In order to resolve a lawsuit brought by the shareholders, Elon Musk-led Tesla’s board of directors will pay back $735 million to the business, which is equal to the value of 3.1 million Tesla stock options. Additionally, Tesla directors have agreed that they would not be paid in 2021, 2022, or 2023 while the board also changes how remuneration is decided.
Tesla had maintained that the directors needed to be motivated and have their interests aligned with those of investors, hence stock options were essential. The business opposed the case, claiming that the electric vehicle manufacturer had unheard-of growth that caused its shares to increase by a factor of ten. The growth in stock value also resulted in an increase in the number of stock options granted to Musk and its directors.
The Police and Fire Retirement System of the City of Detroit filed the lawsuit in 2020. The payment is being paid in order to help Tesla, whose shares the retirement fund owns. The complaint claimed that by giving themselves about 11 million stock options between 2017 and 2020, the directors significantly exceeded the standards for a business board.
Furthermore, Elon Musk’s $56 billion remuneration package will not be impacted by the settlement reached by the Tesla board. Musk’s remuneration package was contested by shareholders in court last year, and the outcome is anticipated to be made public soon.
A derivative action was brought by Tesla stockholders against the company’s directors. It is one of the biggest wins for a derivative lawsuit in the Chancery court’s history.
Tesla CEO Elon Musk has a history of avoiding legal action. Musk recently prevailed in a case brought by Tesla shareholders who claimed he had broken securities laws and compelled Tesla to acquire SolarCity, a failing rooftop solar startup, in order to protect his investment.
