Facebook’s Zuckerberg Must Adhere to Delaware Formality

In Ernesto Espinoza v. Mark Zuckerberg, et al. and Facebook, Inc., C.A. No. 9745-CB (Del. Ch. Oct. 28, 2015), the Delaware Court of Chancery held that "stockholder ratification of a self-dealing transaction must be accomplished formally by a vote at a meeting of stockholders or by written consent in order to shift the standard of review that otherwise would apply to such a transaction."

This action required the Court to review the board approved compensation the six non-executive members of Facebook’s eight-member board. At the outset, this intersected transaction is subject to the entire fairness standard of review.