FORTUNENovember 27, 2006 the Man T o See In The valley

from Apple to NETSCAPE TO Hewlett-Packard to youtube, larry sonsini ha s been the most important lawyer in the most important i ndustry for 30 years. Now his legacy is under scrutiny as the twin scan dals of options backdating and “pretexting” raise the question: I S he too close to the companies he represents? by roger parloff

“I first remember hearing Larry Sonsini’sname probably in the industry. But he’s more. Sonsini, 65, is an integral part in 1986 or 1987,” says Dave Roux, who co-founded Silver Lake of Silicon Valley’s history and culture. He’s the unflappable, Partners, a private-equity firm in eM nlo Park Calif., focusing low-key business advisor everyone trusts, which is saying a lot on technology investments. in a community of super-smart, hyperaggressive egomaniacs. Back then, when Roux lived on the East Coast, he was at a He’s the behind-the-scenes player to whom the executives at meeting of the board of Lotus Development in Boston, when the most innovative companies of the Digital Age take all their someone suggested they find the “East Coast Larry Sonsini” to toughest business problems. act as their lawyer. Larry Who? Roux asked. “They explained This year, though, Sonsini’s 40th with the Palo Alto firm of to me that he was the Larry Bird of Silicon Valley,” he says. Wilson Sonsini Goodrich & Rosati, he’s found himself shoved “The go-to guy when you need the thing to work. The ice-in- uncomfortably into the spotlight. Some newspaper readers first his-veins, blue-collar, scramble-for-the-ball, great-teammate, learned his name in July, when it appeared in articles about the no-ego, championship-caliber guy.” options-backdating scandal. Many of the implicated companies Twenty years later everybody in the tech business knows were tech firms, and a high percentage of them were his clients. Sonsini. He is the most influential and well-connected lawyer In September his name came up again when he was called be-

photograph by Albert Watson prince of the valley fore a subcommittee of the U.S. House Energy and Commerce his stomach,” his drive to excel at anything he does. In 1984, Committee to answer questions about Hewlett-Packard’s now when Latta was still a young associate, Sonsini invited him infamous board leak investigation. Rival lawyers and corporate- and another lawyer to fill out a foursome at the nearby Sharon governance watchdogs then piled on, raising questions about Heights golf course. At the time, says Latta, Sonsini preferred whether Sonsini wore too many hats in the Valley, by investing tennis and wasn’t much of a golfer. When Latta arrived, Sonsini in clients and serving on their boards. Maybe he represented and client Ken Oshman—the “O” in telecom-equipment maker so many clients, they argued, that he was risking conflicts of ROLM Computer—were already banging balls on the driving interest. range with strange intensity. Latta then discovered that Sonsini There’s no disputing that Sonsini’s client roster is long. It and Oshman had already played an 18-hole round that morning; could serve as an outline for a history of the digital revolution. he would be joining them for their second round of 18. Then He started out working for semiconductor companies like LSI Latta found out what was going on. “Oshman’s company was Logic, Cypress Semiconductor, and National Semiconductor, being acquired by IBM,” he explains, “and the IBM guys are then moved on to hardware companies like Silicon Graphics, serious golfers. So Oshman and Larry are going to get good at Apple Computer, Sun Microsystems, and Seagate Technolo- golf. Larry’s not going to do something that he isn’t going to be gies, then represented software firms like Novell, WordPerfect, good at. They must have been out there for nine hours.” and Sybase, and finally added Internet pioneers like Netscape, Sonsini was born in Rome, N.Y. When he was 8, his father, a Google, and YouTube. This month Sonsini will complete an- quality-control inspector at Revere Brass & Wire, packed up his other defining deal, the $17.6 billion acquisition of client Fre- family and moved. “Rome wasn’t growing,” says Sonsini, “and escale Semiconductor by private-equity investors—the largest he had an itch.” In Los Angeles, Sonsini’s father found work tech buyout ever. with Hughes Tool Co. and, though he had no college education, This is the story of how a modest securities lawyer became the climbed through the ranks to the No. 2 position. “He instilled in most powerful man in the most crucial sector of the American me a very strong work ethic,” says Sonsini. “It wasn’t important economy. And what it means when a player noted for his probity what you did, but it was important that you do something and and unfailingly good judgment suddenly finds his name being do it well.” linked to some pretty sleazy behavior. Despite his slight build, Sonsini became a quarterback in high school and then, as just a freshman at the University of driven California at Berkeley, a first-string varsity rugby player on a At an interview in Sonsini’s Palo Alto office in October, his team in contention for the national title. Yet Sonsini gave up discipline and organization are immediately apparent. Papers college athletics in his second year to focus on his studies. “I are arranged in neat, evenly spaced stacks across his desk. The wanted to be a professional,” he says, “and I wasn’t going to be desk is modest in size, with clean, modern lines—no frippery. a professional athlete.” He is dressed elegantly in a dark suit and tie, which stand out in Upon graduating in 1963, Sonsini entered Berkeley’s Boalt Silicon Valley, where business casual was born and still flour- Hall School of Law. During the spring of his first ey ar, in 1964, ishes. At five foot ten and 165 tear gas periodically wafted pounds, Sonsini is fit from over the campus from Sproul morning workouts in his home Hall, for this was the year gym. He weighs slightly less THE ROAD TO APPLE of the Free Speech Move- than he did in college. ment—the opening bell of the Sonsini speaks calmly in ’60s. But Sonsini was “a pure a confident, voice-of-God 1959 Berkeley freshman observer of it all,” he says. baritone that a network news 1966 Graduates from law “I was so consumed in law anchor would covet. There is school at the University school.” (Though several of no irony, sarcasm, or cynicism of California at his partners today are major evident in him, and he seems Berkeley, becomes first political fundraisers—John guileless in comparison to associate for McCloskey Apple’s Roos for Democrats and Bo- Wilson & Mosher. many East Coast lawyers. ipo ris Feldman for Republicans His sentences end promptly •Does his firstI PO for $101 —Sonsini’s own politics are as soon as he has answered a Coherent Radiation. largely unknown, even to his question, another uncommon 1978 Firm renamed Wilson Sonsini million partners.) trait in his bill-by-the-hour Goodrich & Rosati. profession. He is more Gary 1980 represents Apple Computer in something Cooper than Cary Grant. unique What’s concealed is what Other Clients during this era A lready determined to his partner Bob Latta refers Sun Microsystems, Quantum become a business lawyer, to as the “nuclear reactor in Sonsini signed on as a research prince of the valley assistant to professor odrich & Rosati. Richard Jennings, a frosty palo alto heats up Though the firm repre- don who had co-authored the sented venture capitalists first casebook on securities 1988 WSGR surpasses all Bay Area law firms in and investment bankers from regulation. Though most profitability. time to time, its preference Boalt graduates joined big 1994 Novell acquires WordPerfect. Sonsini, who was to represent the start- commercial firms in New had represented both, resigns from Word- ups themselves—a strategy York, Los Angeles, or Perfect’s board and gets not always understood by San Francisco, Jennings waivers permitting him to represent Novell. its younger lawyers. Latta suggested to Sonsini that 1995 Netscape IPO starts remembers when he was an he look at a tiny outfit in Internet bubble by showing associate in the 1980s be- Palo Alto. “Dick said to me, that a company with no ing in Sonsini’s office one ‘There’s something going on earnings can go public. day when Sonsini took a call down in the Valley. There •Pixar’s $132 million IPO on the speakerphone from are a lot of young businesses •Netscape IPO starts Internet bubble by Bill Hambrecht and George starting, and they ’re showing that a company with no earnings Quist. Their firm was then companies that are going can go public. the dominant high-technol- to have to go public.’ ” ogy underwriter in San Fran- At that time Santa Clara netscape’s cisco, and they had called to Valley was already home ipo inquire if Wilson Sonsini to a handful of mature Other Clients during this era $140 would agree to become their tech companies, includ- Cypress, Sybase, Silicon Graphics regular outside counsel. “I ing Hewlett-Packard and million think I literally got out of the Fairchild Semiconduc- chair and started jumping up tor. Hewlett-Packard— and down,” Latta recalls. He launched from a garage and dedicated to innovation—was was gleeful, he explains, because he thought that now he’d serving as an inspiration and paradigm for many young entre- have a shot at making as much money as his classmates who’d preneurs. Early venture capitalists were providing seed capi- gone to San Francisco firms. “But Larry doesn’t hesitate for tal. Thanks to liberal intellectual-property policies, Stanford a second,” Latta continues. “Immediately he takes this apolo- and Berkeley were letting their engineering graduates try to getic tone and starts talking about why that’s not a good idea commercialize inventions they’d come up with while still in for them. That there are several law firms up in San Francisco school. “It was still early,” Sonsini says, “but you could see it. that can do just a fine job of representing them, whereas there’s Something unique was happening.” really only one firm down in Palo Alto that can do a good job Though the starting pay was well below San Francisco rates— of representing the companies they want to back. ‘Isn’t my and notwithstanding that Sonsini had no savings and that his highest and best use for you to continue to do what I’m doing? wife was pregnant with their first child—he rolled the dice with And if, by the way, that means you introduce these companies the firm then called McCloskey Wilson & Mosher, where he to me if you get to them before I do, that would be appreciated.’ became the first associate. His new mentor was John Wilson, It was just brilliant.” then 50, who after a distinguished legal career in the East had Sonsini explains: “My view was that representing companies moved to the Valley in 1956. (Wilson died in 1999.) enables you to get involved at all stages of their growth. You “So we started to develop the recipe for how to build com- develop a breadth and depth that makes you a better advisor panies,” Sonsini recalls. The recipe required entrepreneurial- and a better lawyer. It was also a fundamental part of the busi- ism, capital, and infrastructure, and Wilson’s law firm was part ness plan. Many law firms at that point ew re focusing more on of the infrastructure. “I was becoming a piece of the recipe,” the capital markets side, representing investment banks, and Sonsini says. to me that left a great opportunity to really develop the other “What I was learning very early on,” he continues, “was that side of the business.” I could build an enterprise too. In fact, I had to.” Wilson and There was also one fringe benefit to representing the com- Sonsini both wanted to continue to represent their clients as panies. Senior corporate lawyers at Valley firms sometimes got they grew, rather than handing them off to larger firms when opportunities to invest in clients at the venture capital stage. they went public. To do that, they’d need additional expertise, Most startups would fail, but those that went public could pay and Sonsini was put in charge of figuring out which new spe- off handsomely. Taking stakes in clients, however, created a cialists the firm een ded, and then recruiting them. “So I guess potential for conflicts of interest. If a lawyer holds stock in a I was thrown early on into a leadership role,” he says. In 1973 client company, for instance, and then has to decide whether his name went on the door, and in 1978 the firm, still with ef wer the client needs to disclose information that will cause its stock than 15 lawyers, adopted its current name: Wilson Sonsini Go- price to plummet, the lawyer’s judgment might be clouded. prince of the valley

Such investing might also trigger internal rifts at a law firm, smart, headstrong, combative, abrasive—it becomes appar- since only the corporate lawyers were likely to get the oppor- ent that these are not the easiest people to advise. Yet they all tunities, leaving their partners in other specialties out of a seemed willing to listen to Sonsini. lucrative loop. “I don’t take orders well,” says T.J. Rodgers, the founder, So in 1978 Wilson Sonsini set up WS Investments, a fund chairman, and CEO of Cypress Semiconductor. “But taking designed to manage both problems. Each partner’s pay would advice from Larry Sonsini is easy. He’s professorial. He’s non- automatically be docked to create the fund—the deductions judgmental. ‘You can choose to do this, you can choose to do were mandatory—and each would, in turn, have a stake in that, and these will be the consequences.’ So you realize you’re the proceeds. Small investments in private companies could not being forced or pushed into anything. He explains to us then be made when opportunities arose—typically $25,000 to why the sometimes frustrating, arcane, and inefficient system $50,000, according to Sonsini. (Still, the payouts could be big. we have makes sense, or at least made sense at one time, and The fund’s investment in Google, for instance, was worth close therefore should be followed.” to $20 million after the company’s IPO in 2004.) This way, each These entrepreneurs were so eager to use him that they did partner’s stake in the fate of any one client would be diluted and not seem to mind that he often also represented their competi- all partners got a piece of the action. tors. For a period in the 1980s, Sonsini was representing Seagate “It’s an opportunity for a return,” Sonsini says of the fund. Technologies, Conner Peripherals, and Quantum, which were “And many times it’s how we get paid. [Startups] don’t have then the country’s three largest disk-drive companies—and any money. So if I invest $25,000, you know what he does? bitter enemies. “It’s a tradeoff,” says Steve Luczo, Seagate’s Over a period of 12 months he pays us $25,000 back in the way chairman and former CEO. “Because he’s counsel to the three of legal fees.” biggest, he’s also most aware of the issues that face the industry. In later years, investing in startup clients became a nearly That’s what you want.” In addition, Luczo says, he trusted Son- universal practice among Silicon Valley law firms. eN vertheless, sini to keep his confidences. “We’re not idiots,” he says. “Would many East Coast lawyers and other critics condemn it because you do that all the time? No. With Larry? Yeah.” of the lingering potential for conflicts. “I don’t buy the argu- That reasoning may make more sense in Palo Alto than in ment that the incentive with regard to any particular company New York City, since the Valley lawyering style is less adver- is diluted, because so many issues—like backdating, expensing sarial. “Most East Coast lawyers are in the business of protect- ing wealth,” explains Latta. “You’re talking “We started to develop the recipe for how to about a pie that’s not changing size much. build companies,” sonsini says of his first few You’ve got to take share away from someone years in silicon valley. “I was becom ing a p iece  else, and one way you compete is with your of the rec ipe.”  lawyer. Lawyers are combatants. Out here it’s always been different. Larry’s always been in the business of creating wealth. We options, etc.—apply across the entire sector,” says corporate- don’t want to spend weeks arguing, with lots of theatrics.” governance watchdog Nell Minow, co-founder of the Corporate A lot of wealth was definitely being created. Netscape’s 1995 Library research firm. IPO ushered in a new phase in the Valley’s history by demon- Should Sonsini have flatly banned such investing? “During the strating that even a company with no earnings history could go days of building the Valley,” he says, “when we were all working public and make its investors fabulously wealthy. The bubble together as entrepreneurs and trying to build industries, I don’t happened fast, and Sonsini hadn’t seen it coming. “Things know if that would have been a good thing or not.” started to align, and it just exploded,” he says. “We handled 2,000 private companies, and now this great window opened it just exploded up for them, and you can imagine what it was like.” Wilson Son- The event that marked Wilson Sonsini’s arrival on the national sini did 118 initial public offerings in 1999 (representing both business stage was its representation of Apple Computer in its companies and underwriters)—the most of any law firm in the initial public offering in 1980. It was the largest IPO since Ford nation. The firm bulked up to handle the workload, peaking in Motor Co.’s in 1956, and the notion that a local Palo Alto firm size at close to 800 lawyers in 2000. would handle it was a seismic event in the deal community. There Other firms were belatedly arriving on the scene too, of was also a mini–bull market at the time, enabling the firm to course. While Wilson Sonsini had competed mainly with two rattle off a series of tech IPOs, and the momentum began to feed other Valley firms in the 1970s, by “tulip time” more than 40 on itself. By 1988, Wilson Sonsini’s average profits per partner major national law firms had opened outposts there. reached $430,000, blowing past all the San Francisco firms and “That was a period of raw greed,” says Boris Feldman, the outpacing the nearest competitor by $100,000, according to The head of Wilson Sonsini’s litigation department. “Greed was Recorder, a San Francisco legal newspaper. always an important component in the Valley, but it was sort of But it wasn’t just reputation that was selling Sonsini. When restrained greed: the sense that if you build a good company, you meet a few of his entrepreneur clients—intimidatingly you’ll be rewarded for it. But during that time framework, what prince of the valley people forgot was the element of building value. It was much NYSE board, though, had 27 members at the time, Sonsini was more like a gold rush. The values in the Valley were, if not cor- not on the compensation committee, and former U.S. Attorney rupted, then certainly strained.” Dan Webb’s official postmortem of the debacle concluded that In 1999 and 2000, Sonsini says, it became “somewhat of a the directors who weren’t on that committee were misled. (Son- practice” in the Valley for lawyers to insist on being given in- sini declines to discuss the issue, citing pending litigation.) vestment opportunities in their startup clients as a condition of Sonsini’s winning Hewlett-Packard as a client was another representing them. He admits that some Wilson Sonsini lawyers landmark, and another mixed blessing. As a young lawyer in did this, and that they shouldn’t have. It was widely reported the 1970s Sonsini’s ambition had always been to one day repre- that many Silicon Valley lawyers were making more off their sent Hewlett-Packard, the template for all the Valley startups investments in clients than from their legal work. According to that followed. In the late-1990s Sonsini got his wish, eventu- The American Lawyer magazine, WS Investments distributed ally handling Hewlett-Packard’s $2.2 billion spinoff of Agilent $175 million to the firm’s members in 2000. The figure plum- Technologies in 2000 and its $19 billion merger with Compaq meted to $8 million a year later. Computer in 2001. A Wilson Sonsini spokesperson says she doesn’t know where Then came “pretexting.” From early 2005 to March 2006, the $175 million figure came from, that it sounds wrong, and Hewlett-Packard’s nonexecutive chairwoman, Patricia Dunn, that it would be hard to compute a meaningful substitute. Son- led two internal probes to find out which board member was sini maintains that only very junior partners at Wilson Son- leaking information to the press. The company’s investigators sini—those with salaries then in the $400,000 range—would deceived phone companies into providing them with private have ever made more from WS Investments than from their phone records of directors and journalists—an activity that partnership draws. (Wilson Sonsini’s average profits per part- ultimately led to felony charges against Dunn, then senior HP ner from legal work in 2000 were $835,000, according to The lawyer Kevin Hunsaker, and three investigators. American Lawyer.) Sonsini has faced a wave After the crash, Wilson Son- of criticism arising from the sini’s lawyer ranks dropped to the bubble years affair, culminating with his fewer than 600 before they be- 1996 WSGR client Stratacom merges with being summoned, along with gan growing again. Cisco Systems in a $4.7 billion deal. Dunn and HP CEO Mark 1998 WSGR opens its first branch offices, in Hurd, before a House sub- baggage Seattle and Austin. committee in late September. In 2001, Sonsini achieved It turned out, however, that 1999 Client InfoSys Technologies becomes the another landmark validation firstI ndian company to offer American the most serious criticisms of business stature, not depository shares. against him were based on unlike the Apple IPO in false assumptions. •Sonsini advises on the $2.2 billion IPO its symbolism. This one, of Agilent Technologies, a spinoff of As the story of the ham- however, brought some Hewlett-Packard. fisted operation became pub- baggage with it. lic in September, internal HP •WSGR handles 118 U.S. IPOs for “Dick Grasso, then chair- companies and underwriters, the most of documents leaked out that man of the New York Stock Ex­ any legal advisor. indicated that an outside law change, came to me and said, firm had approved the pre- 2000 WSGR’s size peaks at more than 800 ‘We don’t have anybody from lawyers. texting operation in advance. the West Coast, and we don’t One had, but it wasn’t Wilson 2001 The tech stock bubble bursts, and the IPO have anybody from the tech- Sonsini, as many initially as- pipeline dries up. WSGR nology industry, and I would does only 12 IPOs this sumed. It was, rather, a tiny agilent’s like to propose you to become year, which is still the most firm in Massachusetts that ipo a board member of the New for any law firm in the did work for—and shared York Stock Exchange,’ ” Son- country. $2.2 space with—one of the now sini recalls. •Sonsini joins the New billion criminally charged investiga- Sonsini joined in Febru- York Stock Exchange tors. The voluminous docu- ary 2001. Minow’s Corporate board of directors. ments made public by the Library now labels Sonsini a •Sonsini represents HP in House subcommittee estab- “problem director” because its $19 billion takeover of lish that Wilson Sonsini was he sat on that board during Compaq, which entailed never consulted about either part of the time when Grasso a bruising proxy fight and probe until April 2006, after was amassing his now infa- court battle. the snooping had been com- mous $189 million deferred- pleted. At that point Dunn compensation package. The asked not for a legal opinion prince of the valley about the methods used—which HP described to Sonsini in a were Wilson Sonsini clients during the relevant period. memo only as “lawful methodology” used by “licensed security These numbers look ominous, but for two reasons may not firms”—but for advice about what to do about the leaker. be. First, Wilson Sonsini’s clients are no more heavily repre- Still, it looked bad when a Sonsini e-mail surfaced that con- sented among the companies under scrutiny than those of any cluded: “It appears, therefore, that the process was well done other law firm, once you take into account the firms’ relevant and within legal limits.” The e-mail was part of an exchange market shares and niches. The premier East Coast technology in June with venture capitalist and former HP director Tom firm, Boston’s Hale & Dorr—now WilmerHale—represented Perkins, a co-founder of Kleiner Perkins Caufield & Byers. By five of the 13 Massachusetts-based companies on the list of that time Perkins had found out that his private phone records accused backdaters, or 37%. Similarly, six of Wilson Sonsini’s had been obtained. Perkins also then believed, incorrectly as leading Bay Area competitors represented multiple Silicon Valley clients on the list, seemingly in rough proportion to their shares of Val- “He’s very ethical, brilliant, successful,” says ley business. venture capitalist and former hp director tom The second reason, according to nine perkins. “people are tak ing shots at h im. In my Silicon Valley public company board book he’s still no. 1.” members, CEOs, or outside lawyers, is this: While outside law firms may be in- volved in drawing up a stock options plan it turned out, that there might have been wiretapping too. Yet for a public company, they very rarely administer it. And that’s the context of the e-mail was not appreciated. Sonsini had still where all the problems have been showing up so far: missing not been asked or authorized by HP to conduct any additional documentation, misdated or forged records, faulty accounting. investigation. He was told simply to relate to Perkins what had “I’ve never seen it done by outside counsel,” says tech investor been done and the opinion of the HP in-house lawyers about Roux, of Silver Lake Partners, who has served on many boards its legality. In his e-mail to Perkins he did so, explaining in the and compensation committees. first paragraph that his information came from Hunsaker and “How to give options is well known,” says Rodgers, the Cy- Baskins. Only later, in August, did HP finally retain Wilson press CEO. “You hire outside counsel, they have their word Sonsini to look into what the investigators had done and inde- processor kick up a bunch of documents, and they charge you pendently assess its legality. After doing so, the firm concluded 50,000 bucks. Then you and your HR person give out options that while “pretexting at the time … was not generally unlawful,” according to the plan. You administer it; they’re not involved. it became unlawful when conducted in certain ways and that, You don’t want them involved, because you don’t want to be sent accordingly, the firm “could not confirm that eth techniques … a bill for $2,000 every time you give out stock options.” complied in all respects with applicable law.” The recommenda- Sonsini’s more direct link to the backdating scandal is tion was that “HP immediately cease pretexting.” through his board ties: He was a director at two companies Tom Perkins won’t comment on the HP matter, but he that have encountered options problems. One was Brocade says this about Sonsini: “He’s very ethical, brilliant, suc- Communications, whose former CEO Greg Reyes and former cessful. People are taking shots at him. In my book, he’s still human resources chief have both been charged with criminal No. 1. Expect him to continue to work with all of [Kleiner backdating violations by federal prosecutors in San Francisco. Perkins’s] companies.” Though the prosecutors theorize that Reyes defrauded the company’s board of directors, Sonsini has been tainted by the questions of association. Because Sonsini was on Brocade’s audit commit- independence tee one year, he has also been named as a defendant in private Then there’s the options-backdating scandal. That kicked class-action suits. Sonsini was on the board of Novell too, which off in March 2006, when a Wall Street Journal article showed has initiated a voluntary audit of its options practices. Like all that many stock option grants during the late 1990s and early Novell directors, Sonsini received options himself. He never ex- 2000s had been exquisitely well timed, suggesting that their ercised his, according to a firm spokesperson, and they expired grant dates must have actually been chosen retrospectively— three months after he left the board in 2002. Sonsini declines i.e., backdated. As a result, the Securities and Exchange to discuss either Novell or Brocade. Commission launched an inquiry. What has been offered as the smoking gun implicating Options were a particularly important form of compensa- Sonsini in the scandal is that he allegedly recommended that tion for startup technology companies and a central pillar of Brocade’s board make Reyes a “committee of one,” with power Valley culture. They were routinely given not just to directors to grant options without the full board’s approval. That’s what and top officers, but also to members of the rank and file. Reyes himself told Business Week in February. In an interview Of the 120 companies now being scrutinized for backdating, with FORTUNE, Reyes’s criminal defense lawyer, Richard Mar- either by government officials or internal auditors, 42 are Sili- maro, seems to implicate Sonsini via gushing praise: “Sonsini con Valley companies (35%), and of that subset, at least 40% at all times acted totally above board and with the highest ethics prince of the valley of the profession, and my client ties of a lawyer and a board relied on his sage advice.” member are fundamentally A Wilson Sonsini spokes- In the spotlight different,” says Minow, woman says that Brocade’s of the Corporate Library. committee of one was actu- 2002 WSGR handles $82.5 million Netflix IPO. “You can’t be the third base ally set up by a different law 2003 WSGR’s lawyer ranks shrink to 600 . coach, the umpire, and the firm, which she declines to 2004 Google IPO, valued at $1.7 billion. WSGR batter at the same time.” name. In any event, commit- fund makes about $20 million on its Here the watchdogs appear tee-of-one arrangements are Google investment. to have won their argument. neither as rare nor as intrin- 2005 Brocade, where Sonsini was a director, Though Sonsini sat on nine sically reckless as they may announces restatement because of public boards in February appear. The “committee” at options backdating. 2002, today he’s down to just Brocade could award options •HP CEO Carly Fiorina is infuria-ted one, and he says he expects only to rank-and-file em- by board leaks to the press. Sonsini to phase out that one soon ployees, not to officers and interviews directors. too. He’s come around to directors, so there was no 2006 Walt Disney acquires the view that “the presump- google’s opportunity for self-dealing. Pixar for $7.4 billion. tion” should be against sit- In that context, the practice ipo ting on public boards. “It’s •Wall Street Journal was—and remains—perva- publishes articles on $1.7 a question of the evolution sive, since it’s not practical to widespread options of independence and objec- have full boards constantly backdating. billion tivity in corporate gover- approving options grants to •HP “pretexting” scandal, nance,” he says. scores of employees. in which investigators Last year Sonsini consid- “If you’re moving quickly in obtained private phone ered retiring from law prac- a hot job market,” says former records, becomes public. tice to become chairman of SEC commissioner Joseph •WSGR advises Freescale the private-equity firm Sil- Grundfest, who co-heads Semiconductor on its sale to a private- ver Lake Partners. But hav- Stanford’s Rock Center for equity consortium, for $16.2 billion—the ing turned down the offer, Corporate Governance, “and largest buyout ever in the technology he says he plans to continue there’s an employee you want, sector. practicing for the foresee- boards would delegate to able future. (His father, a CEOs the authority to make vigorous 90, participated offers for grants up to a cer- in the firm’s celebration of tain size or for a certain total Sonsini’s 40th year of prac- number of shares. That would tice at a retreat in Pebble not be rare in the least. And creating a committee of one never Beach this year.) gave anyone the right to backdate. That said, in hindsight it “I have so many friends who say, ‘Look, why aren’t you stop- clearly would be better practice to have crisper controls on ping? We can all go take golf trips,’ ” he says. “That’s the last that process, particularly to make sure that grant dates are thing I’m made of. I’m just beginning to be the best lawyer I appropriately and timely documented.” can be, and why would I get off the train now? If you’re going The remaining thing Sonsini might be faulted for is sitting to be a top business lawyer in this country, you’ve got to take on the boards of his clients. That’s another practice that’s more a lot of years. You don’t develop the judgment except over a common on the West Coast than in the East, and one that long period of time.” some corporate-governance watchdogs denounce. “The du- Evidently you develop some thick skin too. F Produced exclusively by Fortune Custom Reprints. ©2006 Time Inc. All rights reserved.