Tesla's directors will pay $735 million to settle a lawsuit filed by shareholders. Details here | Mint - Mint

Elon Musk led Tesla's directors will return $735 million, the equivalent value of 3.1 million Tesla stock options to the company in order to settle a lawsuit filed by the shareholders. Tesla directors have also agreed to not receive any compensation for 2021, 2022 and 2023 while the board will also change the way compensation is determined.

Tesla had argued that stock options were necessary in order to incentivize the directors and align their goals with that of investors. The company had fought the lawsuit arguing that the electric carmaker went through unprecedented growth which led its stock to grow 10-fold. The gain in stock value also meant an increase in stock options awarded to its directors and Musk.

The case was filed by the Police and Fire Retirement System of the City of Detroit in 2020. The retirement fund holds Tesla stocks and the settlement is paid in order to benefit the company. lawsuit alleged that the directors grossly exceeded norms for a corporate board when they awarded themselves around 11 million stock options between 2017 and 2020.

Furthermore, the settlement by Tesla directors will not affect the $56 billion compensation package of Elon Musk. Shareholders had challenged Musk's compensation package in a case last year and the decision is expected to be announced in the matter soon.

The case filed by Tesla shareholders against the company's directors is called a derivative lawsuit. It is one of the largest-ever victories for a derivative case in the court of Chancery.

Elon Musk and his company Tesla have a penchant for fending off lawsuits. Last month, Musk won a lawsuit brought by Tesla shareholders who accused him of violating securities laws and forcing Tesla to buy struggling rooftop solar company SolarCity in 2016 to save his investment.

(With inputs from Reuters)