Facebook board gets sued by shareholder
Lawsuit claims boardmembers are being too generous with share
Facebook CEO Mark Zuckerberg and members of the social network's board have been sued by a shareholder who is unhappy with them being able to awarded each other up to $150 million of stock annually.
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.
Zuckerberg made $653,165 last year, but according to Forbes his net worth is $27.7 billion. Among the other defendants is Facebook Chief Operating Officer Sheryl Sandberg, a director whose compensation was $16.15 million in 2013 is worth $999 million, according to Forbes.
The lawsuit alleges breach of fiduciary duty, waste of corporate assets and unjust enrichment.
The shareholder wants to force directors to repay Facebook for alleged damages sustained and to impose "meaningful limits" subject to shareholder approval about how much stock the board can award itself.
The plan annually caps total awards at 25 million shares and individual awards at 2.5 million. 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 and Walt Disney that on average generated twice as much revenue and three times more profit.
Facebook spokeswoman Genevieve Grdina said "the lawsuit is without merit and we will defend ourselves vigorously," in an email to Reuters.
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