Tesla Inc. (Nasdaq: TSLA) has ended a controversial practice where it paid its CEO Elon Musk to provide director and executives (D&O) liability insurance, the electric vehicle maker said in a filing with the US Securities and Exchange Commission.
what happened: Auto Tomeker said it paid Musk days 3 million for 100 days coverage – a total of 100 million – but did not extend the contract.
“After the expiration of the 90-day period, we did not extend the term of the compensation payment agreement with our CEOs and instead tied the liability of the individual directors and officers to the third party carriers,” said Tesla.
The Palo Alto-based company did not say which carrier it chose to offer, or the premium it paid for the D&O policy.
Why it’s important: Kevin Herzl, managing member of the Detroit-based Herzel Law Company, told CNBC that It is “extremely unusual” to replace the company’s policy with an official guarantee. News.
“Tesla’s board did the right thing in getting the traditional director and executives liability insurance policy policy from a third party insurer,” Hazel said.
Charles Elson, a professor of corporate governance, said the personal compensation made by the CEO “connects the directors very closely with the CEO.”
Elson told CNBC that such an alliance would make it difficult for board members to have good oversight on behalf of all shareholders.
Price action: Shares of Tesla traded down 0.9% in the previous session to close at 41 6,416.50, mostly after closing at 4 20,420.28.
Photo by TED Conference on Flickr
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