Meta Platforms Inc. has agreed to pay $190 million to settle claims that its board, including CEO Mark Zuckerberg, failed to stop repeated privacy violations and arranged a deal to protect Zuckerberg from personal liability. The settlement was revealed in Delaware Chancery Court filings on Thursday after being kept secret since a trial was paused in July.
This lawsuit was brought by Meta investors who accused the board of mishandling the fallout from the Cambridge Analytica scandal and approving a $5 billion settlement with the U.S. Federal Trade Commission (FTC) that unfairly shielded Zuckerberg. Investors sought at least $7 billion in damages, arguing the board overpaid in the FTC deal to avoid Zuckerberg having to pay out of pocket.
The $190 million settlement will be paid through an insurance policy covering Meta directors and will go back to the company rather than to individual shareholders. Meta stated that the settlement is not an admission of wrongdoing.
The core issue arose from the discovery that an outside developer collected personal data from millions of Facebook users without their consent. Cambridge Analytica later used this data during Donald Trump’s 2016 presidential campaign. The FTC fined Facebook $5 billion in 2019, finding that it had violated a 2012 agreement that required obtaining user permission before sharing data.
As part of the settlement, Meta agreed to update its corporate governance. This includes stronger privacy monitoring, protections against retaliation for employees who report privacy issues, and a new code of conduct for directors to avoid conflicts of interest and improve legal compliance.
The case, known as Facebook Derivative Litigation, is a type of lawsuit where investors sue board members on behalf of the company. The settlement still needs approval from Judge Kathaleen S.J. McCormick in Delaware’s Chancery Court.
Lawyers representing Meta investors, including retirement funds and individual shareholders, expressed satisfaction with the settlement. The same judge previously rejected Elon Musk’s $55 billion pay package at Tesla, a decision that, along with others, led several companies to change their state of incorporation from Delaware to places like Nevada and Texas.
Meta has said it is considering moving its incorporation out of Delaware, which hosts more than 60% of Fortune 500 companies, but it’s unsure if settling the case will influence that decision.
The $190 million settlement closes a chapter on one of Facebook’s most significant privacy controversies, but it also sets new demands on how Meta handles privacy and corporate responsibility going forward.