Zuckerberg, Facebook Directors Sued Over Excessive Pay


Mark Zuckerberg and the rest of Facebook’s board are facing a derivative suit that alleges the company is paying its directors too much, according to a Reuters report written by Johnathan Stempel (June 9, 2014).  Facebook shareholder Ernesto Espinoza filed a lawsuit in Delaware Chancery Court that said that the $461,000 paid on average to non-employee directors in 2013 was excessive.  It noted that Facebook paid 43% more than similar companies such as Amazon and Walt Disney did, while those companies had higher revenues and profits.

The suit also alleged that the policy that allows each Facebook director to take home up to $150 million each year needs limits.  The suit derives that figure from the company’s equity incentive plan, which it says allows for distribution of up to 25 million shares of stock in addition to a payment of up to $2.5 million.  Although the suit does not argue that Facebook has paid or will pay such a sum, the amount under the plan paid each year to an individual board member could total $156 million.

The lawsuit claims breach of fiduciary duty, unjust enrichment, and waste of corporate assets.  If successful, the directors named in the suit would have to pay Facebook back for the damage caused and impose limits on director compensation. While the courts in Delaware will decide this case, regardless of the outcome, the issue of executive and director pay will remain a point of contention and a source of future lawsuits.

Page Perry is an Atlanta-based law firm dedicated to protecting investor rights.