Published by Global Banking & Finance Review®
Posted on January 24, 2025
3 min readLast updated: January 27, 2026
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Tesla directors settle a $919 million lawsuit over excessive pay, requiring them to return compensation and implement governance changes.
By Tom Hals
WILMINGTON, Del. (Reuters) - Tesla directors including Chair Robyn Denholm and James Murdoch got court approval on Wednesday for a settlement worth up to $919 million that requires they return compensation to the carmaker to resolve allegations they overpaid themselves.
The settlement requires Tesla board members including Denholm and Murdoch to return roughly $277 million in cash, $459 million in stock options and to forgo stock options for 2021-23 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 ruling approving the settlement at a telephonic hearing on Wednesday, according to an attorney for the plaintiffs and a shareholder who objected to the deal.
"We're very pleased with the chancellor's ruling," Andrew Dupre, an attorney for the shareholders, told Reuters.
The plaintiff's legal team said last year the settlement was the second-largest ever in Delaware's Court of Chancery, the go-to forum for shareholder litigation.
The directors did not admit 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.
The fee is the fourth-largest in the history of shareholder litigation in Delaware.
The company and its attorney did not immediately respond to a request for comment.
The settlement resolves a 2020 lawsuit by the Police and Fire Retirement System of the City of Detroit which challenged director compensation from 2017 to 2020 as excessive.
The Tesla directors received stock options that became worth hundreds of millions of dollars as the value of Tesla stock surged 10 times over that period.
By comparison, the average total compensation for directors at S&P 500 companies is $327,096 in 2024, according to SpencerStuart, a consulting group that conducts executive searches.
Musk did not receive compensation for his role as a Tesla board member.
However, a Tesla shareholder filed a separate lawsuit in 2018 challenging Musk's $56 billion pay for serving as Tesla's CEO. Last year, the same judge ordered Musk's pay package be rescinded because Musk controlled the pay negotiations. One of the factors the judge considered was the amount of wealth that directors owed to Musk or Tesla.
Denholm, for example, testified in that case that her board tenure at Tesla netted her around $280 million, which she described as "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. Forbes lists Ellison as one of the richest people in the world with a fortune estimated at $206 billion.
The settlement does not spell out how much each director has to return, just a collective amount.
The settlement also included governance changes such as requiring shareholder approval for director compensation.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio and Noeleen Walder)
The main topic is the settlement of a lawsuit against Tesla directors over excessive pay.
The settlement requires Tesla directors to return cash and stock options and implement governance changes.
Key figures include Tesla directors Robyn Denholm and James Murdoch.
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