By Tom Hals
WILMINGTON, Del. (Reuters) – Tesla (TSLA) directors including Chairman Robyn Denholm and James Murdoch won court approval on Wednesday for a settlement worth up to $919 million that requires them to return compensation to the automaker to resolve allegations that they themselves overpaid.
The settlement requires Tesla board members, including Denholm and Murdoch, to return approximately $277 million in cash, $459 million in stock options and forfeit stock options for 2021-2023 worth $184 million. The settlement was not covered by insurance, according to a court filing by the shareholder who brought the case.
Chancellor Kathaleen McCormick, the judge overseeing the case, read her decision approving the settlement during a telephone hearing Wednesday, according to an attorney for the plaintiffs and a shareholder who opposed the deal.
When it closes: 4:00 p.m. EST
“We are very pleased with the chancellor’s decision,” Andrew Dupré, a lawyer for the shareholders, told Reuters.
The plaintiff’s legal team said last year that the settlement was the second largest ever reached in the Delaware Court of Chancery, the go-to forum for shareholder disputes.
Administrators have not admitted 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.
These fees are the fourth highest in the history of shareholder litigation in Delaware.
The company and its lawyer did not immediately respond to a request for comment.
The settlement ends a 2020 lawsuit filed by the City of Detroit Police and Fire Retirement System, which challenged administrators’ compensation from 2017 to 2020 as excessive.
Tesla directors received stock options that reached hundreds of millions of dollars as the value of Tesla shares increased 10-fold during this period.
For comparison, the average total compensation for directors of S&P 500 companies is $327,096 in 2024, according to SpencerStuart, a consulting group that conducts executive searches.
Musk received no compensation for his role as a Tesla board member.
However, a Tesla shareholder filed a separate lawsuit in 2018 challenging Musk’s $56 billion salary as Tesla CEO. Last year, the same judge ordered that Musk’s compensation package be overturned because Musk controlled salary negotiations. One of the factors the judge considered was the amount of wealth the directors owed to Musk or Tesla.
Denholm, for example, testified in that case that her tenure on Tesla’s board earned her approximately $280 million, which she described as “life-changing wealth.”
