New Mexico advises proxy to vote against Elon Musk’s $1 trillion Tesla pay package

The New Mexico State Investment Council has advised its proxy, Northern Trust Asset Management, to vote against Tesla’s proposed $1 trillion pay package for CEO Elon Musk.

Council members voted 6-3 in opposition to the hefty package last week.

State Treasurer Laura Montoya, who sits on the council, said she was dumbfounded when she learned about the pay package, adding that Tesla’s operational and financial performance as of late has been negative and volatile.

“How do you give somebody more for poor performance or for not showing up to work?” Montoya asked. “You don’t get to be rewarded for bad behavior.”

Montoya, who was instrumental in getting the vote on the agenda, said her opposition to the pay package was not based on politics. Acknowledging that people will “view things however they want to view them,” she said her letters and documentation on the matter show it was nothing personal against Musk.

“Yes, there’s operational risk, political risk and headline risk that Elon Musk has created to add on to this,” Montoya said. “But because of all those factors of him choosing to be political, the stock is hurting.”

SIC spokesperson Charles Wollmann told the Journal that the agency has no direct investments in Tesla. The electric vehicle maker is, however, part of the Russell 1000 Index, where the SIC reported $7.38 billion in index fund investments at the end of August.

Through the agency’s investments, Wollmann said the SIC has about $160 million of exposure in Tesla shares, meaning a portion of the funds put into the index is allocated there.

In August, the New Mexico Educational Retirement Board also selected Northern Trust Asset Management to oversee its $18.5 billion fund, including custody, accounting, post-trade compliance, performance and investment support, according to a news release.

The NMERB provides retirement benefits to active and retired workers of New Mexico public schools and higher education institutions, as well as state employees active in educational programs.

Wollmann said the SIC does not typically facilitate voting over proxy matters since it does not manage money internally. Rather, he said the agency “contractually relies” on its investment managers — in this case, Northern Trust Asset Management — to vote in its best interest.

“My understanding is, with SIC, we have some legal language that says they’re supposed to vote in our best interest,” Montoya said at the Oct. 28 meeting. “To me, my best interest is that I would not want to be on the record saying that I, New Mexico, would support a trillion-dollar package.”

Adding that New Mexico is a leading state in low-income areas like its number of Medicaid and food stamp recipients, along with ongoing challenges in job security and Supplemental Nutrition Assistance Program benefits, Montoya said she didn’t want to touch the pay package with a “10-foot pole.”

According to Reuters, the proposed $1 trillion pay package would be one of the largest compensation plans in history. If approved, it would grant Musk up to 12% of additional Tesla stock, and the company board claimed the CEO would receive no salary or cash bonuses.

Montoya said approval of the pay package would affect anyone who has invested in the stock, whether that be state agencies or everyday New Mexicans.

“It’s OK if it was expected because we did everything right, but when you intentionally sabotage your own portfolio because of whatever you decided to do or whatever the board decided to do, then that’s not OK,” Montoya said.

The SIC oversees more than $66 billion in various state permanent funds, making it one of the nation’s largest sovereign wealth funds. Much of the money that flows into the agency comes from taxes and royalties on oil and natural gas production in New Mexico.

The permanent funds provide annual distributions that help pay for New Mexico public schools, universities and early childhood programs, among other beneficiaries.

New Mexico is not the only entity looking to deny the proposed package. The California Public Employees’ Retirement System, the largest public pension plan in the nation, that owns around 5 million Tesla shares, also plans to vote against the compensation plan.

Similarly, one of the world’s largest proxy advisers, Institutional Shareholder Services, is recommending Tesla investors to vote against the pay package. If approved, the group warned it would lock in “extraordinarily high pay opportunities over the next ten years” and reduce “the board’s ability to meaningfully adjust future pay levels.”

In a post on X, the social media app owned by Musk, Tesla criticized Institutional Shareholder Services’ recommendation, saying it was “unfounded and nonsensical.” The company also claimed that the group “misses fundamental points of investing and governance.”

Tesla shares are up 23% year to date, though the electric vehicle maker said late last month its third-quarter profits fell 37% to $1.4 billion — marking the fourth quarter in a row that it has reported a decline.

The company’s annual shareholder meeting and proxy vote are scheduled for Thursday.