Elon Musk and other members of Tesla’s board have agreed to return more than $735 million in stock awards and cash as part of a settlement in a lawsuit concerning board compensation. The lawsuit was initiated by the Police and Fire Retirement System of Detroit, a Tesla shareholder. The plaintiff claimed that board compensation had been excessive and improperly awarded since 2017.
The defendants in the lawsuit include Tesla CEO Elon Musk, Elon’s brother Kimbal Musk, media mogul James Murdoch, billionaire Larry Ellison, and nearly all Tesla board members from the past six years. Over the years, they have received hundreds of millions of dollars in stock options, with much of their value attributed to the rise in Tesla’s stock price.
In a recent court filing, Tesla agreed to a substantial settlement, whereby board members would return over $735 million in stock awards and cash. The settlement does not require the directors to admit any wrongdoing but is aimed at resolving the litigation and eliminating further legal uncertainties and expenses.
The settlement includes the forfeiture of all compensation from 2021 to 2023, including the cancellation of existing stock options and the return of stocks and cash from exercised options. In total, it amounts to $458 million in stocks and $276 million in cash being returned to Tesla. Additionally, Tesla’s board has committed to hiring an external consultant to review its board compensation practices.
The settlement is pending approval from Chancellor Kathaleen St. J. McCormick, the judge overseeing the case. It is worth noting that McCormick is also presiding over another compensation lawsuit 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 a ruling is expected soon.
The details of how much each director will be giving back have not been disclosed yet. Nonetheless, the settlement is significant and will have a substantial impact on Tesla once it is approved, as the company will regain a significant number of shares and cash.
