Tesla’s controversial CEO Elon Musk, and his massive wealth, are front and center in a shareholder vote this coming week.

Five months ago, a Delaware judge threw out the largest pay package in history, then worth more than $50 billion, that Telsa’s very friendly board had given Musk in 2018. Now, Musk and the board want Tesla shareholders not only to vote again to give him back those stock options, but to relocate Tesla away from the judge’s state entirely.

And his board is threatening if they don’t do so, they won’t get the attention they need from Musk to turn around a company facing its greatest trouble in several years. Tesla’s stock price slid by more than half from its peak as a trillion-dollar company in late 2021. Its sales fell short of forecasts and promises. Its profits are squeezed by a global price war for EVs that it started itself.

The answer will come Thursday, when Tesla holds its annual shareholders meeting and announces results of shareholder votes on two proposals. One would once again approve the package of 303 million split-adjusted stock options, worth $46.9 billion as of Friday’s closing price. That’s down from the $51 billion those options were worth at the time of the decision.

The shareholders approved the package back in 2018, with 73% voting in favor of it. But Delaware Chancery Court Chancellor Kathaleen McCormick in January ruled in favor of shareholders who challenged the package. She wrote that the company’s board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”

McCormick said that process the Tesla board used to create the pay package was “deeply flawed” and criticized the board for being to close to the famous CEO to represent the interests of the shareholders.

“Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit,” she wrote.

Musk and Tesla reacted by appealing the ruling, and by seeking permission from shareholders to move the company’s state of incorporation from Delaware to Texas, where its headquarters is located. Many major companies are incorporated in a different state from where their main offices are located, often in Delaware, which has a reputation for being business friendly. It was because of Tesla’s incorporation in Delaware that McCormick was able to rule on the fairness of the pay package.

Despite the widespread support among shareholders back in 2018 for Musk’s pay package, the Tesla board seems to be scrambling to shore-up support for this month’s vote. It has filed with the SEC more than two dozen communications with shareholders advocating for a yes vote, far more active than most companies are when seeking shareholder approval of their proxy items. It has even opened a lottery in which the winning shareholder who casts a vote gets a tour of Tesla’s Texas factory conducted personally by Musk.

Tesla’s filings to shareholders argue it must keep the pay package in place to keep Musk fully engaged running Tesla and not one of his other companies.

“This is obviously not about the money,” Tesla Chair Robyn Denholm wrote in a letter to shareholders. “We all know Elon is one of the wealthiest people on the planet, and he would remain so even if Tesla were to renege on the commitment we made in 2018. Elon is not a typical executive, and Tesla is not a typical company.”

Rather, she continued, it’s about “what will motivate him to continue to create value for stockholders,” she wrote.

“What we recognized in 2018 and continue to recognize today is that one thing Elon most certainly does not have is unlimited time,” Denholm wrote. “Nor does he face any shortage of ideas and other places he can make an incredible difference in the world. We want those ideas, that energy and that time to be at Tesla, for the benefit of you, our owners. But that requires reciprocal respect.”

But part of the problem with winning support is that Musk is far more controversial than he was in 2018, and appears to be far less focused on simply running Tesla.

He famously bought social media platform Twitter for $44 billion in 2022, selling $22.9 billion of his Tesla shares to help fund that purchase. He has even been accused of improperly selling $7.5 billon of those shares late that year knowing that Tesla was due to soon report disappointing sales that would reduce Tesla’s price.

Under his management of Twitter, since rebranded X, he’s restored accounts for users who had been banned for hate speech, advocacy of violence or misinformation. Meanwhile, allegations about widespread antisemitism on the platform, and Musk’s own endorsement of antisemitic tweets, has driven away many advertisers and caused widespread losses.

But perhaps a more serious concern among Tesla shareholders is problems faced by the electric car pioneer itself. While shares shot up more than 1,700% between when the original package was approved in 2018 and its high point in November 2021, making Musk the richest person in the world at that time, it has lost more than half of that value since, including a 30% drop this year.

Tesla has been forced to cut prices in the face of weaker than forecast demand for sales, and increased competition from other automakers offering their own EVs.

“This shareholder vote is happening at the most tenuous time for Musk,” said Dan Ives, tech analyst with Wedbush Securities and an analyst who is still bullish on Tesla shares. “After Tesla went through a Cinderella ride, it’s become a horror show. There’s a group of shareholders who are frustrated. And this is a shot across the bow for them to show they’re not satisfied.”

While Ives thinks that the pay package will again be approved by shareholders in the current vote, he said it will be a much closer vote this time. He said despite Tesla’s problems and the controversy swirling around Musk, many shareholders believe keeping him at the company, and focused on Tesla more than SpaceX, his new artificial intelligence company xAI, The Boring Company, Neuralink and his rebranded social media company X, or his other ventures, is crucial for the company’s future.

Musk has even said he would not want to grow Tesla to become a leader in artificial intelligence and robotics, as he has promised, without a compensation plan that would give him ownership of around 25% of the company’s stock. That would be about double the roughly 13% stake he currently owns.

“It comes down to Musk,” Ives said. “Musk is still the hearts and lungs of the Tesla growth story.”

Some high profile shareholders have spoken out in favor of Musk ahead of the vote, including Ron Baron, CEO of Baron Capital, which has Tesla as one of its top holdings with a stake worth more than $2 billion in the company.

“Elon’s compensation contract contained aggressive performance metrics that few in 2018 believed could be achieved. If these aggressive performance metrics had not been achieved, Elon would have received nothing,” Baron said in a recent statement. “When Tesla achieved targeted earnings, revenues, and market cap metrics, Tesla’s shareholders benefitted greatly. He performed under his compensation contract. He earned his pay. Elon is the ultimate ‘key man.’ Without his relentless drive and uncompromising standards, there would be no Tesla.”

But there are also high profile opponents of the deal including Institutional Shareholder Services and Glass Lewis, two firms that advise investors on how to vote on proxy proposals. Both are urging no votes on Musk’s package.

“The award value was considered outsized from the start,” wrote ISS. “Some investors may find the board’s argument compelling, that it would be unfair for CEO Musk not to receive the award. However, the concerns raised, both back in 2018 and in the interim, have not been sufficiently mitigated.”

In her decision throwing out the original package, McCormick rejected the argument that Musk would be uncompensated if the package was thrown out, writing, “Musk’s preexisting equity stake provided him tens of billions of dollars for his efforts.”

And it could continue to be up to the courts in Delaware to decide if Musk gets the options restored, no matter how the shareholders vote this month, and whether or not they approve incorporating in Texas.

The attorneys for Tesla have told the court in Delaware that the companies’ desire to move its incorporation to Texas is not an effort to evade jurisdiction from the original court order in Delaware as that case is appealed.

But the outcome of the vote could decide how much Musk wants to continue to be involved with Tesla, the company that made him so rich and so famous before he became so controversial.

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