As Facebook CEO Mark Zuckerberg sees his investments grow, so do his lawsuits. A shareholder of the social network filed a lawsuit against him and other board members for being irrationally generous.
The case was filed Friday at the Delaware Chancery Court. Complainant Ernesto Espinoza is not happy with how Facebook awards its board of directors with millions of stocks annually as part of the company’s compensation policy and equity incentive plan in 2012.
"Moreover, the members of the board are free to continue to award themselves virtually any amount of compensation they choose into perpetuity," the complaint states.
Various reports show that Facebook allows its company directors to set their own compensation with around $150 million stock each. The company also allegedly paid an average of $461,000 in stock to its non-employee directors in 2013, which surpassed industry peers by around 43 percent.
Facebook’s present compensation program, according to research, sets the individual annual limit on the directors’ compensation to 2.5 million of shares. As of June 9, the company traded about $63 per share at the New York Stock Exchange.
The lawsuit enumerated the cases of board member Peter Thiel and COO Sheryl Sandberg, who is also a board member. Thiel was awarded $387,874 in stock by Facebook in 2013, and whose net worth is now at $2.6 billion based on Bloomberg Billionaire Index. Meanwhile, Sandberg was awarded last year with a total compensation of $16.1 million, which includes $15 million stock awards.
Espinoza, who is represented by law firm Robbins Arroyo, argues that these awards are a breach of fiduciary duties, unjust enrichment and waste of corporate assets.
Research says he asked the court judge to "recoup the unfair excessive compensation" on behalf of Facebook that has allegedly incurred damages and to "impose meaningful restrictions on the board's ability" to grant such awards.
“The lawsuit is without merit and we will defend ourselves vigorously," Facebook spokeswoman Genevieve Grdina says in a statement.
Other reports say this isn’t the first case of Espinoza against a company. In 2010, he was also a complainant in a case against Hewlett-Packard Co., on how the company handled the resignation of chief executive Mark Hurd allegedly over his relationship with a company’s former contractor.
Meanwhile, further research reveals Zuckerberg earned $653,157 in 2013, with his net worth pegged at $27.7 billion.
Recall that Zuckerberg has been receiving lawsuits recently. One is from a real estate broker accusing the CEO of not fulfilling a promise of introducing him to his wealthy friends who could be potential real estate buyers. The other is from a court in Iran for alleged breach of privacy of Facebook, which was later on denied by another Iranian official calling the news a total lie.