Voice News

Tesla directors pay $735mln to settle lawsuit over excess compensation

Tesla directors pay $735mln to settle lawsuit over excess compensation
WILMINGTON: Tesla Inc.’s (TSLA.O) directors will refund $735 million to the business in one of the largest shareholder settlements of its kind, according to a Monday filing in a Delaware court.

The agreement resolves a lawsuit filed in 2020 by a retirement fund that owns Tesla stock and disputed stock options given to Tesla directors beginning in June 2017.

The settlement has no bearing on Elon Musk’s $56 billion remuneration package, which is being contested by shareholders in a separate action that went to trial last year. A decision in the Musk lawsuit is likely soon.

According to a court filing, the board of directors, which included Oracle co-founder Larry Ellison, decided to repay the equivalent value of 3.1 million Tesla stock options.

A request for comment from Tesla was not returned. According to a court filing, the directors acted in good faith and in the best interests of Tesla stockholders, but chose to settle to avoid the danger of litigation for themselves and the company.

The directors were accused of providing themselves unfair and disproportionate compensation in the form of about 11 million stock options from 2017 to 2020, which allegedly exceeded corporate board guidelines.

The Police and Fire Retirement System of the City of Detroit filed the action in 2020, and the settlement was paid to Tesla to benefit the corporation, a form of litigation called as a derivative lawsuit.

The settlement is one of the largest ever in the Court of Chancery, a prominent venue for shareholder action.

Tesla and Musk have a history of battling lawsuits. Musk has won defamation lawsuits, securities law violations, and shareholder lawsuits accusing him of coercing Tesla into buying SolarCity at trial.

As part of the agreement, the directors agreed not to receive any compensation in 2021, 2022, or 2023, and the board agreed to change the way compensation is calculated.

Tesla has defended itself against the case by claiming that the firm saw nearly unparalleled growth, with its stock price increasing tenfold. Along with the increase in stock value, the value of stock options granted to the directors and Musk increased dramatically.

Tesla claimed it used stock options to guarantee directors’ incentives were aligned with investor aspirations.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *