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Say the words “employee benefits” to a typical law school graduate and watch the eyes glaze over. Such practices have historically meant toiling on health and pension plans for lumbering corporate giants. But practices focused on employee benefits — and especially executive compensation — have undergone a dramatic transformation in recent years. Employee benefits lawyers are the first ones called in when technology executives start doling out stock options instead of cash to workers. Lawyers who specialize in employee benefits often hold the hands of some of the most powerful options-toting executives in Silicon Valley, Calif. Those same executives have been especially deal-happy in recent years and don’t dare do a deal without mulling the impact on options plans. A merger or an acquisition requires even deeper consideration. The intense deal activity in recent years has helped plump the stature of both the benefits/executive compensation groups and lawyers with that expertise. And Silicon Valley firms have been quietly bulking up on benefits lawyers in recent years. Not only is the expertise in demand, but the lawyers command top dollar. “You don’t want to farm it out — it means dealing with the executives of companies,” Scott Spector, the chairman of Fenwick & West’s employee benefits group, said. “As the companies become bigger, and the deals become more sophisticated, and the equity becomes of greater value than it has historically been, you’re going to see the compensation group is grown right in sync with the corporate group,” he added. Spector recently lured P. Garth Gartrell away from Pillsbury Madison & Sutro, where he was employee benefits group head, to become the second partner in Spector’s seven-lawyer employee benefits group. The team is still modest in size for a 250-lawyer firm, but good benefits people are apparently even harder to find than lawyers in other specialties. “It’s a practice just being created — you don’t have people coming out of law school knowing how to or thinking about managing an options plan,” said Stephen Fackler, a Cooley Godward partner who heads the firm’s executive compensation and benefits group. There’s also more to it than just stock options. When counseling clients, executive compensation/benefits lawyers must dip into other areas of the law, including corporate, labor, tax and securities, and even accounting rules. “It requires an unusual combination of legal skills in the context of advising a client,” said Fackler. Fackler joined Cooley in 1994 from Palo Alto’s Ware & Freidenrich, before it merged with San Diego’s Gray, Cary, Ames & Frye. He was brought aboard to help grow a compensation and benefits practice beyond its four lawyers. Fackler’s group now has 20 lawyers, plus four lawyers he shares with the firm’s tax and corporate groups. In structuring the group, Fackler integrated the kind of work start-ups require alongside the needs of bigger companies, like Hewlett-Packard, which has an old-fashioned pension fund alongside a complex mix of options, bonuses, profit-sharing and health plans. “The typical high-tech start-up doesn’t feel the need to have integrated services,” said Fackler. But little companies get bigger, and like H-P, start demanding more integrated services. Fackler’s group doesn’t depend on corporate lawyers to lure in clients. Employee benefits lawyers at Cooley cater to their own clients as well as providing services to companies that have come to the firm through other practices. More than half of Fackler’s practice, for example, comprises clients that only use Cooley for its compensation issues. Because compensation lawyers have their hands in the company’s inception — when stock options are first doled out — they generally gain a wide variety of expertise on top of myriad skills they bring to the job. “You can become a super-generalist from a super-specialist,” said Gartrell, who started work with Fenwick on May 1. The employee benefits path led to a plum in-house slot with a networking consulting firm for one former compensation lawyer. Head of the 17-lawyer employee benefits group at Wilson Sonsini Goodrich & Rosati, Timothy Sparks was also a member of the firm’s management committee and participated in the overall direction of the 600-lawyer firm. He left in March for what is now Callisma Inc. (formerly Rt. #1 Solutions) in Redwood City, Calif. “If you want to play in the technology market, you have to have someone who understands the issues,” Sparks said. Typical of compensation lawyers, Sparks worked closely with the management teams of his clients, and so he gleaned an intimate understanding of both their legal and strategic business needs. It made him an effective participant in the firm’s direction and prepared him for his role at Callisma, he said. “You’re absolutely integrated into the firm’s broader practices, and you take a front-and-center role in a company’s strategic issues,” Sparks said. “It’s not the back-room practice it’s typically thought of.”

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