Ahead of its June 13 annual meeting, Tesla Inc. (NASDAQ:TSLA) is reportedly pulling out all the stops to convince its growing base of retail investors to reapprove CEO Elon Musk‘s controversial pay package.

What Happened: The company’s board has enlisted a strategic advisor and an external law firm to spearhead the campaign, Bloomberg reported, citing a person familiar with the matter. A dedicated “Vote Tesla” website targets retail investors, who hold an estimated 42% of Tesla’s shares.

The site features a video message from board Chair Robyn Denholm emphasizing that supporting Musk’s pay is critical for the company’s growth.

Court Rejection, Board Rebuttal: This vote follows a Delaware judge’s rejection of the compensation agreement in March. The judge argued that Tesla directors didn’t prioritize shareholder interests.

Denholm, in the promotional video, counters this argument, stating, “We don’t believe one judge’s opinion should void the will of millions of votes cast by all of the owners.”

Challenges Ahead: Despite significant social media support for Musk, retail investor participation in annual meetings is typically low, and Tesla’s recent financial decline amidst a global electric vehicle slowdown adds uncertainty, as per Bloomberg.

Largest Investor Dissents: Tesla’s biggest individual investor, Leo KoGuan, has publicly opposed the pay deal and Musk’s management style. A former longtime admirer of Musk, KoGuan has grown concerned about the billionaire entrepreneur’s divided focus across SpaceX, Neuralink, and other ventures, and believes Tesla shouldn’t solely fund Musk’s other endeavors.

KoGuan, who reportedly owns 0.8% of Tesla, stated, “The court had spoken and many facts came out. He has to respect and obey the court’s decision.” He also plans to vote against relocating Tesla’s headquarters from Delaware to Texas, according to the report.

See Also: Everything You Need to Know About Tesla Stock

Shifting Shareholder Landscape: Large asset managers now hold roughly 46% of Tesla’s shares, down from 70% in 2018 during the first vote on the pay package, as per Bloomberg. Back then, the board won with 73% approval. This time, the outcome may be less certain.

How Tesla outside shareholders, by current stake, voted on Elon Musk's compensation package in 2018: pic.twitter.com/Y9ZWH4prwK

— Sawyer Merritt (@SawyerMerritt) May 15, 2024

Investor Silence, Proxy Awaitment: Tesla’s two largest investors after Musk, Vanguard and BlackRock, reportedly voted for and against the 2018 proposal, respectively. Their stance on the re-vote, however, remains unclear.

T. Rowe Price, currently the 10th largest investor and a 2018 supporter, recently announced its backing for the reinstatement.

Market observers are reported watching proxy advisory firms like ISS and Glass Lewis, whose recommendations can influence voting, especially those of passive funds.

Why It Matters: While non-binding, the vote carries significant weight for Musk’s leadership. Board approval strengthens their case against the court decision, while a loss could be a major setback.

Musk has even threatened to pursue ventures outside Tesla if he doesn’t secure a 25% equity stake.

Tesla investor and CEO of Gerber Kawasaki Wealth and Investment Management, Ross Gerber, has said the vote puts the integrity of Tesla’s board on the line.

This month, Tesla deployed advertisements to inform shareholders about the upcoming vote, which Gerber criticized. Some experts have also criticized the proposed payout as “lunacy and completely detached from reality.”

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