Social media giant Facebook’s co-founder and CEO, Mark Zuckerberg, will have to testify this November in court to explain why he abandoned a plan to create non-voting shares.
The shares would have allowed Zuckerberg to retain control of the company after selling most of his stake to fund charitable endeavors.
The CEO has been ordered by a Delaware Chancery Court Judge, Judge Travis Laster, to testify on November 19th in a lawsuit brought by investors to recoup legal fees incurred in stopping the plan.
Lawyers for the investors are seeking $129 million from Facebook while Facebook officials are arguing that the investors only deserve $20 million. Judge Laster wants to hear from Zuckerberg in order to make a decision on which value.
There is also another group of investors that are suing Zuckerberg as well as other Facebook directors in the same court right now, who say that board members should be held accountable of the chummy way they considered the founder’s request for the creation of non-voting shares.
“The reclassification proposal has been withdrawn,” stated Vanessa Chan, a Facebook spokeswoman.
“The only issue still being litigated is compensation for plaintiffs’ lawyers, who are seeking the second-highest fee in the history of the court. We continue to oppose their efforts to recover a windfall at the expense of stockholders.”
Judge Laster has scheduled three consecutive days for Zuckerberg’s testimony in the September 6 order that was given to him.
“Over the past year and a half, Facebook’s business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more,’’ Zuckerberg said in September of 2017.
In a post on Facebook, Zuckerberg wrote on September 22nd:
I want to share some important news about Facebook and how Priscilla and I are funding our philanthropy.
I’ve often said Facebook was not originally founded to be a company, but to accomplish a social mission. To help us focus on our mission and make decisions that don’t always pay off right away, Facebook has always been structured as a controlled company. This has helped us serve our community best.
At the same time, Priscilla and I also feel a responsibility to do our part to address global challenges — like curing all diseases in our children’s lifetime and personalizing education for every student.
That’s why, last year, I shared a proposal announced by Facebook’s board of directors to create a new class of Facebook stock. The idea was that it would allow me to keep voting control of Facebook so we can continue to build for the long term, but also allow Priscilla and me to fund the work we’re doing through the Chan Zuckerberg Initiative.
At the time, I felt that this reclassification was the best way to do both of these things. In fact, I thought it was the only way. But I also knew it was going to be complicated and it wasn’t a perfect solution.
Today I think we have a better one. Over the past year and a half, Facebook’s business has performed well and the value of our stock has grown to the point that I can fully fund our philanthropy and retain voting control of Facebook for 20 years or more. As a result, I’ve asked our board to withdraw the proposal to reclassify our stock — and the board has agreed.
I want to be clear: this doesn’t change Priscilla and my plans to give away 99% of our Facebook shares during our lives. In fact, we now plan to accelerate our work and sell more of those shares sooner. I anticipate selling 35-75 million Facebook shares in the next 18 months to fund our work in education, science, and advocacy.
We have a lot of work ahead at Facebook to help build community and bring the world closer together. We also have a lot of work at the Chan Zuckerberg Initiative working with amazing scientists, educators, and doctors around the world who need support today, not decades from now. This path offers a way to do all of this, and I’m looking forward to making more progress together.