Tesla directors has pay $735 million to settle lawsuit compensation
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Among the largest shareholder settlements of its kind, Tesla Inc’s directors will return $735 million to the company to settle claims they grossly overpaid themselves.

Retirement funds that hold Tesla stock filed a lawsuit in 2020 challenging stock options granted to Tesla directors in June 2017 and challenged the settlement.

A separate lawsuit filed last year by shareholders challenges Elon Musk’s $56 billion compensation package, which is unaffected by the settlement. Musk’s case is expected to be decided soon.

3.1 million Tesla stock options were returned to the company by its directors, including Oracle co-founder Larry Ellison, according to court documents.

A request for comment was not responded to by Tesla. According to a court filing, Tesla’s directors acted in good faith and in the best interests of its stockholders, but decided to settle to avoid litigation for themselves and the company.

From 2017 to 2020, the directors were accused of awarding themselves unfair and excessive stock options worth approximately 11 million that grossly exceeded corporate board norms.

A derivative lawsuit was brought by the Police and Fire Retirement System of the City of Detroit in 2020, and the settlement is paid to Tesla to benefit the company. It is one of the largest derivative settlements ever reached in the Court of Chancery, one of the most important venues for shareholder litigation.

Musk and Tesla have a reputation for fighting lawsuits. In a defamation suit, a securities law violation case, and a shareholder lawsuit accusing him of coercing Tesla into buying SolarCity, Musk has prevailed at trial.

In addition to not receiving any compensation in 2021, 2022, and 2023, the board will change the way compensation is determined.

According to Tesla, it experienced almost unprecedented growth, which resulted in a 10-fold increase in its stock price. Stock options awarded to Musk and directors also rose sharply in value alongside the gain in stock value.

The company argued it used stock options to ensure the goals of investors were aligned with those of directors.