Facebook Beats Preliminary Pay Challenge Alleging Mismanagement

Facebook Inc. doesn’t have to turn over its books to the municipal retirement systems accusing the social media giant of overpaying the top executives who led it into a major advertising scandal, a Delaware judge ruled Oct. 29.

• The Chancery Court suit sought corporate records that would allegedly have shown what Facebook’s leadership knew about its alleged scheme to jack up advertising rates based on distorted metrics, which has spawned multiple class actions.
• But shareholders can only get books that are relevant to a potential legal claim, and Facebook’s directors have broad contractual immunity from mismanagement allegations, so the suit needed to present evidence of disloyalty, bad faith, or excessive pay, according to the ruling by Vice Chancellor Joseph R. Slights III.
• The complaint was “devoid of any credible evidence” that would let a court analyze “the propriety, or not,” of Facebook’s executive pay levels, the judge said, declining to “second-guess” internal compensation decisions.