Zuckerberg, Facebook directors sued over pay plan

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% 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.


  • Everybody who contributes to India’s economic growth must be paid well

    Private sector blue chip companies are known to pay top dollar for top-level talent. Directors in such companies take home hefty pay packets.


Stay informed on our latest news!


Sarthak Raychaudhuri

vice-president, HR, Asia South Whirlpool of India

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs


Amita Sharma

Smart cities for the smart citizens

The 21st century has been spoken of as the urban ...

Zehra Naqvi

Baby and you

Every person who’s had a chance to be a parent ...

Bubbles Sabharwal

Women of the world, unite for a change

Last week I attended the Women in the World forum ...


William D. Green

Chairman & CEO, Accenture