Tesla (TSLA) directors to pay $735M in overcompensation lawsuit
According to a recent filing in a Delaware court on Monday, Tesla (NASDAQ: TSLA) directors, including Oracle co-founder Larry Ellison, have agreed to return $735 million to the company in a settlement that aims to resolve allegations that they significantly overcompensated themselves, making it one of the most substantial shareholder settlements of its nature.
The settlement effectively resolves a lawsuit filed in 2020 by a retirement fund that holds Tesla stock. The lawsuit challenged the stock options issued to Tesla directors, which had been initiated in June 2017.
The directors were accused of granting themselves unfair and excessively large compensation in the form of approximately 11 million stock options between 2017 and 2020. These stock options were claimed to significantly surpass the customary standards for a corporate board in terms of compensation.
As part of the settlement agreement, the directors have agreed to return the value equivalent to 3.1 million Tesla stock options.
The settlement does not impact a $56 billion compensation package granted to CEO Elon Musk. In Musk’s case, there is a separate lawsuit that was initiated last year and is currently undergoing trial. A ruling is expected soon.
The directors have also agreed to forego any compensation for the years 2021, 2022, and 2023. The board has also committed to revising the methodology for determining compensation in the future.
Shares of TSLA are up 2.78% in afternoon trading on Monday.
By Michael Elkins | [email protected]