Tesla’s directors have agreed to return more than $700 million to the company after fielding accusations they grossly overpaid themselves, marking one of the largest corporate settlements in history, Reuters reported.
The settlement, which was filed in the Delaware Chancery Court on Monday, shows the board members have made a deal to give back $735 million to the electric vehicle company, including $3.1 million in stock options, according to the news service. The directors have also agreed to enact corporate-governance changes to how board members’ compensation issues are assessed, Bloomberg Law reported.
The agreement concludes a lawsuit filed in 2020 alleging Tesla’s directors “breached their fiduciary duties by awarding themselves excessive and unfair compensation,” a filing shows. The directors, including Tesla CEO Elon Musk, Oracle Corp. co-founder Larry Ellison and Musk’s brother, Kimbal Musk, awarded themselves roughly $11 million worth of stock options from 2017 to 2020, Reuters reported.
The directors defended their actions during the lawsuit, but ultimately chose to settle to “eliminate the uncertainty, risk, burden, and expense of further litigation,” according to a July 14 filing cited by Bloomberg Law.
Delaware Chancery Court Chief Judge Kathaleen St. Jude McCormick must approve the directors’ deal before the settlement is finalized.
A separate lawsuit challenging Tesla co-founder Elon Musk’s $56 billion compensation package is also underway. In the complaint, shareholders alleged that conflicts of interest and improper disclosures involving performance goals influenced Musk’s pay package, one of the largest in U.S. corporate history.
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