Picture this, the board of one of the world's most innovative companies, Tesla, including its controversial CEO, Elon Musk, choosing to retreat over $735 million in stocks and cash. Surprising, isn't it?
Rewind to 2020, when the Police and Fire Retirement System of Detroit, a Tesla shareholder, showed dissatisfaction. Their bone of contention? Excessive board compensation, a problem that they thought had been mounting since 2017. Among those pointed at were Elon Musk himself, his brother Kimbal, media titan James Murdoch, billionaire Larry Ellison, and practically every board member Tesla had seen in the past six years.
So, was this a routine distribution of wealth among the board members? Think again. It wasn't just about the usual stock options flow to board members. This time, it's about the colossal value those options took on due to Tesla's stock climbing the Wall Street ladder.
Fast forward to last week. Tesla came up with an impressive settlement proposal in a new court filing. According to Tesla directors, a whopping $735 million worth of stock awards and cash would be returned, all without admitting any wrongdoing. This isn't an admission of guilt but rather a strategic move to avoid the uncertainties and expenses of further litigation. Can't blame them for wanting to avoid a long-drawn court battle, can you?
Tesla board of directors in 2018And the settlement has some teeth. The directors will be surrendering all compensation from 2021 to 2023. That's quite the reversal! We're talking about canceled stock options, returned stocks from options exercised, and even cash returned from stocks sold after the options were exercised. When you crunch the numbers, it amounts to a return of $458 million in stocks and $276 million in cash.
As part of this settlement, Tesla's board has agreed to bring in an external consultant to give the board's compensation policies a once-over. All this, however, awaits the nod from the overseeing judge, Chancellor St. J. McCormick.
McCormick also happens to be handling another Tesla lawsuit, specifically about Musk's whopping 2018 CEO compensation plan, which could be as high as $55 billion. It's no small change, and Musk seems determined to fight it out rather than settle.
So, who's in the right? It's a difficult call. One could argue that the board, as the custodian of shareholders' interests, did what it had to do - raise the stock's value. And rise, it did - over 1000% since 2017. A part-time job yielding full-time results, some might say.
Nevertheless, if approved, this settlement promises to be a game-changer for Tesla's quarterly figures, returning a mountain of shares and cash. Quite a board meeting that must have been, huh?
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