By Tom Hals
WILMINGTON, Del. (Reuters) – Tesla (TSLA) Directors including Chairman Robyn Denholm and James Murdoch won court approval Wednesday for a settlement worth up to $919 million that requires them to return damages to the automaker to resolve claims they overpaid themselves.
The settlement requires Tesla board members including Denholm and Murdoch to return approximately $277 million in cash, $459 million in stock options and to forgo stock options for 2021-23 worth $184 million. Insurance did not cover the settlement, according to court filings by the shareholder who brought the case.
Chancellor Kathaleen McCormick, the judge overseeing the case, read her ruling approving the settlement in a telephone hearing Wednesday, according to an attorney for the plaintiffs and a shareholder who opposed the deal.
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“We are very pleased with the chancellor's ruling,” Andrew Dupre, attorney for the shareholders, told Reuters.
The plaintiff's legal team said last year that the settlement was the second largest ever in the Delaware Court of Chancery, the 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 shareholder litigation history in Delaware.
The company and its attorney did not immediately respond to a request for comment.
The settlement resolves a 2020 lawsuit by the City of Detroit Police and Fire Retirement System that challenged director compensation between 2017 and 2020 as excessive.
Tesla directors received stock options that became worth hundreds of millions of dollars as the value of Tesla stock increased 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, an executive search consulting group.
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 that Musk's pay package be revoked because Musk controlled the salary negotiations. One of the factors considered by the judge was the amount of wealth directors had for Musk or Tesla.
Denholm, for example, testified in that case that her board tenure at Tesla netted her about $280 million, which she described as “life-changing wealth.”