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Under the Bus

I recently spent a day with some high-profile lawyers at a big New York firm. It was a few days before Ann Baskins, the general counsel of HP, was to testify before a congressional subcommittee. I asked the lawyers whether they thought Baskins would survive the boardroom spying scandal. All six agreed that her career was over. A few days later Baskins "resigned."

One of the lawyers had an interesting take on why she wouldn't survive the scandal, even if she did nothing wrong. He basically said that GCs are expendable during corporate scandals.

This was his argument: Because GCs have no real responsibility to generate revenue, the resignation or termination of a GC barely registers on Wall Street. And during a scandal, such a termination might actually boost the stock price because it sends the message that the company is serious about cleaning house. The CEO can then hire someone with unimpeachable ethics to further placate shareholders and customers. Boeing had some success with this strategy when it brought in J. Michael Luttig, a former 4th Circuit judge, to run its legal department after a number of high-profile scandals tarnished the reputation of the company.

At press time nobody had any clue as to whom HP would hire to replace Baskins--though it most likely will be someone with as squeaky clean an image as Luttig.

As for Baskins, her future is unclear. If the legal blogs are an indication of how the in-house bar views its former member, she will never serve as an in-house lawyer in a public company again. One blogger wrote that Baskins' conduct "was disgraceful and sets a bad example to young women lawyers who may have looked up to her." Another wrote, "Baskins hired the PI firm and was duty bound to make sure the investigation met ethical and legal standards. ... [She] should be fired for cause."

Personally, I think Baskins may have been too loyal to management, which may have clouded her judgment. A truly impartial legal adviser never would have approved the tactics HP used in this investigation. Baskins, who had basically spent her entire legal career at HP, may have forgotten that her job was to protect the interests of the shareholders--not that of management. As we all learned from the Enron disaster, that mistake not only can be career ending, but also can land you in jail. The HP scandal now has taught us that it is often the lawyers who are thrown under the bus first.

Staff Writer

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