its appeal to the Delaware Supreme Court.
