Elon Musk at shareholder’s meeting September 22; courtesy of Tesla
In recent news, Tesla paid CEO Elon Musk $3 million for 90 days worth of business insurance which indemnifies executives of the company from certain legal expenses, as reported by CNBC on Tuesday. The news comes from a filing that replaced the controversial agreement with a more traditional form of insurance.
Earlier in the year, Tesla told investors that it would be foregoing typical liability insurance for officers and directors for the year. Instead, Musk would be paid personally to cover company and board member costs for legal defense, settlements, or other liability factors. Tesla cited “disproportiantely high” legal premiums as the reason for the strange arrangement.
Tesla paid CEO Elon Musk $3 million to provide indemnity for directors, officers – CNBC. Hey @elonmusk and @Tesla let’s form a captive insurance co, ask me how…. https://t.co/1xtNl3j82a
— Kimchi “Big, McLarge, Huge” Toe Knife🍥 (@DareDeviledEgg) October 27, 2020
On the unusual nature of the move, Kevin Hirzel, the managing member of Hirzel Law in Detroit said, “It is highly unusual to replace a directors’ and officers’ insurance policy with a personal guaranty from an officer for any period of time.” He continued, “If the CEO is guaranteeing payment under the indemnification agreement, it leads to potential conflicts of interest and threatens the independence of the board of directors.”
In the past, Musk has also been noted for his unusual options package, which pays out depending on certain criteria Tesla must meet.
Moving forward, Tesla will hopefully avoid any other sketchy arrangements, especially given the filing, which reinstates a more conventional model for insurance.
Yesterday, it was also revealed in a filing Tesla would spend up to $12 billion on battery and electric vehicle factories over the next two years.
