Tesla Inc. (NASDAQ:TSLA) directors including Chair Robyn Denholm have reportedly gotten court approval for a settlement to resolve allegations that they overpaid themselves.

What Happened: As per the terms of the settlement, Tesla board members will return roughly $277 million in cash and $459 million in stock options to the carmaker. They will also forgo stock options for the 2021-2023 period worth $184 million, Reuters reported.

The settlement, however, did not specify how much each of the directors has to return.

The judge overseeing the case, Kathaleen McCormick, approved the settlement in a telephonic hearing on Wednesday, Reuters said while adding that the directors did not admit wrongdoing.

The judge also awarded $176 million in fees and costs to the three law firms that brought the case, overruling Tesla's request to cap the fee at $64 million.

Why It Matters: The settlement approved by the court resolves the lawsuit brought forth by the Police and Fire Retirement System of the City of Detroit in 2020. The lawsuit alleged that the compensation awarded to Tesla directors from 2017 to 2020 was excessive.

Tesla CEO Elon Musk did not get paid for his role as a board member.

However, a minor shareholder filed a separate lawsuit in 2018 challenging his $56 billion CEO pay package and McCormick ruled in January 2024 that it would be voided, citing Musk's influence on the board when they adopted the pay plan.

Tesla shareholders subsequently voted again to reinstate the package in June. However, McCormick again ruled against the package in December.

Tesla said in a post on X in December that the company deems the ruling to be wrong and intends to appeal to the Delaware Supreme Court.

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