Tesla shareholder vote on Musk's historic pay package won't resolve 'legal disputes'

Tesla's annual meeting on Thursday in Austin, Texas, will feature a final vote on a contentious proposal asking shareholders to "ratify the 100% performance-based stock option award to Elon Musk" granted in 2018.

Even if investors back the measure, the courts will have the last say.

The proposal, one of a dozen for shareholders to consider, is on the ballot because a Delaware court in January ordered the Tesla CEO's compensation package to be rescinded. The pay package included performance-based stock options previously worth around $56 billion.

Judge Kathaleen McCormick found that Tesla's board members lacked independence from Musk, failed to properly negotiate at arm's length with the CEO and didn't to give shareholders the full picture before asking them to vote on his 2018 pay plan.

Ann Lipton, a corporate and securities law trial attorney who now teaches at Tulane Law School, said shareholders aren't in a position to overturn the judge's ruling.

"Some people apparently believe (incorrectly) that a vote in favor will settle the legal disputes," Lipton told CNBC in an email. "It won't. It will make them more complicated."

A vote to reinstate the pay plan would serve as a public relations win for Musk, who's dealing with a host of major challenges at Tesla and beyond. The electric vehicle maker is mired in a sales decline due to an aging lineup, increased competition especially in China, and brand deterioration that a recent survey attributed partly to Musk's "antics" and "political rants."

Large institutional investors, including CalPERS and CalSTRS (California's giant retirement systems) as well as Norway's sovereign wealth fund and SOC Investment Group have come out staunchly against voting for the pay plan.

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