Dawn Geske Jul. 8, 2016, 7:26pm

MENLO PARK – Social media giant Facebook has had a lawsuit filed against it just shortly after announcing a new stock structure.

The lawsuit filed against Facebook in April in the Delaware Court of Chancery claims that the individuals that bargained for the new structure didn’t bargain hard enough against CEO Mark Zuckerberg for anything of "real value” while giving him more control.

Under the new structure, shareholders have agreed to create a new Class C capital stock. In a one-time stock dividend, Facebook will issue two-nonvoting shares for each Class A and Class B share held by shareholders. The new stock structure is designed to focus on Zuckerberg’s long-term vision for the company and to encourage him to stay in an active leadership with Facebook.

While both Class A and Class B stocks offered shareholders voting rights, the new Class C stock doesn’t come with any voting rights. Under the new stock structure, Zuckerberg will remain in control of the company, owning 60 percent of the company’s stock, which he has announced he will be donating 99 percent of to charity along with his wife Dr. Priscilla Chan. This is valued at $45 billion.

Under new stock structure, the Class C stock will not trade under the FB ticker; it will be traded under a different symbol. The Class C shares will have all the same rights as the Class A and Class B shares, except for voting rights.

The new structure has come under fire as shareholders have expressed concern that the Class C stocks give too much control to Zuckerberg, making him the sole visionary for Facebook.

“The new C class does not give Zuckerberg more control but it does allow him to retain control moving forward because he will now retain his current voting power even though new equity is being issued,” Stephen F. Diamond, associate professor of law at Santa Clara University, told the Northern California Record. “The arrangement is bad for shareholders because it extends the time during which Zuckerberg will control the company. That means shareholders do not have a board that represents their interests.

“If you believe that Zuckerberg can effectively manage the growth of the company without genuine independent oversight, then it bodes well. But the record of single dominant controlling CEOs is generally not very good beyond a certain stage in the life of a company, particularly technology companies.”

Zuckerberg and Chan recently announced an investment in Andela, a startup company located in New York and Nigeria that works to train software developers in Africa.

Also, included in the stock announcement was the re-election of Facebook Board Director Peter Thiel. Thiel was an early investor in Facebook and has been criticized for funding lawsuits against Gawker Media. Facebook Chief Operating Officer Sheryl Sandberg said during this time Thiel acted independently from Facebook and would continue to sit on the board, despite the controversy.

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