Wilson’s Hits Just Keep On Coming

When a report on stock option backdating says there is no evidence your law firm did anything illegal or hid anything from investors — much less that your shop invented the practice — you might breathe a little easier.

For Wilson Sonsini Goodrich & Rosati, though, those positives resembled a disclaimer in a probing publication issued by The Corporate Library, an investor advocate and research firm based in Portland, Maine. (You can get the report online, but it’ll cost ya.)

The report says that Wilson’s multiple roles at companies under backdating scrutiny — i.e. serving as outside counsel while Wilson partners simultaneously sat on the board that awarded stock options to the law firm — could spell trouble for their clients.

“[Wilson] embraced a series of relationships that were inherently conflicted, and while they may not have led in any way to the current crisis facing so many of these companies,” the report said, “the very existence of these multiple relationships, and what they say about the boards involved, could have an effect on the potential for damage now faced by these companies and the individuals involved.”

Wilson Sonsini spokeswoman Courtney Dorman said the firm is “proud” so many firms have chosen it to be their counsel. “The innuendo related to the firm included in the (Corporate Library) publication is false and irresponsible,” Dorman said. “We take issues of conflicts, real or perceived, very seriously and to suggest otherwise is simply untrue.”

The study listed 11 Wilson partners and tracked down some 30 clients where they served on the board. Not all of those companies have backdating problems, but several that do also count the firm as an investor.

Bad corporate governance involves a wide spectrum of behavior, it said, not just outright fraud.

“More often than not they involve an ethical rather than a legal dimension, and the Wilson Sonsini Goodrich & Rosati web of connections among its many Silicon Valley clients presents a prime example,” the authors state.

Law partners should not serve as directors at client companies because the relationship is fundamentally conflicted, the report concludes, and firms and their partners should not hold investments in companies where they provide legal opinions regarding securities.

“While strict observance of these simple guidelines might not have prevented the options backdating scandal from occurring in the first place,” the report said, “it would certainly have prevented the additional controversy now surrounding WSGR, and the many companies with which it has been involved over the years.”

Dan Levine


3 Responses to “Wilson’s Hits Just Keep On Coming”

  1. You Says:

    Portland, Maine not Oreogan

  2. Melanie Bond, Media Relations for The Corporate Library Says:

    Please note that The Corporate Library is based in Portland Maine, not Oregon.

    Also, the report is indeed available for purchase online, and in fact is featured prominently on our homepage, http://www.thecorporatelibrary.com.

    Melanie Bond
    Media Relations, The Corporate Library

  3. Dan Levine Says:

    Sorry for those mix-ups! The changes have been made to the post.

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