Facebook Settles Investor Suit Over Claim of Excessive Pay

  • Social networking company agrees to keep closer watch
  • Facebook, Zuckerberg were sued over 2012 incentive plan

Mark Zuckerberg.

Photographer: David Paul Morris/Bloomberg

Officials of Facebook Inc., owner of the world’s largest social network, settled a shareholder lawsuit by agreeing to revise pay schedules and keep a closer watch on how company officials are compensated.

Investor Ernesto Espinoza sued Facebook and controlling shareholder Mark Zuckerberg saying a 2012 pay plan improperly allowed directors to set their own pay and that Zuckerberg exceeded allowable compensation for some senior officials.

Facebook’s board in 2013 paid non-employee directors an average of $461,000 in stock, exceeding industry peers by as much as 43 percent, Espinoza said in the Delaware Chancery Court lawsuit.

In a settlement agreement filed Monday, the company agreed to conduct annual compensation assessments, hire an independent compensation consultant, have the board monitor compensation changes and consider stockholder approval of the compensation program at this year’s annual meeting.

“We believe that resolving this matter is in the best interests of the company and its shareholders so we can continue to focus on our mission and business,” Vanessa Chan, a spokeswoman for Facebook, said in an e-mailed statement.

Espinoza’s lawyers agreed in part to avoid “the significant risk, expense and length of continued proceedings,” they said in court papers.

Proof Problems

“Counsel also are mindful of the inherent problems of proof and possible defenses to the claims alleged in such actions,” they wrote.

Kathaleen McCormick, an attorney for Espinoza, didn’t immediately respond to a request for comment on the settlement.

The accord will be considered by a judge at a fairness hearing.

The case is Espinoza v. Zuckerberg, CA9745, Delaware Chancery Court (Wilmington).

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