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By Tom Hals
WILMINGTON, Del. (Reuters) – Tesla (TSLA), including chairwoman Robyn Denholm and James Murdoch, won court approval Wednesday for a settlement worth up to $919 million that requires the automaker to pay restitution to settle allegations that overpay
The deal requires Tesla board members, including Denholm and Murdoch, to return approximately $277 million in cash, $459 million in stock options and relinquish stock options for 2021-23 worth of 184 million dollars. The deal was not covered by insurance, according to a court filing by the shareholder who filed the case.
Chancellor Kathaleen McCormick, the judge overseeing the case, read her ruling approving the settlement in a telephone hearing Wednesday, according to a lawyer for the plaintiffs and a shareholder who opposed the deal.
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“We are very pleased with the chancellor’s decision,” Andrew Dupre, a lawyer for the shareholders, told Reuters.
The plaintiff’s legal team said last year that the settlement was the second largest ever in Delaware’s Court of Chancery, the go-to forum for shareholder litigation.
The directors admitted no wrongdoing.
McCormick also awarded $176 million in fees and costs to the three law firms that brought the case on a contingency basis.
Tesla had asked McCormick to cap the fee at $64 million.
The fee is the fourth largest in shareholder litigation history in Delaware.
The company and its attorney did not immediately respond to a request for comment.
The settlement resolves a 2020 lawsuit by the City of Detroit Fire and Police Retirement System that challenged the director’s compensation from 2017 to 2020 as excessive.
Tesla executives received stock options worth hundreds of millions of dollars as the value of Tesla stock increased 10-fold during this period.
By comparison, the average total compensation for CEOs of S&P 500 companies is $327,096 in 2024, according to SpencerStuart, an executive search consulting group.
Musk did not receive compensation for his role as a Tesla board member.
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 that Musk’s pay package be terminated because Musk controlled salary negotiations. One of the factors the judge considered was the amount of wealth the directors attributed to Musk or Tesla.
Denholm, for example, testified in that case that his board tenure at Tesla netted him about $280 million, which he described as “life-changing wealth.”
