Editor: Can you give our readers some idea of your background and experience?
MacCarthy: I graduated from Stanford Law School in 1985 and came to Winston & Strawn shortly thereafter. I have spent my entire career here, practicing in the areas of corporate law, mergers and acquisitions and securities law. At present I am chairman of the firm's corporate department.
Editor: Can you describe the firm's corporate governance practice?
MacCarthy: We have had a corporate governance practice for some time. As part of our corporate practice we have been engaged, for many years, in advising clients on the duties and responsibilities of members of boards of directors and board committees, the relationship between directors and officers, the fiduciary duties of corporate insiders, the use to which outside experts - accountants and lawyers, for example - may be put by officers and directors in fulfilling their responsibilities, and so on. Much of this practice has derived from Delaware law, although there are a variety of sources. In recent years, as a result of the much-publicized corporate scandals and, as a consequence, Sarbanes-Oxley, this practice has just exploded. Our corporate clients are very concerned that the issues raised in the current environment be properly addressed. The newly adopted New York Stock Exchange and NASDAQ rules, by way of example, are under careful review at the moment for a number of these clients. While this area of our corporate practice has always been important, it is now a matter of focussed concern: people know that they must adopt, and adhere to, sound practices in terms of corporate governance.
Editor: Is it fair to say that Sarbanes-Oxley is really more of a codification of statutes, regulations and case law already in place, rather than something new?
MacCarthy: Only in part. To be sure, Sarbanes-Oxley does codify a whole body of rules that have been around for a long time. People have been aware of their fiduciary responsibilites over all this time. But, the ways in which they meet their responsibilites - the CEO and CFO certifications, for example, and the reporting requirements, internal control mechanisms and accountability procedures - and the penalties that result from their failing to do so - are new. The push for good governance is not something being imposed solely from above; rather, it is often coming from within the organization. Officers and directors are asking about their exposure and demanding that systems be put into place to enable them to limit that exposure. They are taking steps themselves to insure that these systems work. In summary, I think Sarbanes-Oxley builds on an infrastructure that was already there, but it serves to close the circle on a number of corporate governance issues, and the driving force behinds its implementation is the concern of the corporate insiders, the directors and officers, themselves.
Editor: Who are you working with when you deal with a client on corporate governance issues? Are you dealing with the board of directors, the legal department or the CFO or CEO directly?
MacCarthy: General Counsel is almost always involved. The presence of other corporate insiders really depends on the issue. An overview of the board's responsibilities and the larger implications of Sarbanes-Oxley may entail dealing with all of the directors. Internal controls, financial reporting and the various accounting issues may involve the audit committee of the board. Many corporate governance issues, such as the determination of director independence, are first addressed by the nominating and corporate governance committee of the board. The CEO and the CFO have very specific concerns under Sarbanes-Oxley, and, of course, we work very closely with them to ensure adherence to the new regime. The one common denominator is a heightened awareness of what it means to be a corporate insider.
Editor: Winston & Strawn recently opened an office in London. Have you had dealings with English corporations on the corporate governance issues that have attracted your attention here?
MacCarthy: People in England paid attention to the corporate scandals in the U.S. if they had investments that were affected. Otherwise, the subject is not yet as high on the radar screen in the UK. Our corporate practice in London does not yet have much of a corporate governance focus. I do not believe that the rules in place in England are as highly developed as they are here and, in any event, the kinds of corporate scandals we have seen in recent years have not occurred there.
Editor: What led up to Winston & Strawn taking this step, opening an office in London?
MacCarthy: For a considerable time we have been engaged in discussions with a number of City of London firms. In June of this year we came to the conclusion that, while such discussions will continue, it was time to open an office in London and establish a London presence. This was initially set up with two partners, one a New York lawyer and the other an English-qualified solicitor. A third partner, from our Washington, D.C. office, has now joined, as have four associates. It is a very small operation at present, but we will grow. London is one of the great money centers of the world, and it is also an entry point for Europe, particularly for American corporate clients. It is essential for the firm to follow its clients, and, until we opened a London office, we were not able to provide sufficient services to our UK-bound corporate clients. I would have to say that we were a little late in addressing this issue, but we have every intention of making up for lost time. There is an extraordinary amount of business being conducted in London, and we expect the office to grow significantly.
Editor: What is the source of your attorneys in London?
MacCarthy: The people staffing our London office are going to be a mix of American and English lawyers, and we anticipate that the client base will reflect a similar orientation. So far as practice areas are concerned, we anticipate litigation and arbitration as key growth areas. Winston & Strawn has a very strong national litigation practice in this country, and the firm has a very strong international arbitration practice that operates out of the Geneva office. We have extraordinary resources in these two disciplines, and we expect to draw upon them to achieve maximum growth in London. In addition, we look to grow our London operation on the corporate side.
Editor: Do you anticipate growing by merging with a City of London firm, or is your growth expected to be solely internal?
MacCarthy: As I indicated earlier, I think the most logical path for us is to eventually find the right merger partner. We have a European presence already, in Geneva and in Paris. The latter office has some forty lawyers in all. We expect to be able to draw upon the expertise already in place to help our practice in London grow, and we will do so irrespective of when we find the right firm for a merger partner. When that opportunity does arise, of course, we think the rate of growth in our London operation will be greatly enhanced.
Editor: As the larger American law firms expand their international practices, two firm models seem to be emerging: that of the single-branded global firm and that of the firm alliance network. How does Winston & Strawn see itself in this regard?
MacCarthy: Winston & Strawn has a very strong brand. Its reputation for the highest quality of legal service ought to inform all of its offices, whatever the location and wherever the services are performed. That is the only way that a firm can prosper and grow in a global economy increasingly dominated by global clients. Accordingly, I would characterize Winston & Strawn as a firm that seeks to identify itself as a single-branded global firm.
Editor: Do you think globalization is irreversible at this point?
MacCarthy: Yes, I do. Law firms are pretty conservative institutions, and it is their clients which have led the way into the global arena. The large multinational corporations of thirty years ago have become fully integrated global enterprises today, and it is inevitable that their law firms should follow suit, although that development has taken a long time to build momentum. Now that it is underway, I think that it is as irreversible as globalization itself. We are determined that we be capable of servicing our clients whatever their needs and wherever the location, and, as a result, I think we will be among the global survivors in this transition from a law firm arena defined by nationality to one without national boundaries.
Editor: What does that mean, in say ten years, for the London office of Winston & Strawn?
MacCarthy: I certainly think our London presence is going to be significantly greater. In addition to Geneva and Paris, I think our European operations would include offices in Germany and Italy and, perhaps, Russia. The Russian economy is growing, as is Winston & Strawn's Russian client base, so an office in Moscow or St. Petersburg in ten years is not out of the question. One of the strengths of a truly global firm, of course, is the ability to draw upon and coordinate the resources of the different offices, and the London office might well grow to take on such a role.