Tesla paid $3 million to Musk for executive liability insurance. Tesla: The company has ended this arrangement

 Recently, a regulatory filing file submitted by Tesla showed that Tesla had paid its CEO Elon Musk (Elon Musk) $3 million to purchase an important commercial insurance worth 90 days. This insurance can save the company’s directors and executives from certain legal expenses.

The documents show that the company has ended this "controversial arrangement" and obtained this insurance in a more traditional way.

In April of this year, Tesla told its shareholders that the company would suspend payment of "directors and executives' liability insurance" within a year. According to the new plan, Tesla will pay Musk a fee, which means that the decision makes Tesla’s current and future board members rely on Musk to pay for his legal defense and defense in a series of high-risk cases. Settlement fees.

Tesla once explained in the document that the reason for this decision was "due to the disproportionately high price quoted by the insurance company", but the decision was also questioned by professionals. Charles Elson, a professor of corporate governance at the University of Delaware, suspects that getting the CEO to personally provide liability insurance for directors is very difficult because it means protecting them from CEC decisions. "In my opinion, this is just a bad idea."

US Consumer News and Business Channel (CNBC) analyzed that this move may create a conflict of interest between Musk and the board of directors who should oversee him. However, the agreement has now been suspended, and the company "turns to bundle the liability insurance policies of directors and executives with third-party airlines."

"It is extremely unusual to replace the insurance policies of directors and executives with personal guarantees from executives for any period of time," said Kevin Hirzel, a managing member of the Detroit Hirzel Law firm. If the CEO guarantees payment under the compensation agreement, it may cause a conflict of interest and threaten the independence of the board." He added: "The Tesla board of directors has obtained traditional directors and senior managers from third-party insurance companies. Liability insurance policy, this is the right approach."

Elson also said that it is a good thing for Tesla to resume providing such insurance to company directors and executives through third parties. In his view, this allows the board to better monitor the CEO.


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