Take too much and face a lawsuit, Tesla board member returns $735 million in stock options

Tesla board member returns $735 million in stock options to avoid lawsuit

【Phoneauto News】On July 19th, according to foreign media reports, the Tesla board of directors has agreed to return an astonishing $735 million to resolve a lawsuit. The lawsuit alleges that the Tesla board of directors received excessive stock option rewards between 2017 and 2020.


The lawsuit was initiated in 2020 by the Detroit Police and Fire Retirement System, which holds a portion of Tesla’s shares. The plaintiffs claim that the granting of approximately 11 million stock options to the board of directors by Tesla shareholders over a three-year period starting in 2017 was significantly beyond reasonable limits.

Although the court documents state that the directors claim their actions were in good faith and in the best interests of Tesla shareholders, they still chose to settle in order to “eliminate the uncertainty, risk, burden, and expense of further litigation.” Therefore, directors including Larry Ellison, co-founder of software giant Oracle, James Murdoch, son of media mogul Rupert Murdoch, as well as Tesla CEO Elon Musk’s brother Kimbal Musk, have all agreed to return 3.1 million Tesla stock options. The transaction is considered one of the largest shareholder settlements in its class.

According to Bloomberg, Tesla will return shares worth $458,649,785 and cash totaling $276,616,720. The board of directors has agreed to waive their compensation for 2021-2023 and will hire an independent advisor to help determine future compensation. Tesla argues in this case that this period coincided with a rapid growth period for the automaker, leading to a surge in its stock price and ultimately increasing the value of the stock options granted to the directors.


It is worth noting that the CEO of Tesla, Musk, has not been affected by this decision. The $56 billion compensation plan he received is the largest in history. He was also sued last year for his exorbitant salary, and it is expected that a formal ruling will be made on the case in the near future.

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