With Facebook's massive IPO right around the corner, CEO Mark Zuckerberg made the company's largest acquisition ever without consulting his board of directors, according to an account in today's Wall Street Journal. Instead, the 27-year-old boss decided to buy the photo-sharing app Instagram for $1 billion from the privacy of his $7 million Palo Alto home, where he negotiated for three days with 28-year-old Instagram founder Kevin Systrom. Then, according to a Journal source, the board "was told, not consulted."
Zuckerberg controls 57 percent of Facebook voting rights, and can therefore do pretty much as he pleases. But with Facebook's public offering — and potential $100 billion valuation — only a few weeks away, spontaneous and improvisational business moves become more curious. In the words of the Journal, "These sorts of fast decisions, commonplace among scrappy, private start-ups, get trickier in the more structured world of multibillion-dollar public corporations where Facebook will soon operate."
Zuckerberg reportedly believed using lawyers right away might turn Instagram off the deal, and decided to put in the time in himself and go with intimacy instead. But to investors, the move can also be seen as a statement about the CEO's power, especially with the company about to enter a new chapter. Zuckerberg has already been criticized for skipping briefings with analysts about the IPO, and not treating investors with the appropriate warmth, perhaps indicating tensions to come in the public era.
The board, after all, has a purpose, as explained to the Journal by one business expert: "They are the last line of defense for minority shareholders." To Zuckerberg's credit, he talked Systrom down from $2 billion.