Tesla Directors Agree to Pay Back $735 Million in Stock Options Lawsuit Settlement
Directors at Tesla have agreed to pay back a staggering $735 million to settle a lawsuit claiming that they paid themselves far too much in stock options between 2017 and 2020.
The suit was brought in 2020 by a retirement fund, the Police and Fire Retirement System of the City of Detroit, that holds the EV-maker’s stock, the plaintiffs arguing that the award of around 11 million stock options in the three years from 2017 was grossly excessive.
Though court documents say the directors claim to have acted in good faith and in the best interests of Tesla’s shareholders, they opted to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation.” As a result, directors including Larry Ellison, the co-founder of software giant Oracle, James Murdoch, son of media tycoon Rupert Murdoch, and Tesla CEO Elon Musk’s own brother, Kimbal Musk, agreed to return 3.1 million Tesla stock options. The deal is believed to be one of the largest shareholder settlements of its kind.
## Largest Shareholder Settlement
Bloomberg reports that shares valued at $458,649,785 plus $276,616,720 in cash will be returned to Tesla, and that the directors have agreed to forgo compensation for 2021-23 and will hire an independent consultant to help determine pay awards in the future.
Tesla’s defense during the case was that the period in question coincided with rapid growth for the automaker, which sent its stock price soaring, along with the value of stock options awarded to directors.
Of note is that Tesla CEO Elon Musk isn’t affected by the judgment. His mammoth $56 billion remuneration package, the largest ever recorded, is the subject of a separate suit that went to trial last year and is expected to conclude soon.
## Conclusion
The settlement of $735 million in the stock options lawsuit against Tesla directors marks a significant development in the ongoing legal battles surrounding executive compensation at the electric vehicle company. The retirement fund’s claim that the award of 11 million stock options between 2017 and 2020 was excessive has been acknowledged by the directors, who have chosen to settle the case rather than continue with litigation.
The agreement to return 3.1 million Tesla stock options and forgo compensation for 2021-23 demonstrates the directors’ willingness to address the concerns raised by shareholders. By hiring an independent consultant to determine future pay awards, they aim to ensure a fair and transparent process moving forward.
While Tesla CEO Elon Musk’s $56 billion remuneration package is not affected by this settlement, it remains the subject of a separate lawsuit. The outcome of this case will be closely watched, as it has the potential to set a precedent for executive compensation in the industry.
Overall, the resolution of the stock options lawsuit against Tesla directors highlights the importance of responsible corporate governance and accountability. Shareholders have a vested interest in ensuring that executive compensation aligns with company performance and shareholder value. As Tesla continues to navigate these legal challenges, it will be crucial for the company to maintain transparency and uphold the highest standards of corporate ethics.