The social networking giant, Facebook(NASDAQ : FB) is in news again for an unsettled law suit coming from one of its share holder. Mark Zuckerberg and other board members have been sued over a policy which allows each of the board members to reward themselves with no less 150 million dollars worth shares, which is clearly illegal to do.
The complaint, which was filed this Friday night at Delaware Chancery Court, by Ernesto Espinoza stated that the board members are essentially free to reward with whichever amount they want to under the social media company’s incentive plans, which also falls true for other employees, officers and consultants working for the company.
The current plans sets out an yearly compensation limit of 2.5 million for the directors and other board member in the company. However, the complaint stated that the Peter Thiel, whose capital no less than $2.6 Bn, received about $366,000 as a token for joining board members at the company where on the other hand Sheryl Sandberg, Facebook’s chief operating officer and a member of the board, received only $16.1 million in total as a compensation in 2013.
The complaint, which was made public Monday, stated, “Moreover, the members of the board are free to continue to award themselves virtually any amount of compensation they choose into perpetuity.”
Facebook, last year, paid out nearly $461,000 in shares to its non-member directors, which is nearly 43% larger than a regular payout companies, including Google, Yahoo and Apple, make.
Also in an another event, Facebook defended itself by stating that the lawsuit has no ground. “The lawsuit is without merit and we will defend ourselves vigorously,” said Facebook spokeswoman Genevieve Grdina.
The lawsuit is about the improper use of resources Facebook has, which eventually will result in the market loss and to the share holder. Calling it a “lawsuit without merit”, doesn’t justify the payouts made in the name of incentive.