02:16 PM EDT, 06/10/2024 (MT Newswires) -- The fate of Tesla (TSLA) Chief Executive Elon Musk's 2018 compensation package hangs in the balance, with Wedbush Securities expecting the electric vehicle maker's shareholders to re-approve the proposed $56 billion package later this week, while two proxy advisory firms have recommended against it.

Tesla shareholders are scheduled to vote Thursday on proposals to ratify Musk's compensation plan and move the company's state of incorporation to Texas from Delaware. A Delaware judge in January voided the payout plan for Musk, calling it an "unfathomable sum."

The billionaire CEO's pay package, which was already approved by shareholders in 2018, has been an area of "hot button contention among some investors," Wedbush analyst Daniel Ives said in a note last week. However, they expect the proposal to be re-approved overwhelmingly, effectively rendering the Delaware court ruling moot as the company will now be moving to incorporate in Texas, he said.

Proxy advisory firm Glass Lewis recommended last month that Tesla shareholders oppose the pay package, calling the award "excessively dilutive." Also in May, fellow proxy adviser Institutional Shareholder Services called on shareholders to reject the compensation plan, saying it was "outsized from the start" and hasn't met some of the board's stated objectives, media outlets reported at the time.

In April, Tesla reported first-quarter financial results that were below Wall Street's estimates, following a delivery miss for the quarter. The company's shares are down nearly 30% so far this year amid waning EV demand. The compensation issue has been "an overhang" on the EV maker's stock, with the shareholder vote seen as "important to move this distraction in the rearview mirror," Wedbush said last week.

Earlier this year, Musk said on X he would be "uncomfortable" growing Tesla to be a leader in AI and robotics without a 25% voting control. "Enough to be influential, but not so much that I can't be overturned," Musk wrote at the time. "Unless that is the case, I would prefer to build products outside of Tesla."

Wedbush said last week Musk needs to recommit as Tesla CEO for the next three to five years to allay investor concerns and focus on company growth. Musk also needs to commit all that AI initiatives will be "under the Tesla hood and will be not be separated," according to the note.

Last week, Tesla Chair Robyn Denholm said in a letter to investors that Musk's pay package must be approved to keep him motivated. "If Tesla is to retain Elon's attention and motivate him to continue to devote his time, energy, ambition and vision to deliver comparable results in the future, we must stand by our deal," Denholm wrote in the letter.

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