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Facebook (FB) Excessive Director Compensation Shareholder Derivative Lawsuit

Shareholder derivative suit alleges that the Facebook Board of Directors  violated duties to shareholders by paying themselves 63% more than “peers”.  This suit was filed on June 6, 2014 in Delaware state court.

Defendants in Facebook derivative lawsuit

Mark Zuckerberg is Facebook's Chief Executive Officer and a director and has been since July 2004 and Chairman of the Board and has been since January 2012.

Sheryl K. Sandberg is Facebook's Chief Operating Officer and has been since March 2008 and a director and has been since June 2012.

Donald E. Graham is Facebook's Lead Independent Director and has been since at least January 2012 and a director has been since March 2009. Defendant Graham is also Chairman of Facebook's Compensation Committee and has been since June 2013 and a member of that committee and has been since at least May 2012.

Peter A. Thiel is a Facebook director and has been since April 2005. Defendant Thiel is also a member of Facebook's Compensation Committee and has been since May 2013.

Marc L. Andreessen is a Facebook director and has been since June 2008. Since 2013, defendant Andreessen has received an aggregate of 7,742 restricted stock units with a grant date fair value of $387,874.

Reed Hastings is a Facebook director and has been since June 2011. Defendant Hastings is also a member of Facebook's Compensation Committee and has been since at least March 2014.

Erskine B. Bowles is a Facebook director and has been since September 2011.

Susan D. Desmond-Hellmann is a Facebook director and has been since March 2013.

Allegations that Facebook’s board of directors is self dealing

Facebook's Board of Directors (the "Board") has unfettered ability to grant its members an unlimited amount of stock as part of their annual "compensation."  The named defendants have abused this power by giving themselves excessive stock awards that when combined with their other forms of compensation gives the non-executive members of the Board a yearly take beyond what could be considered reasonable.  In fact, Facebook pays its non-executives directors 43% more than its peers, despite its net income and revenues being 66% and 49% lower than its peers, respectively.  Moreover, the members of the Board are free to continue to award themselves virtually any amount of compensation they choose into perpetuity. The only limit on the amount of equity the directors can grant themselves is a 2.5 million share limit per director in a single year. At the Company's current stock price, 2.5 million Facebook shares are worth approximately $145 million, and accordingly, is not a true limit.

 

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