Mark Zuckerberg and other Meta Platforms Inc. directors agreed to a $190 million settlement of claims they failed to rectify repeated violations of Facebook users’
privacy and improperly engineered an accord to shield the billionaire chief executive officer from personal liability, court filings show.
The amount of the settlement, disclosed in a filing Thursday in Delaware Chancery Court, had been sealed since a tri
al was halted in July. A lawsuit by Meta investors claimed board mem
bers mishandled the Cambridge Analytica data privacy scandal and improperly agreed to a $5 billion US Federal Trad
e Commission settlement to personally protect Zuckerberg.
Meta shareholders sought at least $7 billion in damages, arguing directors wrongfully overpaid in the FTC deal to pre
vent Zuckerberg from digging into his own pocket to cover some of the financial hit to the company. The accord, which will be paid by an insurance policy covering Meta
directors, amounts to a recovery of 3%. In a court filing, the company denied wrongdoing and said the settlement wasn’t an admission that it was liable.
“We are pleased that a settlement was reached that reinforces our longstanding commitment to strong corporate governance,” Meta said in a statement Thursday.
The case centered on disclosures that an outside developer collected personal data from millions of Facebook users without their consent. Cambridge Analytic
a used the information after being hired by now-President Donald Trump’s 2016 election campaign.
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Meta shareholders sued Zuckerberg and other directors – including venture-capitalist Marc Andreessen – hoping a judge would hold them personally liable f
or billions in fines and legal costs tied to repeated violation of the company’s
privacy policies. FTC officials fined Facebook $5 billion in 2019 after finding it violated a 2012 agreement with regu
lators mandating it get users’ permission before sharing their data.
The deal also requires Meta to make changes to some of its corporate governance policies, including toughe
ning up privacy monitoring and making it harder to retaliate against employees who point out privacy missteps, acc
ording to court filings. Meta also agreed to set up a code of conduct for directors focused on avoiding conflict
s of interest and beefing up compliance with “laws and regulations,” the filings show.
Because it’s a derivative case — one that allows investors to sue board members on behalf of the company — the pr
oposed settlement must be approved by Chancery Judge Ka
thaleen S.J. McCormick. The $190 million in insurance payments will go back to the company rather than to any individual investor.
Lawyers for Meta investors – which include retirement funds and an individual shareholder – laid out the acc
ords’ terms in a filing designed to tee it up for approval by McCormick. Samuel Closic, a lawyer for Meta shareholders
who sued, said Thursday he was “proud of the settlement” and looked forward to presenting it to McCormick.
McCormick is the same judge who rejected Tesla Inc. CEO Elon Musk’s $55 billion pay package. That ruling and
a handful of others — part of a court crackdown on insider conflicts of interest — prompted several companies to
shift their states of incorporation to Nevada and Texas, including Te
sla and Bill Ackman’s Pershing Capital. They cited alleged judicial bias against tech leaders such
as Musk and Zuckerberg.
The wave of exits from Delaware, which funds more than a quarter of its budget with billions in corporate fees, led
to a major overhaul of the state’s corporate laws earlier this year. The changes were drafted by an expert panel that included former judges now practicing law at fir
ms linked to Musk and Zuckerberg, including one involved in the Cambridge Analytica case.
Meta officials have publicly said they are weighing whether to yank their incorporation papers out of Delaware, which is the corporate home to more than 60% of Fortun
e 500 companies. It’s unclear whether approval of the settlement will clear the way for the incorporation switch.