Tesla Board of Directors Settles $735M Shareholder Lawsuit
Tesla’s Board of Directors, including CEO Elon Musk, has reached a settlement to return $735 million following accusation of overpaying themselves, concluding a 2020 shareholder lawsuit.
- The lawsuit accused Tesla’s board members of granting themselves excessive compensation and siphoning off millions of dollars from the company.
- The board members agreed to return $735 million to Tesla and forego any compensation for 2021, 2022, and 2023.
- The settlement awaits final approval from Chancellor Kathleen McCormick and is expected to be one of the largest shareholder settlements in the Court of Chancery.
DELAWARE, USA – On July 17th, Tesla’s Board of Directors, including CEO Elon Musk, reached a settlement to return $735 million to the company following allegations of excessive compensation. The settlement concludes a 2020 lawsuit filed by investors who claimed that the directors had overpaid themselves.
The EV giant’s Board of Directors has agreed to settle a shareholder lawsuit by returning $735 million to the company, as revealed in a court filing. The settlement follows allegations that the directors, including its Chief Officer Elon Musk, had granted themselves excessive compensation, breaching their fiduciary duties.
The lawsuit, filed by the Police and Fire Retirement System of Detroit in 2020, accused the board of inappropriately siphoning off millions of dollars from Tesla. At the time, Crain’s Detroit Business reported that the 78-page complaint stated that “they [the board] have granted themselves millions in excessive compensation and are poised to continue this unrelenting avarice into the indefinite future.”
According to the shareholder lawsuit, between 2017 and 2020 the board members awarded themselves significant compensation that was deemed excessive and unfair. The directors were accused of utilizing their stock options to overpay themselves, a claim that they have denied. However, in an effort to eliminate further litigation and associated risks, the board has chosen to settle the case.
In addition to returning $735 million to Tesla, the board has also agreed not to receive any compensation for 2021, 2022, and 2023 and has been instructed to revise the process of determining future compensation. The settlement, subject to final approval from Chancellor Kathleen McCormick, who oversaw Elon Musk’s previous trial, marks one of the largest shareholder settlements in the Court of Chancery.
Amidst the shareholder lawsuit news, Tesla’s competitor, Ford Motor Co., has recently reduced prices on its electric pickup trucks to challenge Tesla’s dominance in the EV market. Ford hopes that lower prices will lead to increased production and improved accessibility for consumers. Tesla CEO Elon Musk responded to Ford’s initiative, acknowledging the quality of the Ford Lightning while highlighting concerns about its high price.
“Shortly after launching the F-150 Lightning, rapidly rising material costs, supply constraints, and other factors drove up the cost of the E.V. truck for Ford and our customers,” said Marin Gjaja, the chief customer officer for the company’s EV division. “We’ve continued to work in the background to improve accessibility to help lower prices for our customers and shorten wait times.”
As competition in the EV sector heats up, both companies strive to meet consumer demands for affordable and sustainable transportation options.
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