(Reuters) - U.S. public pension fund CalSTRS said on Wednesday it is opposed to Tesla Inc recommendation to support Chief Executive Elon Musk's compensation arrangement at the electric car maker's shareholder meeting.
The Silicon Valley billionaire's compensation package announced in January involves no salary or cash bonus but sets rewards based on Tesla's market value rising to $650 billion (£464 billion) over the next 10 years.
Tesla shareholders are due to vote on Wednesday, and the company needs majority approval for the proposal to go through.
California State Teachers' Retirement System (CalSTRS), one of the nation's largest public pension plans, is the 59th largest investor in the car maker, with a 0.13 percent stake.
"Given the size of the award, we believe the potential dilution to shareholders is just too great. In addition, we have concerns about the lack of focus on profitability for the company, and the one profitability metric that is used excludes the cost of stock-based compensation," CalSTRS's Director of Corporate Governance, Anne Sheehan, said.
Earlier this month, proxy advisory firm Institutional Shareholder Services recommended Tesla stockholders reject the package, saying the "unprecedented" award was too rich.
Musk could own as much as $55.8 billion in Tesla stock and more than a quarter of the electric car company in the next decade if he hits all targets of the new plan.
Under the proposed award, which involves stock options that vest in 12 tranches, Tesla's market value must increase to $100 billion for the first tranche to vest and rise in additional $50 billion increments for the remainder.
Tesla is valued at about $52.46 billion at Tuesday's closing price, according to Thomson Reuters data. Its shares have fallen nearly 12 percent since the pay plan for Musk was announced.
(Reporting by Rishika Chatterjee in Bengaluru; Editing by Sunil Nair)