Written by Tom Hales
WILMINGTON, Del. (Reuters) – Tesla Inc (TSLA) executives, including Chairman Robin Denholm and James Murdoch, won court approval on Wednesday for a settlement worth up to $919 million that requires them to return damages to the automaker to resolve allegations that they overpaid… excess for themselves.
The settlement requires Tesla board members, including Denholm and Murdoch, to return approximately $277 million in cash, $459 million in stock options and to give up 2021-2023 stock options worth $184 million. The settlement was not covered by insurance, according to a court filing by the shareholder who brought the case.
Counsel Kathleen McCormick, the judge overseeing the case, read her ruling approving the settlement at a telephone hearing on Wednesday, according to an attorney for the plaintiffs and a shareholder who objected to the deal.
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“We are very pleased with the Finance Minister’s decision,” shareholders’ lawyer Andrew Dupree told Reuters.
The plaintiff’s legal team said last year that the settlement was the second-largest ever in Delaware Court of Chancery, the preferred forum for shareholder lawsuits.
The directors did not admit to any wrongdoing.
McCormick also awarded $176 million in fees and costs to the three law firms that brought the case on a contingency basis.
Tesla asked McCormick to cap the fee at $64 million.
The fees are the fourth largest in the history of shareholder litigation in Delaware.
The company and its attorney did not immediately respond to a request for comment.
The settlement resolves a 2020 lawsuit filed by the police and the City of Detroit Fire Retirement System that challenged managers’ compensation from 2017 to 2020 as excessive.
Tesla executives received stock options that became worth hundreds of millions of dollars, with the value of Tesla shares rising 10-fold during that period.
By comparison, the average total compensation for directors at S&P 500 companies is $327,096 in 2024, according to SpencerStuart, a consulting group that conducts executive searches.
Musk did not receive any compensation for his role as a member of Tesla’s board of directors.
However, a Tesla shareholder filed a separate lawsuit in 2018 challenging Musk’s $56 billion pay for serving as Tesla’s CEO. Last year, the same judge ordered Musk’s pay package to be voided because Musk controlled the pay negotiations. One factor the judge took into consideration was how much wealth the directors owed to Musk or Tesla.
For example, Denholm testified in that case that her time on Tesla’s board brought her about $280 million, which she described as a “life-changing fortune.”
Other managers named in the lawsuit include Musk’s brother Kimbal, Brad Buss, Ira Ehrenpreis, Antonio Gracias, Steven Jurvetson, Linda Johnson Rice, Kathleen Wilson Thompson, Hiromichi Mizuno, and Oracle co-founder Lawrence.
Ellison. Forbes magazine ranks Ellison as one of the richest people in the world with an estimated fortune of $206 billion.
The settlement does not state the amount each manager must return, only the collective amount.
The settlement also included governance changes such as requiring shareholder approval of director compensation.
(Reporting by Tom Hales in Wilmington, Delaware; Editing by David Gregorio and Noeleen Walder)