Tesla Directors Settle Overpay Claims for $919 Million

Tesla Directors Settle Compensation Lawsuit for $919 Million

A settlement has been authorized by a Delaware judge, requiring several Tesla directors to return as much as $919 million to the company. This officially resolves claims of improper self-compensation, as reported by Reuters.

Directors Involved in the Settlement

The directors affected by the agreement include Robyn Denholm, the current Chair of Tesla, alongside prominent figures such as Larry Ellison, founder of Oracle, Kimbal Musk, and James Murdoch.

Details of the Lawsuit and Settlement

This resolution stems from a 2020 lawsuit initiated by the Police and Fire Retirement System of the City of Detroit. The suit contested the compensation received by Tesla’s directors between 2017 and 2020, alleging it was excessive.

As part of the settlement, the directors are obligated to return stock and options valued at up to $735 million. Additionally, they will forfeit future compensation totaling an estimated $184 million over a three-year period.

Legal Fees and Costs

Chancellor Kathaleen McCormick, the presiding judge, has also approved $176 million for fees and expenses incurred by the three law firms representing the plaintiffs. These firms operated on a contingency basis, receiving payment only upon a successful outcome.

Tesla has formally requested that Judge McCormick limit the awarded fees to $64 million.

Connection to Elon Musk’s Pay Package Ruling

Notably, Chancellor McCormick previously issued a ruling against the substantial compensation package awarded to Tesla CEO Elon Musk. This occurred despite a subsequent shareholder vote intended to reaffirm the agreement.

The judge’s decision highlights increased scrutiny of executive and director compensation practices within the company.