Zuckerberg, other Facebook directors are sued over pay plan

Mon Jun 9, 2014 5:06pm EDT

Facebook CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters in Palo Alto, California May 26, 2010.  REUTERS/Robert Galbraith

Facebook CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters in Palo Alto, California May 26, 2010.

Credit: Reuters/Robert Galbraith

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(Reuters) - Mark Zuckerberg and other members of Facebook Inc's board have been sued by a shareholder who claimed a policy letting them annually award directors more than $150 million of stock each if they choose is unreasonably generous.

In a complaint filed on Friday night in Delaware Chancery Court, Ernesto Espinoza said the board was "essentially free to grant itself whatever amount of compensation it chooses" under the social media company's 2012 equity incentive plan, which also covers employees, officers and consultants.

He said the plan annually caps total awards at 25 million shares and individual awards at 2.5 million, and in theory lets the board annually award directors $156 million in stock each, based on Friday's closing price of $62.50. The lawsuit does not contend that such large sums will be awarded.

Espinoza also said last year's average $461,000 payout to non-employee directors was too high, being 43 percent larger than typical payouts at "peer" companies such as Amazon.com Inc and Walt Disney Co that on average generated twice as much revenue and three times more profit.

Facebook spokeswoman Genevieve Grdina said in an email: "The lawsuit is without merit and we will defend ourselves vigorously."

A spokeswoman for Robbins Arroyo, a law firm representing the plaintiff, had no immediate comment.

The lawsuit alleges breach of fiduciary duty, waste of corporate assets and unjust enrichment.

It seeks to force directors to repay Facebook for alleged damages sustained by the Menlo Park, California-based company, and to impose "meaningful limits" subject to shareholder approval about how much stock the board can award itself.

Among the other defendants is Facebook Chief Operating Officer Sheryl Sandberg, a director whose compensation was $16.15 million in 2013, according to a regulatory filing. She is worth $999 million, Forbes magazine said on Monday.

Zuckerberg made $653,165 last year, a regulatory filing shows, and Forbes said his net worth is $27.7 billion.

Espinoza was also a plaintiff in a 2010 shareholder case in Delaware against Hewlett-Packard Co concerning its handling of the resignation of Chief Executive Mark Hurd over his relationship with a former contractor.

The case is Espinoza v. Zuckerberg et al, Delaware Chancery Court, No. 9745.

(Additional reporting by Tom Hals in Wilmington, Delaware)

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Comments (1)
ppp9988 wrote:
The lawsuit is without merit and we will defend ourselves vigorously.”
Ha, standard sentence these days. too funny how these clowns are able to scam the investor community. Time to change that company into a non profit setting.
There is in fact no merit to the assets of this company. Some servers, some data centers and nothing more. All talk about future earnings, that is just speculation that might never happen.
Facebook is like a fashion thing. It can be outdated sooner than many think. We saw that happening with many social sites in the past.
The user base of facebook is also doubtful. One billion users include fake accounts, accounts that never logged in since the past month etc. Sure no meaning to the advertising revenue calculations.
Sometimes I think that the brain of investors a long time ago has
left the skull.

Jun 10, 2014 8:02am EDT  --  Report as abuse
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