We are co-lead counsel in a class action on behalf of Facebook stockholders challenging CEO Mark Zuckerberg’s proposal to secure perpetual voting control over Facebook by issuing a new class of non-voting common stock. Zuckerberg owns approximately 15% of Facebook’s outstanding shares but controls over 60% of the voting power through his ownership of ten-vote-per-share Class B stock. In 2015 Zuckerberg and his wife decided to create a charitable corporation to which they would give virtually all of their wealth, but Zuckerberg did not want to relinquish his voting control of Facebook.
Zuckerberg’s solution was to issue to all Facebook stockholders, including himself, new “Class C” stock that had no voting rights, so he could give away the no-vote Class C stock but keep the high-vote Class B stock and thereby maintain control for as long he wished. The issuance of the non-voting stock would substantially dilute the value of Facebook stock held by all other stockholders. Plaintiffs, including Swedish pension fund AP7, allege that Zuckerberg and the other members of Facebook’s Board of Directors, several of whom have close ties to Zuckerberg, breached their fiduciary duties by approving Zuckerberg’s plan to maintain perpetual control without compensating stockholders for the dilution the plan would inflict on them. The case is currently in the discovery phase and is scheduled to go to trial in October 2017.