Former HLS Dean Leaves Board Post

Former Harvard Law School (HLS) Dean Robert C. Clark resigned his seat on the board of investment bank Lazard last month after a growing chorus of criticism that his seats on both Lazard and Time Warner’s boards of directors represented a conflict of interest.

But Clark maintains that despite the fact that Lazard was advising a shareholder mounting a takeover attempt of Time Warner, his seat on the two boards did not pose a conflict.

Dissident shareholder Carl C. Icahn retained Lazard on Nov. 29, 2005 as part of his battle to split up the media conglomerate, which was formed by a merger of America Online and Time Warner in January 2001.

“Clark has to get off one or the other of the boards right now,” Nell Minow, co-founder of the corporate governance research firm Corporate Library, told The New York Times on Dec. 4, 2005. “It can’t happen fast enough.”

Less than a week—and a few national news stories—later, Clark resigned his directorship at Lazard, stating in a letter to the firm’s general counsel that he wished to “eliminate the appearance of a conflict of interest” and “free the companies from unproductive distractions.”

In a phone interview with The Crimson yesterday, Clark said that he resigned from the Lazard board over the objections of the management at both companies. He added that he had sought out the opinions of many lawyers and businesspeople who had told him that he could remain on both boards without creating a conflict.

“There was no conflict of interest here,” Clark said. “Lazard has annual revenues of about $1.5 billion—when you consider that the income [from Icahn] was $5 million, and maybe a bonus if the [Time Warner] stock price was raised, this issue would never have made it to the board of directors.”

Minnow, who told The Crimson yesterday that the issue is largely resolved, responded that the money was not the issue and that she was surprised that Clark, who has been an advocate of more active directors, would dismiss the potential for a conflict of interest.

“The issue is not the amount of money, it’s that you have two competing interests and that you are sitting on both sides,” Minnow said. “It’s sad that Bob Clark, who has been the champion of having directors go beyond merely representing shareholders, would say that there was no real conflict.”

Clark said that in the end he decided to resign from one of the companies to assuage potential concerns of other directors that sitting on both boards would have affected his judgment. He said he chose to resign from Lazard because he had invested a great deal of time into learning Time Warner’s business and felt that he would be more valuable remaining on its board.

“I joined the board of [Time Warner] in January of 2004 while I was only with Lazard since May of 2005,” Clark said. “This decision was not a statement of my feelings toward the management of either company.”

Clark’s relationships to the Lazard management, in particular to Bruce J. Wasserstein, Lazard’s chief executive, have also come under fire from some corporate governance experts. In addition to Lazard, Clark has also sat on the board of other Wasserstein-controlled companies: cosmetics maker Maybelline, auto supplies manufacturer Collins & Aikman, and publishing company American Lawyer Media Holdings.

Wasserstein, a graduate of both HLS and Harvard Business School, has been a major benefactor of HLS—he was one of 11 alumni who gave $5.1 million in Clark’s honor when he stepped down from the HLS deanship in 2003 and the Wasserstein family has endowed both a professorship and public interest law fellowship at the law school.

Clark said that he likes Wasserstein and considers him a “really smart guy,” but added that he also has high opinions of Richard D. Parsons and Jeffrey L. Bewkes, the CEO and president of Time Warner.

Icahn and his allies, who control nearly 135 million shares—or roughly 3 percent—of Time Warner stock, have announced plans to run eight candidates of their own for the Time Warner board of directors. Icahn has been pressuring the board since August 2005 to take measures to increase the company’s stock price, which has plummeted 70 percent from a high of about $60 since Time Warner merged with America Online in January 2001.

Because the Time Warner board has thirteen directors elected through a plurality voting system, Icahn would have to identify eight current directors whom he wants his allies to vote against. When asked if Clark was one of his targets, Icahn initially said that all the directors were at fault for Time Warner’s performance, but later backtracked and pointed out that Clark was not a member of the board that approved what he deemed the disastrous merger between Time Warner and America Online.

—Staff writer Paras D. Bhayani can be reached at pbhayani@fas.harvard.edu.