Meta shareholders are suing the company’s board for allegedly failing to enforce privacy rules

Meta’s executives will meet in a Delaware court starting Wednesday over a lawsuit filed by three minority shareholders who allege that the company’s board of directors failed to enforce privacy rules. While some have complained about how it is almost impossible to hold big tech companies accountable, Meta has come under fire from within for prioritizing its CEO’s personal protection over user privacy. $5B data privacy scandal Meta’s executives, including its chief executive Mark Zuckerberg and former COO Sheryl Sandberg, will appear in a Delaware corporate law court this week over a shareholder lawsuit that is accusing the company’s board of mismanaging privacy controls and approving a record $5B fine to shield Zuckerberg from personal liability. The trial will begin on Wednesday and go on for eight days. The case goes back to Meta’s 2019 settlement with the U.S. Federal Trade Commission ( FTC ), following the Cambridge Analytica scandal in which the personal data of millions of users of the app was harvested through a third-party app and shared without consent. Meta’s shareholders have alleged that the company’s board breached its fiduciary duties by failing to uphold a 2012 FTC consent decree, and that the $5B settlement was unjustly high and designed to protect Zuckerberg’s personal interests rather than serve the company or its shareholders. The lawsuit was filed by three minority shareholders and names several prominent current and former directors, including venture capitalist Marc Andreessen, Investor Peter Thiel, Netflix’s co-founder Reed Hastings, Kenneth Chenault, the former American Express CEO, and Jeff Zients, a former Biden adviser. All of these individuals are expected to testify. Caremark claim moves ahead in Delaware court The trial is especially notable as it is one of the first “Caremark” claims in Delaware. Caremark lawsuits are those alleging a board’s failure to oversee corporate compliance. Historically, such claims struggle to survive early dismissal. The plaintiffs claim that Meta’s board approved the $5B FTC fine without conducting an internal investigation, thereby protecting Zuckerberg from being named personally in the FTC case. They further claim that Zuckerberg unlawfully sold billions in company stock while possessing material non-public information about Facebook’s undisclosed data-sharing practices. In court filings, Meta and the defendants deny these allegations. They argue that the company’s directors did not knowingly violate the 2012 consent decree and acted prudently within their fiduciary duties. Meta maintains that, after the decree, the company implemented “a robust system of privacy controls,” and that there is no evidence of misconduct from the board. Despite these defenses, the core Caremark claim has already survived Meta’s motion to dismiss. Sandberg has also already faced sanctions in the case. The court sanctioned her earlier this year for deleting Gmail messages after being notified of the lawsuit. Sandberg stepped down from her role as Meta’s COO in 2022 and left the board in 2024. Meta’s market capitalization has grown to nearly $2T. The lawsuit has revived longstanding concerns about how aggressively the company pursued growth at the expense of user privacy and public trust. Critics argue Meta’s pursuit of engagement led to its mishandling of systemic data and amplified online harms such as misinformation and hate speech. Chancellor Kathaleen McCormick, who will oversee the Meta case, also made headlines in 2024 for rescinding Tesla’s $55B pay package for CEO Elon Musk. The lawsuit has prompted unease among tech leaders like the venture capital firm, Andreessen Horowitz, co-founded by Meta board member Marc Andreessen, which announced its plans to move its incorporation from Delaware to Nevada. The firm cited “unprecedented subjectivity” in Delaware’s judicial decisions. “What’s at stake is the trust of the company — not just for the users but for the shareholders,” Jason Kint, the CEO of the online publishing group Digital Content Next, said regarding the matter. Your crypto news deserves attention – KEY Difference Wire puts you on 250+ top sites

Source: Cryptopolitan