Judge rules Mark Zuckerberg still needs to follow the rules like everybody else

Just one of the little people.
Just one of the little people.
Image: AP Photo/Ben Margot
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A judge has cleared the way for an investor to proceed with a lawsuit against Facebook CEO Mark Zuckerberg over claims the social network didn’t follow proper protocol for setting the pay of its board of directors.

Delaware Chancery Court Judge Andre Bouchard on Oct. 28 rejected a request by California-based Facebook, which is incorporated in Delaware, to throw out a lawsuit filed by Ernesto Espinoza.

Espinoza claims that Facebook’s board of directors was allowed to set their own pay in 2013 and that Zuckerberg failed to comply with Delaware’s corporate statutes, which require a formal vote at a stockholder meeting or written consent.

Zuckerberg, who holds 60% of Facebook’s voting power, instead filed an affidavit in 2014 approving the pay—an average of $461,000 in stock, which is 43% higher than what directors at peer companies make, according to the suit. The judge said recognizing the affidavit in lieu of a vote or written consent would lead to a slippery slope.

Although an affidavit is a relatively formal expression, once the statutory framework is removed, the possibilities for ambiguity in expressing approval are seemingly limitless—if affidavits are sufficient, what about meeting minutes, press releases, conversations with directors, or even “Liking” a Facebook post of a proposed corporate action?

Despite the size of Zuckerberg’s voting power, Bouchard ruled he is still required to follow Delaware’s corporate laws, noting “his rights as a stockholder are no greater than the rights of any other stockholder—he simply holds more voting power.”