Tesla Directors OK’d to Return $919M in Compensation in Settlement
A Delaware court approved a settlement between Tesla and its directors, requiring them to return up to $919 million in compensation to the company. The settlement was approved by Chancellor Kathaleen McCormick on Wednesday, bringing an end to allegations that the directors overpaid themselves.
As part of the deal, the directors, including Chair Robyn Denholm and James Murdoch, must return $277 million in cash, $459 million in stock options, and forgo $184 million in stock options for 2021-23. The settlement is the second-largest ever in Delaware’s Court of Chancery, with only one larger deal in 2020.
Tesla’s directors received stock options worth hundreds of millions of dollars between 2017 and 2020, thanks to the rapid growth of Tesla’s stock value. By comparison, the average total compensation for directors at S&P 500 companies was $327,096 in 2024.
As part of the settlement, Tesla’s directors agreed to governance changes, including the requirement of shareholder approval for director compensation. The company did not admit wrongdoing.
The plaintiff, the Police and Fire Retirement System of the City of Detroit, brought the case in 2020, citing excessive director compensation. The plaintiff’s legal team was awarded $176 million in fees and costs, the fourth-largest in Delaware’s history.
The settlement is the latest in a series of controversies surrounding Tesla’s leadership compensation. In a separate lawsuit in 2018, a shareholder challenged CEO Elon Musk’s $56 billion pay package, and the court eventually ordered the package to be rescinded. Musk did not receive compensation for his role as a Tesla board member.