Tesla directors, including Chair Robyn Denholm and James Murdoch, have received court approval for a settlement worth up to $919 million to resolve allegations of overpaid compensation. The settlement requires board members to return approximately $277 million in cash, $459 million in stock options, and forgo stock options for 2021-23 worth $184 million.
The settlement, not covered by insurance, was approved by Chancellor Kathaleen McCormick in a telephonic hearing. The directors did not admit wrongdoing, and the settlement marks the second-largest ever in Delaware's Court of Chancery for shareholder litigation.
In addition to the compensation return, the directors will also undergo governance changes, including requiring shareholder approval for director compensation. The lawsuit, brought by the Police and Fire Retirement System of the City of Detroit, challenged director compensation from 2017 to 2020 as excessive.
While Tesla CEO Elon Musk did not receive compensation as a board member, a separate lawsuit challenged his $56 billion pay as CEO. Last year, a judge ordered Musk's pay package be rescinded due to his control over the negotiations.
The settlement does not specify individual repayment amounts for each director, but rather a collective sum. The directors named in the lawsuit include prominent figures such as Kimbal Musk, Brad Buss, and Lawrence Ellison, with Ellison listed as one of the richest individuals globally.
The settlement also includes a significant fee of $176 million awarded to the law firms representing the plaintiffs, making it the fourth-largest fee in Delaware's shareholder litigation history. Tesla and its attorneys have not yet commented on the settlement.
