In a settlement of a lawsuit concerning board compensation, Elon Musk and fellow Tesla board members have consented to return more than $735 million in stock awards and cash. The litigation was initiated by the Police and Fire Retirement System of Detroit, a Tesla shareholder, who believed that the board had been improperly awarded excessive compensation since 2017.
The defendants, including Elon Musk, Tesla’s CEO and board member, his brother Kimbal Musk, media mogul James Murdoch, billionaire Larry Ellison, and nearly all Tesla board members of the past six years, had been granted hundreds of millions of dollars worth of stock options throughout the years. It is important to note that the value of these stock options largely stemmed from the surge in Tesla’s stock value over the same period.
In a recent court filing, Tesla agreed to a substantial settlement with the plaintiff, leading to board members returning over $735 million worth of stock awards and cash.
The settlement does not require the directors to admit any wrongdoing; rather, it is a measure taken to avoid further litigation expenses and uncertainty.
The settlement’s key provisions include board members forfeiting all compensation from 2021 to 2023. This involves the cancellation of existing stock options, the return of stocks from exercised options, and even the reimbursement of cash received from stocks that were sold following the exercise of options. In total, this amounts to $458 million in stocks and $276 million in cash being returned to Tesla.
Additionally, Tesla’s board has agreed to enlist an external consultant to examine its board compensation practices as part of the settlement.
However, the settlement is not yet finalized and awaits approval from Chancellor Kathaleen St. J. McCormick, who is overseeing the case. Interestingly, McCormick is also presiding over another compensation lawsuit concerning Tesla, specifically involving Elon Musk’s 2018 CEO compensation plan, which could potentially be valued at up to $55 billion. Musk has chosen not to settle this particular lawsuit, and the judge is expected to make a ruling on it in the near future.
