Tesla Board to Return $735 Million in Stock Awards to End Suit Over Pay Packages

(Bloomberg) — Tesla Inc. directors, including co-founder Elon Musk, have agreed to return more than $735 million in stock and cash awards to settle an investor lawsuit alleging of board members improperly giving themselves large compensation packages.

Most Read from Bloomberg

The directors – including the founder of Oracle Corp. that Larry Ellison; James Murdoch, son of media mogul Rupert Murdoch; and Musk’s brother, Kimbal Musk – agreed to surrender stock grants and cash for already exercised options, along with making corporate-governance changes to the way compensation issues are reviewed at the level of board, according to court filings.

Tesla directors denied wrongdoing as part of the settlement, but said they agreed to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation,” according to a July 14 filing. filing in Delaware Chancery Court.

Tesla did not immediately respond to a request for comment Monday. A Michigan-based pension fund filed a lawsuit against the electric-carmaker’s board in 2020.

Delaware Chancery Court Chief Judge Kathaleen St. still needs to approve. J. McCormick the deal to make it final.

Musk Compensation Case

The settlement comes as McCormick is also expected to rule on another lawsuit filed by a Tesla shareholder over a $55 billion executive compensation plan for Elon Musk. The suit says the approval of the pay package, the largest in US corporate history, was marred by conflicts of interest and improper disclosures about performance benchmarks.

In the board-pay case settled, lawyers for the Police and Fire Retirement System of the City of Detroit argued that Tesla directors overboarded their own rewards starting in 2017 and did not stop the abuse of system for the next three years.

The story continues

In 2018, Tesla’s two non-employee directors received stock grants worth more than $8.7 million for the year, and the board chairperson — Australian telecom executive Robyn Denholm — was the second-highest paid. board chair in the US, according to the pension fund. suits.

Denholm replaced Musk as board chair as part of a settlement Tesla reached with the US Securities and Exchange Commission over regulators’ claims that the billionaire chief executive’s prolific tweeting about the company violated securities laws.

As part of the director compensation settlement, Tesla board members must surrender stock or cash and agree to forgo compensation in their roles as directors for 2021 through this year, according to court filings. . The board also agreed to hire an “independent compensation consultant” to advise on director compensation issues.

The value of the shares returned was $458,649,785 while the cash the company returned was $276,616,720, according to court filings.

The director-pay case is The Police and Fire Retirement System of Detroit v. Musk, 2020-0477, Delaware Chancery Court (Wilmington).

(Updates with specific settlement amount in the 10th paragraph)

Most Read from Bloomberg Businessweek

©2023 Bloomberg LP