Facebook's board of directors can theoretically award themselves stock worth up to $156 million per person, according to a lawsuit filed in Maryland which alleges the compensation is excessive and wasteful.
The suit, described by Bloomberg, demands the assets be returned to the company and "meaningful limits" put on directors' ability to award their own pay. A Facebook spokesperson told Reuters, "The lawsuit is without merit and we will defend ourselves vigorously."
The complaint is in the form of a shareholder lawsuit — a type of sometimes-frivolous financial litigation in which publicly traded companies are sued by their own investors. These types of suits may be filed with the hope that the targets will settle. In this case, the lawsuit doesn't allege that directors will ever get $156 million per person even though they can technically award themselves that amount.
But the suit does draw attention to just how much money Facebook's directors make. Here's the most recent breakdown from Facebook's SEC disclosures:
The suit claims that the average director package, worth $461,000 in stock, is 43% greater than Facebook's industry peers. The suit also claims that directors are free to award their own pay at any level they choose. That sounds startling until you realize that all boards, at all public companies, appoint their own compensation committees to set their own pay. There is no other way of setting director pay.
However, the allegation that the board could award itself stock worth $156 million per person for this compensation, is pretty surprising. Here's how Reuters described it. Note that the suit doesn't actually allege that the directors will actually ever get this sum:
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.
We asked Facebook for comment but did not immediately get a response.
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