Tesla Inc (Nasdaq: TSLA) Ended the controversial practice of paying CEO Elon Musk to provide director and executive (D&O) liability insurance, the electric car manufacturer said in a filing filed with the U.S. Securities and Exchange Commission.
How it happened: The automaker said it paid Musk $3 million over 90 days, up to $100 million, but did not extend the contract further.
In a statement, Tesla said in a statement that “after 90 days, we did not extend the term of the reimbursement contract with the CEO, but instead bound third-party airlines and customary director and executive liability insurance policies.”
The Palo Alto-based company did not disclose the premiums paid for the carrier or D&O policy they chose to provide the guarantee.
Why it matters: Kevin Hirzel, an administrative member of the Detroit-based Hirzel law office, told CNBC that it is “very rare” for a company to replace its D&O policy with a “always” guarantee with a guarantee from a company executive. Declaration news.
“The Tesla board did the right thing to secure traditional director and executive liability insurance policies from third-party insurers,” Hirzel said.
Corporate governance professor Charles Elson said that the CEO’s personal reparations led the directors to be too close to the CEO.
Elson told CNBC, “These links will make it harder for board members to exercise good oversight on behalf of all shareholders.
Price action: Tesla shares closed down 0.9% on Monday afternoon to $416.50.
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