Thursday, September 28, 2006

Professor Larry Sonsini: Corporate Law Flashback

Rep. Anna Eshoo, the congresswoman whose district encompasses Palo Alto, Calif. (where HP is headquartered), isn’t normally a member of this committee but was invited to participate. Unsurprisingly, given her jurisdiction, she’s expressed more sympathy toward Dunn’s and Sonsini’s situation than some of the other committee members.

Moments ago, Eshoo asked Sonsini about the problem of boardroom leaks. She asked what is out there today in terms of our laws to deal with a director who leaked confidential information?

Sonsini, whose initial authoritative baritone during opening statements had waned throughout the day, suddenly perked up. Instead of discussing pretexting for the umpteenth time, he could play the role of corporate law professor, something he’s done for years at Boalt Law School. It’s a very good question, he commended his congresswoman. First of all, he said, it’s important that boards continually evaluate themselves. Second, it’s important that boards adopt guidelines to deal with fiduciary duties.

But aren’t there laws to regulate this stuff, asked the congresswoman? “It’s corporate law,” said Professor Sonsini, with authority. Sonsini said that corporate law requires directors “to exercise due care,” and if they don’t ” they don’t get the protection of the business judgement rule.”

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