Facebook, Instagram and the Non-Role for the Board of Directors

According to the WSJ, the Facebook Board of Directors was presented with a proposal to buy Instagram with little notice and little involvement.  According to the article, the board was made aware of the acquistion when "the deal was all but done."  As one person put it, the board "[w]as told, not consulted."  The deal was negotiated by Mark Zuckerberg, the CEO and owner of 28% of the company's stock, 57% of the voting power. 

The article noted some possible advantages.  Mr. Zuckerberg was concerned that the CEO of Instagram might have reacted "negatively had he approached him through lawyers."  Moreover, the talks proceeded quickly. 

But the article also raises concerns about the role of the board.  There is nothing wrong with the CEO negotiating an acquisition.  There is nothing wrong with a plan to avoid inundating a CEO of a high tech company with lawyers.  But that is not an explanation for the failure to keep at least some directors informed or otherwise seek their advice.  It suggests that the role of the board is not to provide advice but to ensure legal sufficiency. 

This is not unusual.  See Essay: Neutralizing the Board of Directors and the Impact on Diversity.  But this may well result in an under utilization of the board.  It effectively deprives CEOs of advice that boards are in a unique position to provide. 

J Robert Brown Jr.