Tesla Board of Directors Agree to Repay $735 Million Following Allegations of Excessive Compensation

According to Reuters, Elon Musk, Larry Ellison, and other present and past members of Tesla’s board of directors have agreed to repay $735 million to resolve allegations of excessive payment. This settlement concludes a legal dispute that began in 2020 when a retirement fund for police and firefighters filed a lawsuit questioning the stock options awarded to Tesla’s board since 2017. Additionally, the directors have committed to forgo compensation for the years 2021, 2022, and 2023, and modify the method of calculating their remuneration.

Tesla’s current board includes Elon Musk, his brother Kimbal, Fox News mogul James Murdoch, Airbnb founder Joe Gebbia and Tesla’s former CTO JB Straubel. The case is separate from the lawsuit filed by shareholders over the $56 billion compensation package awarded to CEO Elon Musk.

The City of Detroit Police and Fire Retirement System accused Tesla’s board of unfairly and excessively compensating itself in the form of 11 million stock options between 2017 and 2020, saying it grossly exceeded the company’s board standards. The $735 million settlement will be paid back to Tesla in what is known as a “derivative right” — the largest settlement ever awarded by a Delaware court, according to Reuters.

Tesla argued that the stock options were used to ensure that executive incentives were aligned with investors’ goals. Tesla has yet to comment on the case, but said in court documents that it agreed to settle the risk of future litigation.

Tesla CEO Elon Musk is filing a separate lawsuit to defend his $56 billion pay package. It was brought by shareholder Richard Tornette, who claimed the “biggest compensation grant in human history” was given to Musk, even though he wasn’t entirely focused on Tesla. In 2020, he received the first of 12 payments of $700 million as part of that package.