NEW YORK: Carl Icahn's assault on Time Warner has produced its first casualty - however unintended it may have been.
Robert Clark, who had been a director of both Time Warner and Lazard, the investment bank advising Icahn, said Tuesday that being on both sides was untenable and resigned from Lazard.
Ever since Lazard announced last week that it had signed on to advise Icahn, Clark's role on both boards had been debated by corporate governance experts. Clark, a former dean of Harvard Law School, is widely known in academic circles for his expertise on the subject. He wrote a book called "Corporate Law" in 1986 that explores, among other things, corporate conflicts of interests.
In a letter to Lazard's general counsel, Clark wrote: "Questions have been raised in the media and elsewhere about my membership on both boards. In order to eliminate the appearance of a conflict of interest, whether now or in the near future, and with the hope of freeing the companies from unproductive distractions, I have decided to step off the board of Lazard."
Beyond the letter, Clark declined to comment about his decision. In a statement released by Time Warner, Clark said, "I am very pleased to remain on Time Warner's board and look forward to continuing to work with my fellow directors and management on behalf of the company's shareholders."
Clark was in a particularly tough spot because Icahn is mounting a proxy fight for control of a majority of Time Warner board seats, which could have resulted in the removal of Clark. Lazard and its chairman, Bruce Wasserstein, are providing a strategic road map for Icahn's campaign and helping to find a new slate of directors to nominate.
In addition, Clark faced another potential conflict had he been forced to make certain decisions based on Icahn's proposals. Lazard is being paid a $5 million fee as well as 5 percent of whatever Icahn's dissident group makes on its Time Warner shares above $18 over the next 18 months. Considering that the dissident group owns more than 135 million shares, every dollar increase in share price is worth more than $6.5 million to Lazard.
While the interests of Time Warner and Lazard would appear to be aligned in trying to raise the company's stock price, it is possible that Clark could have been forced to make a strategic decision for Time Warner that he felt was in the long-term best interest of the company, but would not necessarily move the stock in the short term.
In a statement, Lazard said, "While there was not and is not any conflict between Professor Clark's position on the boards of Lazard and Time Warner, we understand his decision, respect his integrity and thank him for his service to Lazard." Time Warner said, "We respect Bob Clark's decision and are honored to have him continue as an independent director of Time Warner."
Some corporate governance experts speculated that Clark had chosen to resign from Lazard over Time Warner because he was also a director of three other companies - Omnicom, Collins & Aikman and TIAA-CREF - and wanted to avoid a potentially similar conflict in the future if Lazard were to advise another shareholder activist.
Clark and Wasserstein of Lazard are close friends and have served on several boards together. Clark has once before resigned from one of Wasserstein's companies because of a potential conflict. In 2004, before Clark became a director of Time Warner, he resigned from the board of American Lawyer Media, a media business owned by Wasserstein, because of the potential conflict of interest given the businesses of the two companies.
