Tesla and its directors have reached a settlement in an investor lawsuit that accused board members of granting themselves exorbitant compensation packages. As part of the settlement, the directors have agreed to return over $735 million in stock awards and cash, as well as implement corporate-governance changes pertaining to board-level compensation reviews.
The lawsuit was first filed in 2020 by a Michigan-based pension fund, the Police and Fire Retirement System of the City of Detroit. The fund argued that Tesla directors had excessively rewarded themselves with compensation awards since 2017, demonstrating a continuous abuse of the system over the next three years. Notably, in 2018, Tesla’s non-employee directors received stock grants totaling over $8.7 million for the year, while the board chairperson, Robyn Denholm, an Australian telecom executive, became the second-highest paid board chair in the US, according to the pension fund’s lawsuit.
While the Tesla directors denied any wrongdoing, they stated that they decided to settle the case in order to avoid further litigation, eliminating the uncertainty, risk, burden, and expense associated with ongoing legal proceedings. The settlement still requires approval from Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick to become final. (via Bloomberg)
Robyn Denholm took over as Tesla’s board chair following a settlement between the company and the US Securities and Exchange Commission (SEC). The settlement was reached after regulators claimed that Elon Musk’s extensive tweeting about the company violated securities laws.
This settlement comes at a time when Judge McCormick is also expected to rule on another case involving a Tesla shareholder who filed a lawsuit over Elon Musk’s $55 billion executive-compensation plan. The suit alleges conflicts of interest and improper disclosures regarding performance benchmarks in the approval process of the largest pay package in US corporate history.
