Tesla CEO Elon Musk along with their 12 directors is ready to return about $735 million in stock awards as well as cash to the company. The step taken to clear up the company claims which they mostly overpaid to themselves.
As per a recent July filing that was scheduled in Delaware court. The deal fixes a 2020 lawsuit by a retirement fund that carries Tesla stock. This includes the Police and Fire Retirement System of the City of Detroit taking the issue with stock options. Since the same was granted to Tesla directors initiates in June 2017.
The list of directors consists of CEO Elon Musk, his brother Kimbal Musk, Oracle co-founder Larry Ellison, and James Murdoch, son of media mogul Rupert Murdoch. The directors come to a close to return the equal value of 3.1 million Tesla stock options. The information came into knowledge on July 14, as per court filing in Delaware Chancery Court evident by Reuters and Bloomberg respectively.
Directors also accept not getting any compensation
The directors were charged with awarding themselves 11 million stock options from the duration starts from 2017 till 2020. The action was to break the norms for a corporate board. Whereas, the court filing observes that the directors show good faith as well as in the finest interest of Tesla stockholders. They come to a common point to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation.”
Also, to be part of the agreement, the directors also accept not getting any compensation for 2021, 2022, and 2023. Moving forward, another outcome of the lawsuit is that Tesla’s board has pledged to change the way compensation is set.
Derivative lawsuit of $735 million settlement
The $735 million settlement will be paid to Tesla in order to benefit the company. Such a case is known as a derivative lawsuit. While this would become the largest-ever settlement for a derivative case in the Court of Chancery. It is also considered a major place for shareholder lawsuits.
While to cover against the lawsuit, Tesla said that its extraordinary growth makes the company stock price up by tenfold times. Also, the stock options were awarded to the directors. As they used the stock options in the form of incentives to the directors.