Tesla Inc. directors, including Chair Robyn Denholm, have received court approval for a settlement to resolve allegations of excess pay. The settlement is the result of a lawsuit brought forth by the Police and Fire Retirement System of the City of Detroit in 2020.
Terms of the Settlement
As per the terms of the settlement, Tesla board members will:
- Return approximately $277 million in cash
- Return $459 million in stock options to the carmaker
- Forgo stock options for the 2021-2023 period worth $184 million
The settlement does not specify the amount each director must return.
Court Approval
The judge overseeing the case, Kathaleen McCormick, approved the settlement in a telephonic hearing. The directors did not admit wrongdoing as part of the settlement. The judge also awarded $176 million in fees and costs to the three law firms that brought the case, overruling Tesla’s request to cap the fee at $64 million.
Background
The lawsuit alleged that the compensation awarded to Tesla directors from 2017 to 2020 was excessive. Tesla CEO Elon Musk did not receive payment for his role as a board member. However, a separate lawsuit challenged his $56 billion CEO pay package, which was initially voided by Judge McCormick but later reinstated by Tesla shareholders.
Related Developments
In a related case, Tesla shareholders voted to reinstate Elon Musk’s $56 billion pay package in June. However, Judge McCormick again ruled against the package in December. Tesla has stated that it intends to appeal the decision to the Delaware Supreme Court.
Conclusion
The settlement approved by the court resolves the lawsuit and requires Tesla board members to return a significant amount of cash and stock options to the company. The case highlights the ongoing scrutiny of executive compensation and the importance of corporate governance.