New Delhi

The California Public Employees' Retirement System (CalPERS) has announced its opposition to Tesla CEO Elon Musk's $56 billion pay package, citing concerns about its alignment with the company's performance.

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CalPERS CEO Marcie Frost stated in an interview with CNBC, "We do not believe that the compensation is commensurate with the performance of the company."

CalPERS, one of Tesla's top 30 investors, holds 9.5 million shares of the electric vehicle manufacturer.

The pension fund's stance adds significant weight to the ongoing debate over Musk's compensation, which has faced scrutiny from various quarters.

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Elon Musk responded to CalPERS' opposition on social media platform X, formerly known as Twitter, asserting that the pension fund's position was unfounded.

He argued that all contractual milestones of the pay package were met and accused CalPERS of reneging on their agreement.

"What she's saying makes no sense, as all the contractual milestones were met. CalPERS is breaking their word," Musk wrote.

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The controversy around Musk's pay package is not new.

Proxy advisory firm Glass Lewis recently urged Tesla shareholders to reject the compensation plan, highlighting its disconnect from the company’s actual performance.

In a rebuttal, Tesla underlined Musk's role in creating wealth for its stockholders, pointing out his significant personal investment in the company.

Musk's pay package, the largest in corporate America, eschews a traditional salary or cash bonus.

Instead, it ties rewards to Tesla's market value, which is expected to rise to $650 billion within a decade from its inception in 2018.

However, a Delaware judge dismissed the package in January, calling it "an unfathomable sum" that was unfair to shareholders.

In April, Tesla sought reaffirmation from its shareholders for Musk’s compensation plan, initially set in 2018.

Adding to the divide among advisory firms, Egan-Jones Proxy Services recommended that investors support the pay package.

The firm noted that maintaining Musk's leadership and motivation is crucial for Tesla’s sustained growth and innovation.

"The continuation of this compensation plan is critical for maintaining Musk’s leadership and motivation, which are essential for Tesla’s sustained growth and innovation," an Egan-Jones manager stated in an email.

Egan-Jones also supported Tesla's proposal to shift its state of incorporation from Delaware to Texas, suggesting that the move could enhance operational efficiency and corporate culture by aligning legal and operational bases.

(With inputs from Reuters)