Court Of Chancery Grants Tesla’s Robyn Denholm, James Murdoch USD 919 Million Settlement To End Excess Pay Case
The expenditure is not covered by insurance
Court Of Chancery Grants Tesla’s Robyn Denholm, James Murdoch USD 919 Million Settlement To End Excess Pay Case
The expenditure is not covered by insurance
The Delaware Court of Chancery has granted Tesla directors, including chairperson Robyn Denholm and James Murdoch a USD 919 million settlement to return the compensation to the carmaker to resolve the allegations of overpaying themselves.
The resolution requires Tesla board members to return USD 277 million in cash, USD 459 million in stock options and forgo USD 184 million stock options for 2021 to 2023.
The settlement has not mentioned how much each director must return.
The settlement includes governance changes including requiring shareholder’s approval for director compensation.
According to the plaintiff’s attorney Andrew Dupre, and a shareholder who objected to the deal, Judge Chancellor Kathaleen McCormick approved the settlement at a telephonic hearing.
Dupre remarked, "We're very pleased with the chancellor's ruling.”
In 2024, the plaintiff's legal team stated that the settlement was the second-largest ever in the Chancery Court, the forum for shareholder litigation.
The judge also awarded USD 176 million in fees and costs to the three law firms that brought the case on a contingency basis.
Tesla had requested the court to cap the fee at USD 64 million. The fee is the fourth-largest in the history of shareholder litigation in Delaware.
The settlement resolves a 2020 lawsuit by the Police and Fire Retirement System of the City of Detroit, which challenged the director compensation from 2017 to 2020 as excessive.
Tesla directors had received stock options, gaining hundreds of millions of dollars, as the value of the company’s stock surged 10 times.
However, Elon Musk did not receive compensation for his role as a Tesla board member.
In 2018, a Tesla shareholder has filed a separate lawsuit challenging Musk's USD 56 billion pay for serving as the CEO.
In 2024, Judge McCormick ordered Musk's pay package be rescinded because he controlled the negotiations. The key factor considered the amount of wealth the directors owed to Tesla or Musk.
Denholm had then testified that her board tenure at the company was USD 280 million – terming it a ‘life-changing wealth’.
The other directors named in the lawsuit included Musk's brother Kimbal, Brad Buss, Ira Ehrenpreis, Antonio Gracias, Stephen Jurvetson, Linda Johnson Rice, Kathleen Wilson-Thompson, Hiromichi Mizuno and the co-founder of Oracle Corp, Lawrence Ellison.