A bold move has just come from Tesla’s boardroom. The company’s team of directors, comprised of notable figures such as Oracle’s co-founder Larry Ellison, Rupert Murdoch’s son James Murdoch, and Elon Musk’s brother Kimbal Musk, have collectively pledged to return a whopping $735 million to the firm in an effort to put to rest a contentious lawsuit alleging overpayment.
Per the specifics shared in court filings, the directors will be returning stock and cash realized from exercised options spanning 2021 to the present. The return sum breaks down into approximately $458.6 million in company shares and an additional $276.6 million in cash.
The directors, while agreeing to the settlement, have maintained their innocence, stating they’ve done no wrong. The decision to return the funds is motivated by their desire to “eliminate the uncertainty, risk, burden, and expense of further litigation,” as per the court filings.
This proposed agreement is currently under review by the Chief Judge of the Delaware Chancery Court. Interestingly, Tesla’s CEO Elon Musk is not included in this deal, as he’s in the midst of his own separate lawsuit surrounding his colossal $56 billion payout as the company’s CEO.
The current return of $735 million has its roots in a 2020 lawsuit, instigated by Detroit’s Police and Fire Retirement System. The lawsuit accused Tesla’s board members of having been overly generous to themselves in the form of stock options during the 2017-2020 period.
However, Tesla’s directors refuted these accusations, reasoning that the company’s accelerated growth was the primary cause for the stock’s soaring trajectory. To put it in perspective, in the last five and a half years, Tesla shares have skyrocketed by a phenomenal 1,795%.
For entrepreneurs and investors, this development underlines the criticality of sound corporate governance and transparency in remuneration practices. It also underscores the complexities of the compensation landscape for companies operating at the cutting edge of innovation and rapid growth.