Tesla directors agree to return $735m over excessive pay lawsuit

In a remarkable development, current and former Tesla directors including chief executive Elon Musk have agreed to return $735m to the electric vehicle maker, settling allegations of excessively high compensation.

The lawsuit, brought in 2020 by a Detroit pension fund, challenged the board's award of stock options between 2017-2020 as vastly outsized compared to corporate pay norms. Mr Musk and high-profile directors like Oracle's Larry Ellison are implicated in the clawback.

To conclude the case, directors consented to forgo all pay for 2021-2023 and overhaul future pay structures. The settlement stands apart from a separate challenge to Mr Musk's contentious $56bn package.

Per the Detroit police and fire retirement system, Tesla's lavish option grants contravened shareholder interests. Tesla maintained the incentives aimed to align director and investor goals.

At $735m, the repayment represents the largest-ever clawback directed by Delaware's Court of Chancery, as per Reuters. While mum presently, Tesla agreed to the settlement terms in recent filings.

For Tesla, the episode spotlights nagging governance questions. Its board, counting Mr Musk's brother Kimbal, has long faced criticisms of lax oversight. Experts say the damaging development is unlikely to derail Tesla's ascent, but clearly serves notice that shareholders will scrutinise sky-high director remuneration.

More broadly, the settlement underscores intensifying demands for restraint as executive pay scales fresh heights. With median S&P 500 CEO compensation reaching $14.5m last year, shareholder revolts akin to Tesla's may become more prevalent.

Also Read: MobilEye makes strides in intelligent speed assistance tech