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Sonsini Part Of Search Team For Hiring New NYSE Chief By Deborah Lohse Mercury News
VALLEY LAWYER QUICKLY GAINED PROMINENCE AT BIG BOARD
September 20, 2003
As a storm over pay boiled into a top-level resignation this week at the New York Stock Exchange, one of Silicon Valley's top technology-industry lawyers, Larry W. Sonsini, emerged as a key figure.
First Sonsini was the board's choice for interim chairman. After he declined, on Friday he was chosen as one of six members charged with finding a new leader.
The drama underscored the fact that Sonsini, already a top West Coast power broker, has quickly risen to prominence at the East Coast institution he joined only two years ago. One of his strengths has been his experience in advising companies on how to meet new standards for corporate ethics.
"It doesn't surprise me that they'd turn to an experienced lawyer at this point precisely because of this issue of corporate governance,'' said Steve Diamond, a former lawyer at Sonsini's firm and a visiting professor at Cornell University.
Sonsini was appointed Friday to a six-member search committee to recruit a replacement for Richard Grasso, the Big Board's chairman of eight years who resigned abruptly Wednesday over criticism of his $140 million pay package.
Some were puzzled that Sonsini turned down the top job, saying he has the legal acumen, capital-markets background, and constituency-building qualities needed by the Big Board at this pivotal time.
"It's fair to say he's one of the most knowledgeable people in the area of corporate governance and highly respected,'' said Joseph Grundfest, Stanford law professor and a former SEC commissioner.
Sonsini declined to talk Friday about the events.
People close to him say that he refused the top job because of the speed with which he was being asked to decide, as well as a reluctance to sever ties to his clients and his firm. They say he also has respect for the existing procedures for emergency succession at the Big Board.
Trusted partners
Before turning it down, these people say, Sonsini gathered a small group of his law partners at the well-known firm of Wilson Sonsini Goodrich & Rosati to weigh the pros and cons of taking the job.
"The biggest struggle was why he would do this on a temporary basis,'' said one person.
Sonsini is known as the quiet power behind almost all of Silicon Valley's mega-deals -- including last year's merger of Hewlett-Packard and Compaq -- as well as trusted counsel to its biggest luminaries.
He sat in the audience quietly feeding information via headset to HP's general counsel during a pivotal shareholder meeting during the HP-Compaq merger battle, for instance.
And Sonsini personally has been tapped by some of the valley's top executives to explain and navigate them through the penalty minefield contained in the new Sarbanes-Oxley corporate governance law.
But his rejection of the top post left many wondering if Sonsini didn't like the prospect of having to explain why -- despite his rock-solid knowledge of corporate governance laws -- he voted along with the rest of the New York Stock Exchange board in favor of the employment contract and pay package that ultimately felled Grasso. Oversized pay packages have been criticized as irresponsible by corporate governance experts in recent years.
"I would expect someone like that to understand the issue,'' said Richard Koppes, former general counsel for CalPERS, the large state pension fund that Tuesday called for Grasso's resignation. Koppes nonetheless said he had great respect for Sonsini, and was withholding judgment until more facts emerge about the vote.
Documents released by the New York Stock Exchange imply that the board members outside of the compensation committee probably felt they had no say in the pay deal at that point.
According to the documents, which were sent to the Securities and Exchange Commission, in August 2003 when Grasso's contract was being extended and his $140 million pay package approved, ``some directors'' expressed concerns about the deal, which they learned was already legally binding.
That payout, which was supposed to be paid to Grasso as soon as possible in the coming years, was an acceleration of special retirement benefits earned in past years by Grasso. The deferred pay was costing the stock exchange millions of dollars a year in high interest, according to the documents.
Sonsini was concerned
A person close to the matter said that Sonsini was one of the directors who expressed concern about the pay, and suggested that the payouts begin quickly to halt the interest accruals. The directors, including Sonsini, also suggested that the pay package be fully disclosed, the person said.
Some shareholder activists remain unappeased and want all the NYSE board members, including Sonsini, to be ousted, then reinstated if they are found blameless in an independent inquiry.
``I have already called for all of them to be replaced,'' said Nell Minow, editor of the Corporate Library, a corporate governance information site. ``If you are going to have a system whereby the CEO selects all the directors and then the compensation doesn't have to be disclosed, that's a recipe for disaster, and I hold them fully accountable for the consequences,'' said Minow in a voice message from Washington, D.C.
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