Court Approves $919 Million Settlement for Tesla Directors
On Wednesday, a court approved a $919 million settlement for Tesla directors, including James Murdoch and Chair Robyn Denholm, which calls for them to reimburse the automaker for overpayment claims.
Denholm and Murdoch, along with other Tesla board members, are required under the settlement to refund about $277 million in cash, $459 million in stock options, and to renounce $184 million in stock options for 2021–2023. The shareholder who initiated the complaint filed a court petition stating that the settlement was not covered by insurance.
Chancellor Kathaleen McCormick, the judge presiding over the case, read her decision accepting the settlement during a telephonic session on Wednesday. The shareholders’ lawyer, Andrew Dupre, expressed his satisfaction with the ruling.
The settlement was the second-largest in Delaware’s Court of Chancery, which is the preferred venue for shareholder lawsuits. The directors involved in the case maintained that they did not engage in any misconduct.
The three law firms that initiated the action on a contingency basis were awarded $176 million in fees and costs by McCormick, despite Tesla’s request for a $64 million fee cap. This charge marks the fourth-highest in Delaware’s history of shareholder litigation.
The agreement resolves a 2020 lawsuit brought by the City of Detroit’s Police and Fire Retirement System, which alleged that director remuneration had been excessive from 2017 to 2020. During this period, with the significant increase in Tesla shares’ value, directors were granted stock options worth hundreds of millions of dollars.
Spencer Stuart, a consulting firm specializing in CEO searches, estimates that the average total salary for directors at S&P 500 companies in 2024 will be $327,096. It is worth noting that Elon Musk, despite his position on the Tesla board, did not receive a salary.
In a separate lawsuit in 2018, a Tesla shareholder challenged Musk’s $56 billion compensation as CEO. Last year, the same judge canceled Musk’s compensation package due to his control over the pay discussions, considering the amount directors owed to Musk or Tesla.
The settlement also mentioned other Tesla board members, including Brad Buss, Ira Ehrenpreis, Antonio Gracias, Stephen Jurvetson, Linda Johnson Rice, Kathleen Wilson-Thompson, Hiromichi Mizuno, Kimbal Musk (Elon’s brother), and Lawrence Ellison, co-founder of Oracle Corp and one of the wealthiest individuals globally.
While the settlement does not specify the amount each director must return, it does include a governance change requiring shareholder approval for director compensation decisions.
