Facebook Paid $106 Million Not to Prosecute Zuckerberg

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Facebook has paid an additional $106 million to the American regulator to prevent its CEO from being personally prosecuted in the Cambridge Analytica scandal. Shareholders are furious that their company is paying for it.

 

A lawsuit by two shareholder groups against Facebook, Mark Zuckerberg, COO Sheryl Sandberg and its board of directors (including Marc Andreessen and Peter Thiel), claims that Facebook overpaid as much as €106 million in its fine to settle the Cambridge Analytica scandal. . The condition is that Zuckerberg would not be charged personally.

Facebook had to pay $5 billion to the American regulator FTC in response to the scandal. But in the meantime, internal documents have come out stating that the FTC also initially planned to sue Zuckerberg himself as CEO of the company. Facebook, therefore, decided to pay more to keep both Zuckerberg and his right-hand man Sheryl Sandberg out of harm’s way.

This is sensitive in terms of corporate governance. After all, Zuckerberg has all the power within Facebook. Although it is a publicly-traded company, it operates a structure in which mainly Zuckerberg shares have voting rights. The case suggests that Facebook’s top executives have let their own company pay for their mismanagement, detrimental to shareholders.

The case is quite complex as it actually progresses from a February 2019 lawsuit. Still, several documents have gone public through other legal proceedings in recent months, which now also show that the FTC initially planned to prosecute Zuckerberg.

The lawsuit supplement also highlights some of Zuckerberg’s other mistakes. For example, during the US congressional hearing, he remained vague on whether senior management knew Cambridge Analytica practices. However, based on internal documents at Facebook, the lawsuit claims that at least three senior executives were aware of the privacy concerns in early 2015.

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