{"id":34200,"date":"2025-07-14T04:06:21","date_gmt":"2025-07-14T04:06:21","guid":{"rendered":"https:\/\/financialrush.com\/?p=34200"},"modified":"2025-07-14T04:06:21","modified_gmt":"2025-07-14T04:06:21","slug":"meta-trial-becomes-test-of-board-culpability-over-corporate-scandals","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=34200","title":{"rendered":"Meta trial becomes test of board culpability over corporate scandals"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=19a5187f-1026-4559-a5bd-a04e1e255973\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Meta luminaries will publicly testify in a Delaware corporate law court this week over shareholder allegations that board mismanagement was directly responsible for billions in sanctions that the social media group paid over data breaches.\u00a0<\/p>\n<p>Two of Facebook parent company\u2019s best known executives, chief executive Mark Zuckerberg and former chief operating officer Sheryl Sandberg, are listed as witnesses in the eight-day trial, which starts on Wednesday. <\/p>\n<p>Longtime director and investor Marc Andreessen, as well as former board members Jeff Zients, a former top adviser to former US president Joe Biden, are also set to appear. Other director defendants include the investor Peter Thiel, Kenneth Chenault, the former American Express chief executive and Reed Hastings, the Netflix co-founder. <\/p>\n<p>The lawsuit, brought by three tiny minority <a href=\"https:\/\/www.ft.com\/stream\/7e37c19e-8fa3-439f-a870-b33f0520bcc0\" data-trackable=\"link\">Meta<\/a> shareholders, is the first time a complaint over a board\u2019s culpability for a corporate scandal has reached a trial in Delaware, where most such lawsuits are quickly dismissed.\u00a0<\/p>\n<p>In a handful of instances, companies have settled litigation over board oversight charges, most notably the directors of Boeing who agreed to pay $237.5mn over shareholder charges that the highest levels at the aviation titan failed to prevent the 737 Max scandal.<\/p>\n<p>In the lawsuit, the shareholders accuse Meta\u2019s directors of knowingly overseeing lax privacy practices, in violation of a 2012 consent decree struck with the US Federal Trade Commission designed to protect users\u2019 personal information \u2014 claims that the defendants reject.\u00a0<\/p>\n<p>The FTC later launched an investigation into Facebook\u2019s parent triggered in particular by the Cambridge Analytica scandal in which user data was leaked to a political research group through a third-party app.<\/p>\n<p>The suing shareholders have asked for damages stemming from the $5bn settlement struck with the FTC in 2019 following the investigation. According to the plaintiffs, the board \u201cprotected\u201d Zuckerberg by approving the price tag without any internal investigation, in return for the FTC agreeing to drop his name as an individual defendant in the case.\u00a0<\/p>\n<aside aria-labelledby=\"aside-label\" class=\"n-content-recommended--single-story n-content-recommended--inset\" data-component=\"recommended\">\n<p class=\"n-content-recommended__title o3-type-body-highlight\">Recommended<\/p>\n<div class=\"o-teaser o-teaser--article o-teaser--small o-teaser--stacked o-teaser--has-image js-teaser\" data-id=\"a86f5ca3-f841-4cdc-9376-304e085c4cfd\">\n<div class=\"o-teaser__image-container js-teaser-image-container\"><a href=\"https:\/\/www.ft.com\/content\/a86f5ca3-f841-4cdc-9376-304e085c4cfd\" data-trackable=\"image-link\" data-trackable-context-story-link=\"image-link\" tabindex=\"-1\" aria-hidden=\"true\"><\/p>\n<div class=\"o-teaser__image-placeholder\" style=\"aspect-ratio:2675\/1505\"><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/aside>\n<p>Plaintiffs also allege that the founder \u201cunlawfully sold billions of dollars of Meta stock because of the material non-public information (\u201cMNPI\u201d) he had regarding the company\u2019s illicit, undisclosed data sharing practices\u201d.\u00a0<\/p>\n<p>Meta declined to comment on the case. In court filings, the defendants argue that the social media company\u2019s directors did not knowingly violate the 2012 consent order, and that the board\u2019s decision-making was prudent and not conflicted.\u00a0<\/p>\n<p>Meta faces continued regulatory and legal scrutiny over issues including privacy and antitrust. Critics have argued that its aggressive hunt for growth and profits as a younger company led to online harms, with the company accused of amplifying hate speech and misinformation to juice engagement, or having poor data management practices. More recently, it has poured billions of dollars into trying to become a leader in artificial intelligence.<\/p>\n<p>\u201cThe allegations are significant in terms of who knew what and when during their largest scandal that they\u2019ve had as a company,\u201d said Jason Kint, a Big Tech critic who leads the Digital Content Next trade group of online publishers. \u201cWhat\u2019s at stake is the trust of the company \u2014 not just for the users but for the shareholders.\u201d<\/p>\n<p>Shareholder lawsuits alleging poor board oversight have become known as \u201cCaremark\u201d claims, named for the healthcare company whose shareholders alleged corporate law liability over criminal fraud charges in the 1990s at the healthcare company.\u00a0<\/p>\n<p>Scholars and judges have long been sceptical that wrongdoing stemming from business operations far removed from the boardroom could be pinned on the offending company\u2019s directors. Directors can also offer a defence that pushing the boundaries of the law is consistent with maximising shareholder value. In the case of Meta, its market capitalisation has soared to nearly $2tn.<\/p>\n<p>\u201cIncreasingly there is a view that other regulators are not robustly doing their job and only corporate law and securities law can bail out victims,\u201d said Ann Lipton, a law professor at the University of Colorado.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n<aside aria-labelledby=\"aside-label\" class=\"n-content-recommended--single-story n-content-recommended--inset\" data-component=\"recommended\">\n<p class=\"n-content-recommended__title o3-type-body-highlight\">Recommended<\/p>\n<div class=\"o-teaser o-teaser--article o-teaser--small o-teaser--stacked o-teaser--has-image js-teaser\" data-id=\"9effb213-6ec7-4f3a-9f81-b235bfc0c108\">\n<div class=\"o-teaser__image-container js-teaser-image-container\"><a href=\"https:\/\/www.ft.com\/content\/9effb213-6ec7-4f3a-9f81-b235bfc0c108\" data-trackable=\"image-link\" data-trackable-context-story-link=\"image-link\" tabindex=\"-1\" aria-hidden=\"true\"><\/p>\n<div class=\"o-teaser__image-placeholder\" style=\"aspect-ratio:2048\/1152\"><img decoding=\"async\" class=\"o-teaser__image\" src=\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fwww.ft.com%2F__origami%2Fservice%2Fimage%2Fv2%2Fimages%2Fraw%2Fhttps%253A%252F%252Fd1e00ek4ebabms.cloudfront.net%252Fproduction%252Ffca782fb-1852-4ce3-b1c0-2b8cbe31bb74.jpg%3Fsource%3Dnext-article%26fit%3Dscale-down%26quality%3Dhighest%26width%3D700%26dpr%3D1?source=next&amp;fit=scale-down&amp;dpr=2&amp;width=240\" alt=\"\"\/><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/aside>\n<p>Meta notes in its court briefs that Delaware judges have previously remarked that a Caremark claim \u201cis possibly the most difficult theory upon which a plaintiff might hope to win a judgment\u201d and that Meta\u2019s \u201cevidence will show that Facebook implemented a robust system of privacy controls\u201d after the 2012 FTC consent decree.<\/p>\n<p>The company has, however, already faced setbacks. The core Caremark claim from the plaintiffs has already survived Meta\u2019s motion to dismiss. <\/p>\n<p>Separately, the court earlier this year granted sanctions against Sandberg, who left her <a href=\"https:\/\/www.ft.com\/content\/d49b2e30-ac53-4e92-a984-f48b8cc654fb\" data-trackable=\"link\">executive role in 2022 <\/a>and the Meta board in 2024, for deleting email messages from her Gmail account after being put on notice about the lawsuit.\u00a0<\/p>\n<p>Last week, venture capital firm Andreessen Horowitz said it would move its incorporation from Delaware to Nevada, citing \u201crecent actions by the [Delaware] Court of Chancery, which have injected an unprecedented level of subjectivity into judicial decisions, undermining the court\u2019s reputation for unbiased expertise\u201d.<\/p>\n<p>The Financial Times has previously reported that Meta has pondered moving its incorporation out of Delaware, the state that has traditionally dominated incorporations by both public and private companies. <\/p>\n<p>Technology companies have been spooked by the 2024 decision by Delaware Chancellor Kathaleen McCormick to <a href=\"https:\/\/www.ft.com\/content\/ac1a0f88-d4f4-42e6-ae05-77fb9348792f\" data-trackable=\"link\">rescind a $55bn pay deal<\/a> that Tesla had previously struck with its chief executive, Elon Musk. That case will soon be heard on appeal by the Delaware Supreme Court.\u00a0\u00a0<\/p>\n<p>Chancellor McCormick is the judge who will now oversee the Facebook trial. \u00a0<\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/19a5187f-1026-4559-a5bd-a04e1e255973\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this&hellip;\n","protected":false},"author":7,"featured_media":34201,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-34200","post","type-post","status-publish","format-standard","has-post-thumbnail","category-tech","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/34200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=34200"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/34200\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/34201"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=34200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=34200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=34200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}