Zuckerberg and other directors sued over gigantic packages
Shareholder claims board can award themselves as much money as they like
A disgruntled shareholder is suing Mark Zuckerberg and other top Facebook execs over what he claims are unreasonably generous payment terms.
Ernesto Espinoza filed with the Delaware Chancery Court on Friday, saying that the way pay was decided at the moment basically left the board free to give itself however much money it wanted.
“[The board] is essentially free to grant itself whatever amount of compensation it chooses,” he complained in his filing.
Facebook is currently following its 2012 equity incentive plan, which caps total awards at 25 million shares and individual awards at 2.5 million, which in theory could let the board award directors up to $157m in stock each, based on Monday’s closing price of $62.88.
Although the board hasn’t paid out that kind of package, Espinosa contends that last year’s average take-home pay of $461,000 to non-employee directors was too much. He said the sum was 43 per cent higher than the typical payout at firms like Amazon and the Walt Disney Company, where revenue was twice as high and profits were triple those of the social network.
The lawsuit is alleging breach of fiduciary duty, waste of corporate assets and unjust enrichment and wants the courts to force the directors to repay Facebook for alleged damages and put “meaningful limits” on how much stock they get, subject to shareholder approval.
Facebook said it was planning to fight the suit.
"The lawsuit is without merit and we will defend ourselves vigorously," Genevieve Grdina told Reuters in an email. ®