Since its inception, only a tiny population of people thought that the company would become such a successful company. Business people can attest to the fact that extremely successful organizations are likely to come face to face with some legal issues. Besides this, millions and millions of dollars are involved, most people would be interested in getting a slice of ownership of the firm (Hiskey, 2012).
However, the many challenges and the big settlements that Facebook encountered were avoidable. As the example of Facebook shows, simple college-dorm agreements may later on form the basis for very serious stock ownership battle. Despite the fact that majority of those who got involved with the founding of Facebook eventually became very rich, the complications emanating from their lack of understanding of the legal framework, resulted to some very serious issues, strained friendships, and eventually leading to some legal battles and settlements worth that amounted to millions or billions (Hiskey, 2012).
The question regarding if ones firm would become successful when started is a tricky question more so in the current 21st century dynamic business landscape. On one hand it might be successful if there is gap in the market, the consumers are in need of certain services/products and no one in the market has stepped forward to provide this services/products. In such a situation, there is a possibility that the company would be successful. On the other hand, if there are other firms offering some services/products, then it would be difficult for a start-up firm to be successful. This stems from the fact that the existing firms are controlling a certain share of the market and they have loyal customers.
Yes, it is mandatory and wise for other companies to take necessary precautions that Facebook did not take. At the end of it all, investors are only interested in ensuring that there is some gains from their investment, and that is usually a certain per cent of the equity/ownership of the company. Evidently, the investors are entitled to receiving good payment from their investment in the company .This is so since they are risking their hard earned cash to invest in the company. However, such important decisions shouldn’t be made lightly or without analysing legal aspect into the matter even when the firm is still at it initial stage of formation.
A good example relates to the Anti-trust legal monopoly case of Google, majority of the critics pointed out that Google never followed particular laws and policies of the regulation act. It was because of this violation of certain laws that led to Google to been sued by the EU for Google using its search-engine dominance to favour its own e-commerce services at the expense of other firms it’s was competing against. To reduce the happenings of such issues into the foreseeable future, firms need to ensure that they fully comply to every the legal requirements (Henthorn, 2011).
The connection between business people and stockholders must all times be grounded on legal contract. Such a move would solve many issues such as reducing any misunderstandings or legal challenges. With regards to the case study, all the partners would have been able to minimize conflicts via using contracts as the main donations by each partner so as to comply to all economic requirements of the industry and also the types of the management to the trade must also function in. Mark Zuckerberg and the other investors should have ensured that they made it clear what duties and responsibilities each investors to play at the start of the creation of Facebook. As time went by, the investor began to request for their legal rights due to the consequences and as a result of the failure to live up to their main duties. By doing this, it would have at once led to the establishment of tension and disagreements- as it was the case of Facebook.
The other challenge which came about as a result of Zuckerberg failure to inform that he had a conflict of interest when he initially worked at Winklevosses’ project. Saverin, a wealthy student, offered Zuckerberg with roughly $14,000 to purchase the servers for Facebook. As a result of this, Zuckerberg assigned Saverin about 29 % of the company. It was owing to this that such decisions came back to affect Zuckerberg. Such kinds of illegal issues led to a lot of challenges for the owners of Facebook. Owing to this issues, there is a great urgency for firms to ensure that that is full delegation of responsibility and clear division of shares in the agreements (Carlson, 2010).
While getting ready to launch The Facebook, Zuckerberg was also working for twins Cameron and Tyler Winklevoss and for Divya Narendra, who had hired him to work on their own social networking site. Their site had essentially the same concept that would become Facebook. The decision not to tell his employers that he was working on a competing site was another problem that would come back to haunt Zuckerberg and Facebook. Another complication came about because Zuckerberg failed to disclose that he had a conflict of interest while working on the Winklevosses’ project.
He launched Facebook some few days prior before its intended launch, and it was noted that Zuckerberg stole the concept and he knowingly postponed its launch so that he would be in a position to launch his project. After noticing this, the Winklevosses sued Zuckerberg. The courts ruled in favour of Winklevosses and it was concluded that Zuckerberg give Winklevosses over a million shares of Facebook stock and $20 million in cash. To prohibit this from occurring, Winklevoss twin and Divya Narendra should have developed a clear agreement with Mark Zuckerberg and which would have entailed prohibiting Zuckerberg from working on a similar project during the time period or until Mark was a staff of Winklevoss twins. Such a scenario or agreement would have benefitted both Mark and other party in the event the terms and conditions of their engagement was agreed upon initially (Sherman, 2010).
Carlson, N. (2010, March 5). At Last — The Full Story Of How Facebook Was Founded. Retrieved June 18, 2015, from
Henthorn, D. (2011). History of Facebook and Entrepreneur Mark Zuckerberg. Retrieved June 18, 2015, from http://www.brighthub.com/office/entrepreneurs/articles/47396.aspx
Hiskey, D. (2012, February 4). February 4th: Mark Zuckerberg Launches Facebook. Retrieved June 22, 2015, from http://www.todayifoundout.com/index.php/2012/02/february-4th-mark-zuckerberg-launches-facebook/
Sherman, E. (2010, May 13). Facebook’s Biggest Problem: Mark Zuckerberg Is a Kidiot. Retrieved June 22, 2015, from