A Facebook shareholder filed suit Friday over the company’s plan to issue a new class of stock that would allow CEO Mark Zuckerberg to retain control of the social-media giant while plowing a huge chunk of his holdings into a philanthropic venture, Reuters reports. The suit in the Delaware Court of Chancery asserts that the firm’s Board of Directors "did not bargain hard" or “obtain anything of meaningful value" from Mr. Zuckerberg before proposing the three-for-one stock shift last week.
Pending shareholder approval at Facebook’s annual meeting in June, the company will issue two shares of the new, nonvoting Class C stock for each Class A and Class B share now held. Mr. Zuckerberg could then sell off existing stock to fund the Chan Zuckerberg Initiative — the limited-liability company through which he and his wife, Priscilla Chan, have pledged to invest $45 million in fighting disease, improving education, and other causes — without diluting his corporate control.
The lawsuit characterizes the plan as “a grant to Zuckerberg of billions of dollars in equity, for which he will pay nothing.” In a statement, Facebook said the stock shift “is in the best interests of the company and all stockholders." The firm has said that Mr. Zuckerberg’s leadership is key to its future success.