Board members of Tesla, the electric vehicle company, have agreed to return more than $700 million to the company amid accusations of grossly overpaying themselves. According to Reuters, this settlement ranks among the largest in history.
The settlement was filed on Monday in the Delaware Chancery Court and reveals that the board members have reached an agreement to return $735 million to Tesla, including $3.1 million in stock options, as reported by the news service. Additionally, the directors have committed to implementing corporate governance changes regarding the assessment of board members’ compensation issues, according to Bloomberg Law.
The resolution brings an end to a lawsuit that was filed in 2020, alleging that Tesla’s directors had breached their fiduciary duties by awarding themselves excessive and unfair compensation, as indicated in the filing. Reuters reports that the directors, including Tesla CEO Elon Musk, Larry Ellison, co-founder of Oracle Corp., and Kimbal Musk, Elon Musk’s brother, had granted themselves approximately $11 million worth of stock options between 2017 and 2020.
During the course of the lawsuit, the directors defended their actions; however, they ultimately opted to settle in order to eliminate the uncertainties, risks, burdens, and expenses associated with further litigation. This information was cited from a filing dated July 14 and reported by Bloomberg Law.
The directors’ agreement requires approval from Chief Judge Kathaleen St. Jude McCormick of the Delaware Chancery Court before it can be finalized.
Separately, another lawsuit challenging Tesla co-founder Elon Musk’s $56 billion compensation package is currently in progress. Shareholders in this case allege that conflicts of interest and inadequate disclosures relating to performance goals had influenced Musk’s substantial pay package, one of the largest ever seen in U.S. corporate history.