The Tesla Inc (NASDAQ: TSLA) stock price rose slightly premarket as investors waited for the company’s Q2 earnings after the market close. Investors reacted positively to the latest Tesla news, where the company decided to settle a case about its directors being overpaid.
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The EV manufacturer’s directors agreed to return $735 million in stock and cash to the company. The directors had earned this amount as compensation for their roles at the company before being sued for excessive pay practices by the Police and Fire Retirement System of Detroit.
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The directors who agreed to return the stock and cash awards include Larry Ellison, the founder of Oracle Corp; Musk’s brother, Kimbal Musk, and James Murdoch, son of media mogul Rupert Murdoch. They agreed to hand over the stock grants and cash for already exercised options.
According to court filings, Tesla also agreed to make corporate governance changes to how board-level compensation issues are reviewed. The Tesla directors denied wrongdoing as part of the deal but said they agreed to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation.”
The settlement will be paid to the company, not the Police department that brought it since it is a derivative case. The Tesla directors also agreed to receive no compensation for their services for the 2021, 2022 and 2023 financial years.
The Tesla directors were accused of awarding themselves unfair and excessive compensation in the form of around 11 million stock options from 2017 to 2020 that allegedly grossly exceeded norms for a corporate board.
Tesla had argued that the compensation to its directors was appropriate since it had led to its stock price soaring by almost 10X, which made the value of the stock options awarded to the directors skyrocket as opposed to if Tesla shares did not rally as high as they did.
With the settlement now out of the way, all eyes will shift to Tesla’s Q2 earnings results, due out later today, with many expecting the company to perform well as an industry leader despite the aggressive price cuts on its vehicles.
*This is not investment advice.
Tesla stock price.
The Tesla stock price was trading up 0.71% at $295.41, rising from Tuesday’s closing price of $293.34.
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