Tesla board to return $1b in stock awards to settle lawsuit over pay packages

Tesla directors, including co-founder Elon Musk, agreed to return more than $US735 million ($1.1 billion) in stock awards and cash to settle an investor lawsuit accusing board members of improperly giving themselves massive compensation packages.

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

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

Tesla didn’t immediately respond to a request to comment on Monday. A Michigan-based pension fund filed the case against the electric-carmaker’s board in 2020.

Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick still must approve the deal for it to become final.

Musk compensation case

The settlement comes as McCormick also is expected to rule in another case filed by a Tesla shareholder over a $US55 billion executive-compensation plan for Elon Musk. The suit says that 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 that settled, lawyers for the Police and Fire Retirement System of the City of Detroit argued Tesla directors went overboard on compensation awards to themselves starting in 2017 and didn’t stop abusing the system over the next three years.

In 2018, Tesla’s two non-employee directors received stock grants worth more than $US8.7 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’s suit.