Tesla's board members have reached a settlement agreement over excessive compensation issues, totaling $919 million, which has been approved by the court. The agreement was initially reached in July 2023 for $735 million, and it is now officially approved, ranking second in the history of the Delaware Court of Chancery in terms of the amount involved.

According to the agreement, Tesla's directors must collectively return $277 million in cash and $459 million in stock options. Additionally, board members must relinquish stock options worth $184 million from 2021 to 2023. The settlement agreement does not disclose the specific amounts each director must return, only the total collective amount.

The ruling was made by Chancellor Kathaleen McCormick of the Delaware Court of Chancery. The case originated from a lawsuit filed by the Detroit Police and Fire Retirement System in 2020, accusing the directors of receiving compensation far beyond reasonable levels between 2017 and 2020 due to Tesla's stock price surging tenfold.

Although directors including Kimbal Musk, Oracle co-founder Larry Ellison, and former board members Brad Buss and Antonio Gracias did not admit to any wrongdoing, the decision to collectively return compensation is seen as an important step to address shareholder concerns and restore confidence in Tesla's governance.

In addition to financial compensation, the settlement agreement also introduces governance reform measures to prevent similar disputes from occurring in the future. One important clause stipulates that director compensation plans must be approved by shareholders to enhance oversight mechanisms.

The plaintiff's legal team received $176 million in this case. Tesla initially requested a cap of $64 million for legal fees, much lower than the $230 million initially requested by the plaintiff, but the court ultimately supported the plaintiff's side, citing the complexity and breadth of the case.

This settlement agreement is another high-profile compensation dispute that Tesla has faced recently. Last year, the same Delaware court ruled to revoke Tesla CEO Elon Musk's $56 billion compensation package, citing improper influence by Musk on the board that led to compensation terms heavily favoring his personal interests. Despite shareholders' attempts to restore the compensation package through a new round of voting, the court again revoked it. Currently, Tesla has appealed the decision.