The Post-IPO World of Facebook GC Ted UllyotCatherine Dunn Corporate Counsel
2012-05-18 00:00:00.0
When Ted Ullyot joined Facebook as general counsel in October 2008, he was coming aboard a fast-growing social network that was turning a new leaf in its corporate history, having hired chief operating officer Sheryl Sandberg away from Google earlier that year. Ullyot arrived with both the White House and AOL-Time Warner on his résumé—two bits of experience that were clearly plusses for a company that was thinking ahead and thinking big.
“He is equally comfortable helping us expand internationally as he is in helping us navigate complicated legal issues we may face in Washington,” Facebook’s vice president of communications and public policy Elliot Schrage told the Los Angeles Times. “Ted's arrival really demonstrates we're a little more grown-up."
Now, as Facebook’s IPO transforms the social network from a private venture to a publicly held corporation, Ullyot’s role is about to undergo its own metamorphosis—both in terms of the disclosure and governance responsibilities that fall to the GC of a public company, as well as the intense scrutiny that Facebook will encounter as it begins trying to meet its new investors’ mega-growth expectations.
“Once you go public you have a little more of a cultural sense that you have to be not only transparent, but that the people impacted by your decisions are a much broader scope of stakeholders,” says Susan Hackett, CEO and chief legal officer at Legal Executive Leadership in Washington, D.C.
The GC and his fellow executives “will really feel like they’re in a fishbowl,” says Dan Cooperman, former general counsel of Apple, and of counsel at Bingham McCutchen in Silicon Valley. For those with a background in public company C-suites, that’s familiar territory. But “for people growing up in a private company culture, this is a change,” Cooperman adds.
Ullyot’s public company experience may help him through the post-IPO transition. He served as general counsel of AOL-Time Warner and GC for AOL-Time Warner Europe; in addition, he’s held positions as White House counsel, chief of staff to U.S. Attorney General Alberto Gonzales, and as an attorney at Kirkland & Ellis in Washington, D.C.
He joined the company precisely because it was fast-paced and innovative, he told the Times. By last summer, Ullyot had built out the legal department from a handful of attorneys upon his arrival to a 30-lawyer team. At the time, as he told CorpCounsel sibling publication The Recorder, his focus was on IP, patents, and keeping the department nimble and full of generalists. "What you focus on tomorrow may not be what you focused on yesterday," he said.
But once the shares start trading, the GC will have a whole new purview, says Cooperman.
In a private tech company, “the goal is let’s get it done quickly and efficiently,” says Cooperman. In contrast, going public necessitates that decisions be carried out in a more process-focused manner.
For example, pre-IPO, discussions between the GC and the CFO and finance staff could be “sidebar conversations.” Post-IPO, the legal department will have to be directly involved in discussions about company finances in order to be able to disclose those mattes properly.
And there’s contact with the press and financial analysts—which can also become issues of legal compliance. While a private company may be mostly worried about not revealing proprietary information out of turn, as a public company, the information that’s communicated about the business can raise regulatory concerns. “The lawyers need to be monitoring that,” says Cooperman.
In terms of board governance, the legal department will need to guide the directors on establishing committees with specific oversight functions. But a more “insidious” issue, says Cooperman, is that of monitoring potential conflicts of interest, such as an instance in which a board director and a member of senior management share a common investment interest.
“This one is particularly nettlesome in private companies going public,” says Cooperman, and as such “requires some attention” from the GC.
Public disclosures—such as revealing executive compensation and describing material contingencies and risks—can also seem like something of a culture shock to company executives, though compiling the S-1 (the pre-IPO regulatory filing that details the ins and outs of the company) does help prepare management for what’s in store.
Post-IPO, then, the GC needs to reinforce those disclosure processes and develop a comfortable dialogue with business execs—such as meeting on a quarterly basis to discuss what’s changed in the business units, and what may require new or additional disclosures.
All of those responsibilities hit the general counsel precisely when they’ve got another big job on their hands: staying on top of growth. “Generally speaking, companies that are growing faster involve more legal work,” says Jorge del Cavo, a partner at Pillsbury Winthrop Shaw Pittman in Palo Alto, who specializes in public offerings among private technology companies.
Newly public companies “tend to become a lot more acquisitive,” he says. “Just to manage that growth normally is more than a full-time job.”
And no matter what a lawyer’s level of experience is, the post-IPO transition involves a big learning curve, says Antone Johnson, former vice president for legal affairs at privately held eHarmony, Inc., and former in-house counsel in charge of corporate law at the publicly traded Gemstar-TVGuide.
Suddenly, says Johnson, now founding principal at Bottom Line Law Group, the company is “accountable to the outside world in a totally different way.” It is accountable at every level for “doing what it’s saying and saying what it’s doing,” he says. “And that is not an easy task for any company.”
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