Tesla's Annual General Meeting (AGM) is fast approaching, and the stakes are high as institutional investors grow increasingly concerned over CEO Elon Musk's $56 billion pay package. The controversial remuneration plan, awarded in 2018, allowed Musk to become the world's richest person. However, questions surrounding the negotiation process and the balance of power between Musk and the board have put the package under scrutiny.

Last year, a trial took place in which several shareholders argued that Musk's 2018 compensation plan should be invalidated, claiming it was the result of questionable negotiations between a compromised board and a CEO with growing influence. Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick ultimately sided with the shareholders, voiding the $56 billion package and an associated 304 million unexercised stock options, which represented around 9 percent of Tesla's outstanding common shares.

In response to the court's ruling, Musk suggested that Tesla should shift its state of incorporation to Texas. Even before the ruling, Musk expressed discomfort with his current voting power, stating that while he had enough influence, he lacked the ability to prevent being overturned. He demanded greater voting power within Tesla's board, threatening to take his innovative ideas elsewhere if his demands were not met.

The upcoming AGM on June 13th will put two significant proposals in front of Tesla's shareholders: the restoration of Musk's $56 billion remuneration package and the adoption of Texas as Tesla's state of incorporation. However, proxy solicitation firms Glass Lewis and ISS have recommended that shareholders reject the reinstatement of Musk's pay package, further intensifying the debate around his compensation. Norway's Government Pension Fund Global, which owns a 0.98 percent stake in Tesla, has also announced its opposition to the pay package.

Supporters of Musk argue that he is the driving force behind Tesla's success, citing the overwhelming number of job applications the company receives. Ron Baron, Chairman and CEO of Baron Funds, highlights that Tesla received around 6 million applications for just 12,000 positions, illustrating the allure of working under Musk's leadership and innovation.

As Tesla's AGM looms, the heated discussion surrounding Musk's pay package and the potential shift to Texas as the state of incorporation rages on. With institutional investors expressing discontent and influential proxy solicitation firms recommending rejection, the outcome of the AGM will undoubtedly have significant implications for Tesla's future direction and for Musk himself.