Tesla directors agree to return $735 million following claims they were massively overpaid
In a lawsuit, shareholders claimed they were massively overpaying themselves.
Elon Musk, Larry Ellison and other current and former members of Tesla's board of directors will return $735 million to settle claims that they massively overpaid themselves, Reuters has reported. The deal wraps up a saga that started in 2020 stemming from a lawsuit filed by a police and firefighter retirement fund challenging stock options granted to Tesla's board starting in 2017. Directors also agreed not to receive compensation for 2021, 2022 and 2023, and change the way compensation is calculated.
Tesla's current board includes Elon Musk, his brother Kimbal, Fox News mogul James Murdoch, Airbnb co-founder Joe Gebbia and former Tesla CTO JB Straubel. The case is separate from a lawsuit filed by shareholders against a $56 billion compensation package awarded to CEO Elon Musk.
The Police and Fire Retirement System of the City of Detroit accused Tesla's board of giving itself unfair and excessive compensation in the form of 11 million stock options between 2017 and 2020, saying it grossly exceeded norms for a corporate board. The $735 million settlement will be paid back to Tesla in what's called a "derivative lawsuit" — the largest ever awarded by Delaware's Court of Chancerty, according to Reuters.
Tesla argued that stock options were used to ensure Director's incentives were aligned with investor goals. Tesla has yet to comment on the affair, but in court documents, said that it agreed to settle to eliminate the risk of future litigation.
Tesla CEO Elon Musk is fighting a separate lawsuit to defend his $56 billion pay package. It was brought by shareholder Richard Tornette, who claimed that "the largest compensation grant in human history" was given to Musk, even though he didn't focus entirely on Tesla. In 2020, he received the first of 12 $700 million payments as part of that package.
