Shares of social network Facebook (NASDAQ:FB) are currently trading at or near all-time highs following a solid earnings release. With that in mind, all of the equity grants that insiders have received in recent years are doing quite well. But one shareholder thinks Facebook has been a little bit too generous when it comes to compensation, particularly as it relates to Facebook's board of directors.

Shareholder Ernest Espinoza filed a class action lawsuit against Facebook last year, alleging that Facebook overpays its board of directors. The lawsuit is now proceeding through the courts, and a Delaware judge recently rejected Facebook's request to toss out the lawsuit.

That's a lot
Facebook's board currently includes six non-executive directors: Marc Andreessen, Erskine Bowles, Susan Desmond-Hellmann, Reed Hastings, and Peter Thiel. Facebook's board has changed slightly over the past couple of years. At issue is what Facebook's non-executive directors were compensated in the form of stock-based compensation for 2013, although their 2014 compensation was comparable.

Director

2013 Stock Awards

2014 Stock Awards

Marc Andreessen

$387,874

$320,551

Erskine Bowles

$387,874

$320,551

Donald Graham

$387,874

$320,551

Reed Hastings

$387,874

$320,551

Susan Desmond-Hellmann

$935,874

$320,551

Peter Thiel

$387,874

$320,551

Source: Facebook proxy statements.

This table doesn't include cash salaries or retainers, which range from around $50,000 to $100,000 for Facebook's board. Desmond-Hellmann's 2013 stock awards were higher because she joined Facebook's board in 2013 and she received a sizable grant alongside her initial appointment that vests over four years.

Jan Koum's compensation is not shown in the table. Although it was significant in 2014 (about $2 billion in stock awards) after Facebook closed the WhatsApp deal and he was appointed to the board, the class action lawsuit is regarding 2013 compensation.

Overall, the lawsuit says that Facebook awarded $461,000 on average to all of its directors, compared with the $320,000 peer average.

But is it too much?
The lawsuit notes that Facebook pays non-executive directors 43% more than its peers, even as its net income and revenue are 66% and 49% lower, respectively. According to the lawsuit, the only limit on stock awards for directors is 2.5 million shares in a single year. Since that limit is so high, it can't be considered a "true limit." When the lawsuit was filed, 2.5 million shares would have been worth $145 million.

There are numerous companies in Facebook's self-identified peer group, but LinkedIn (NYSE:LNKD) is the most similar. While Facebook's director compensation is higher than LinkedIn's, the professional networker's director compensation could arguably be even more overpaid based on relative net income and revenue levels.

Company

2013 Revenue

2013 Income

2013 Per-Director Compensation

Facebook

$7.9 billion

$1.5 billion

$461,000

LinkedIn

$1.5 billion

$27 million

$350,000

Source: Court filings.

Espinoza also takes issue with the fact that the board can effectively set its own compensation under the 2012 Equity Incentive Plan that Facebook adopted in 2012. Making matters worse, Mark Zuckerberg controls 60% of the company's voting power, so he can singlehandedly enact virtually any shareholder action he sees fit.

Evan Niu, CFA owns shares of Facebook and LinkedIn. The Motley Fool owns shares of and recommends Facebook and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.