Controlling Your Destiny in the Private Sector, with Sabastian Niles of Wachtell

A global corporate advisory practice operating at the highest levels, advising on governance, defense and M&A, takes more than just legal talent and brilliance. To function at peak performance week after week, year after year, a person needs to be enthralled with the client’s mission, to live and breathe the nuances and insights gleaned from active listening, and to thrive in collaboration with committed colleagues on complex, novel issues.

Sabastian Niles, a highly regarded partner at the gold-standard corporate firm Wachtell, Lipton, Rosen & Katz, is the profile of excellence in this field. Like his fellow partners, he is involved in every facet of the mission-critical situations confronting client boards of directors and management teams, keeping an eye on the larger purpose of a corporation to drive innovation and growth with positive impact.

“Like many of us at Wachtell Lipton, I have always been inspired, challenged and driven by founder, mentor and my dear friend Marty Lipton’s broad, humane and optimistic vision in the power of corporations to benefit all constituencies and society as a whole,” says Niles. “I’m personally motivated by the desire to help companies navigate corporate transformation amid the pressures of short-termism in a multi-stakeholder, highly competitive and diverse world.” Whatever the specific matter at hand, he works in ways that seek to strengthen corporate culture and corporate purpose, in order to “create value through innovation and the right go-forward strategies, safeguard the enterprise against undue risk, and consistently build and preserve stakeholder trust.”

The broad and diverse mix of work in Niles’ practice is aligned with the key set of matters on which Wachtell has focused. He navigates companies through shareholder activism, contests for corporate control, proxy fights, and campaigns for or against announced mergers and acquisitions. Transactional work, strategic reviews, mergers, acquisitions, buyouts, strategic alliances, divestitures, carve outs and spinoffs arise, both in the context of proactive company moves and in response to shareholder engagement and taking fresh looks at corporate opportunities.

Niles also handles corporate governance and risk oversight matters, where he’s advising boards of directors and management teams as to the director and officer fiduciary duties, positioning with investors and external disclosures, best-in-class practices around risk management, oversight and governance practices, meeting evolving regulatory requirements, and operating effectively and wisely at the intersection of competing stakeholder priorities, ESG-related issues, diversity and inclusion imperatives and corporate strategy.

Navigating the accelerating pace of technological change and geopolitical risk, whether related to artificial intelligence, cybersecurity or global political and regulatory affairs, is a regular feature of Niles’ practice. A prolific writer and sought-after speaker on matters of corporate law, policy, strategy and governance, his work and advice is often referenced in boardrooms, C-suites and classrooms throughout the world.

The common theme and ethos of Niles’ work is driven by the question, “How can companies in the private sector best develop and pursue the right strategies, control their destinies and be an exemplar for stakeholder trust?”

Back in law school at Harvard, Niles co-founded the Harvard Association for Law and Business, and spent late nights and early mornings discussing – and debating – legal and business issues with friends and mentors like Lucian Bebchuk, Guhan Subramanian, Leo E. Strine, Jr., and David B. Wilkins. These days, he continues to engage with the academic, regulatory and policy-maker community, spends significant time with institutional investors, stewardship teams and proxy advisory firms, and invests thought and time for roundtables, guest lecturing and mentoring at his alma mater as well as Wharton and the University of Pennsylvania’s Institute for Law & Economics, Stanford, NYU and other leading institutions. He is also committed to helping develop the next generation of senior executive talent and aspiring corporate directors while supporting seasoned directors, chief executives, legal officers, corporate development and M&A leads, and governance and sustainability teams.

I have long believed that business is the greatest platform for inventing collaborative solutions to complex problems, for advancing positive change.

Niles has been with Wachtell Lipton since he was a summer associate, nearly two decades ago. The firm is widely known for its top-tier legal advice and innovations, having founded the shareholder rights plan, or “poison pill,” back in 1982, a maneuver which is still widely used today. Partners at Wachtell have since led important work on corporate purpose and stakeholder governance to advance long-term, sustainable value creation that benefits investors, employees, customers, suppliers, communities and, more broadly, society and the environment at large.

Lawdragon: You have such a fascinating career. What do you like most about what you do?

Sabastian Niles: I've long had a real passion for the intersection of business, law and corporate strategy. And I have long believed that business is the greatest platform for inventing collaborative solutions to complex problems, for advancing positive change – both locally and at scale, for revealing the differentiating and unifying power of world-class cultures and for proving that we really can all work and come together to do great things that matter no matter our differences and disagreements. I have loved the creativity, legal challenges and opportunities to have positive impact at the firm when supporting companies with high-stakes, high-integrity decision making that stands the test of time, especially in the face of uncertainty and ambiguity.

The role of the legal profession, chief legal officers and general counsel continues to evolve, especially in terms of how best to support boards of directors, CEOs and the rest of the C-suite in being the eyes and ears of a corporation, having a 360-view of the opportunities and risks ahead and providing for the long-term profitability, health and sustainability of the corporate enterprise. Here at the firm, there is an energy and excitement from demonstrating a real, consistent commitment to high performance and collegiality. And when everyone can bring their whole selves to their everyday work, there is no limit to what can be achieved.

When I was a summer associate at Wachtell, I had the opportunity to work very actively, even as a young lawyer, with the in-house client team, Wachtell colleagues and outside advisors, including PR firms, investment bankers and specialists, on turning a significant hostile takeover attempt in the healthcare industry into an innovative win-win-win outcome, transforming a rough confrontation into positive results. That outcome was not inevitable, and we directly contributed to creating that result. Seeing the care, passion and creativity that everyone at Wachtell brought to bear confirmed my excitement about the practice and how we could be uniquely helpful to companies and their stakeholders.

LD: Wachtell is a renowned law firm. Can you talk about the characteristics that have kept the firm in the top-tier of the industry?

SN: Wachtell is a unique and special enterprise, developing lawyers who are listeners and leaders. The founder-inspired culture, camaraderie and clarity we bring to our mission is what attracted me to the firm, and it continues to attract and inspire new generations of hard-working, diverse and brilliant lawyers. We all have that drive to help and volunteer wherever and whenever needed to help the companies – and people – with whom we have the privilege to work achieve their goals, understand and apply the right legal strategies and frameworks and surmount any challenges that arise. Associates get full responsibility as soon as they are ready, the non-legal staff is highly motivated and a real part of the team, and the firm has never deviated from the basic premise on which it was founded – if you do a superior job there will be more demand for your services than you can meet.

Our broader philosophy regarding the role and place of corporations in the world is also relevant. Particularly in the U.S., private sector business is our core engine for innovation, economic growth, jobs, national competitiveness and positive impact in our society, underpinned by strong public-private partnerships. Business has become the most trusted institution in society, receiving the highest ratings for competence and ethics in recent trust and credibility surveys, and this sets a high bar and new set of expectations for CEOs, boards and companies to navigate.

When everyone can bring their whole selves to their everyday work, there is no limit to what can be achieved.

We bring that lens to our work in supporting client boards of directors and management teams, being mindful of the purpose of a corporation, how the client defines and measures corporate success, and the value of bringing a long-term oriented mindset to capital markets that are far too often focused solely on the immediate stock price. Whether it’s transformative M&A, dealing with investor pressure and coming out on top, handling sensitive governance, sustainability or investigation/litigation matters, or innovating and thriving responsibly in the new era of generative AI, giving companies and investors more breathing room to focus on the future, promote sustainable value creation and get out of a quarter-to-quarter mentality has never been more essential.

LD: Tell us more about the culture you have sought to maintain at Wachtell.

SN: We have a team-oriented, task force-based, high-performance culture, knowing we perform at our best when we are inclusive, encouraging and supportive. We stay focused, not trying to be all things to all people. We’re very tight-knit, which brings cohesion, consistency and integrity to our work. Some of my best friends are here at the firm, and our families are friends too.

Enterprises thrive when they are places where your deepest values around excellence, teamwork, camaraderie, inclusion and humility can manifest.

In terms of our structure, we run very lean teams. We use the task force approach to any issue, bringing the right people to the conversation, whether that’s the most junior first year associate or the most senior partners, and ensure the right specialists or generalists are core members of the team. We are ready to litigate to defend and pressure test innovations that advance client goals. Our partners are very hands-on, deeply engaged. Our staff is incredible, too, uplifting and inspiring, and we’re reliant on them to help us all perform at the highest level.

The firm is known for client-centered innovations and landmark results, and we strive to be an incubator for the best ideas, demonstrate flawless execution and solve our client’s challenges and problems in a holistic way that reflects a deep, curated understanding of client objectives and the priorities of all involved stakeholders. We believe that the best, most interesting solutions come when team members constructively challenge and inspire each other, and we all align to a shared purpose. We’re open to feedback. We strive to cultivate and inspire trust. While singularly and universally committed to our clients, we have a diversity of background, thought, age, gender, race, ethnicity, and orientation in our people, and embracing that diversity in ways that center our shared core values is one of our strongest markers of high performance.

We know that the human capital of the firm is a precious resource that we must nurture. Like any successful enterprise, excellence in our context requires on-going self-assessment, renewal and enhancement while maintaining our culture. We build relationships with clients that last for a long time. Many of our most fulfilling client relationships begin long before they really need us, and we celebrate making new relationships when clients find us for the first time.

LD: You have a leading practice when it comes to corporate governance matters and defending companies against activist investors. What trends are you seeing in that space?

SN: CEOs and boards who know how to navigate stress, pressure, transition, crisis and opportunity will thrive. Companies across sectors are facing a new macroeconomic and geopolitical environment, a new corporate governance and ESG environment, a new regulatory environment, a new activist and investor environment and a new business and technological environment. This means there are new opportunities, risks and vulnerabilities that public companies need to understand, prepare for and address. It would be fascinating to know what Clayton Christiansen, architect of disruptive innovation theory and, later, seer of the Capitalist’s Dilemma who identified a disconnect between the innovations that would drive long-term prosperity and the actions that investors with sometimes-flawed financial metrics would prioritize, would think of this moment in time, were he alive today.

We turned a significant hostile takeover attempt in the healthcare industry into an innovative win-win-win outcome, transforming a rough confrontation into positive results... That outcome was not inevitable.

We’re expecting a very busy proxy season next year. Shareholder and stakeholder engagement has become a year-around activity, and the spotlight on board effectiveness, board composition, board and CEO priorities and corporate performance – measured across growth, margin improvement and stakeholder-facing performance measures – will only intensify. Hedge funds and stakeholder groups are recruiting competing director candidates and challenging a company on their governance and business strategies, but our clients are also finding ways to stay ahead of the activists, work constructively with the right investors and build investor trust and stakeholder confidence in refreshed corporate strategies. Our clients across all sectors, whether technology, industrial, healthcare, real estate, retail or financial institutions, are looking at how to navigate an investor base that is increasingly assertive, if not aggressive. Companies who move quickly to pursue the right initiatives, maintain alignment within the boardroom and engage effectively with key shareholders and constituencies will achieve beneficial outcomes, gain the confidence of investors beyond the activist and, where deal-making with an activist is necessary, find common ground or obtain favorable resolution terms.

Building meaningful relationships with the major index funds, including BlackRock, State Street and Vanguard, as well as the major actively managed funds, will continue to require targeted, thoughtful and creative approaches, and engagement for engagement’s sake will not carry the day. These funds bring their own distinctive brands of stewardship, engagement and patient pressure to bear in the capital markets and at their portfolio companies, and embracing a two-way dialogue is the best path for companies to demonstrate to these funds that the company’s strategic choices, board and management priorities, and substantive approach to governance deserves support from such key investors.

Takeover defense and M&A is a very significant, leading part of our practice. Activists are calling for sales of the company and portfolio reviews and enlisting potential buyers. Companies are receiving many unsolicited overtures from competitors, other strategic players, private equity firms and other financial sponsors. Some of these overtures are public, some not. Some companies are also finally in a position to bring M&A back into their own capital allocation priorities, or will soon be positioned and ready to do so, and we’re ready to help, guide and execute.

LD: Is the regulatory environment changing?

SN: Yes, there are also changes in rule-making on the horizon. I could speak at length about the antitrust and enforcement environment, but from the SEC disclosure perspective, we’ve been longtime advocates for reform when it comes to the information that companies, investors and the broader market ought to have about shareholders who pressure, change, control or influence companies. The SEC is working on that, and we’ll see if the SEC will bring sunlight to swap-building in the dark and the shadow market in derivatives, and accelerate 13D filing windows and scope for non-passive investors.

We're also awaiting the specifics of what the SEC will do in the areas of new human capital management disclosures, climate change and emissions-related reporting, cybersecurity and other areas. While overseas regulators are moving forward with rules that affect U.S. companies, the SEC is also working on a whole host of topics that will affect not just company practices, policies and disclosures, but also influence board of directors’ oversight and the definition of best-in-class processes. Well-advised companies are planning ahead for how their internal controls, compliance programs and board processes will need to evolve.

LD: How about AI regulation?

SN: I would have to spend many more hours together with you to dive into that, but business models will evolve even faster than anticipated, and corporate law – and all other forms of law – is playing catch-up. It remains to be seen where U.S. and overseas regulation – and perhaps supervision – will ultimately land with respect to the promise and articulated risks of artificial intelligence. This has been an area of focus for me. Sophisticated organizations, whether for-profit enterprises, public sector or non-profit groups, will be well-advised to partner with companies who embed clear values and principles into AI product governance, design and roll-out strategies. They should have established credible track records of leadership and thoughtfulness in prioritizing responsibility and ethics in AI innovation and should have done the hard work of developing guidelines for responsibly developing, innovating and implementing generative AI. As parents and citizens, we have the opportunity and responsibility to prepare our children, fellow citizens and public policy priorities for an AI-transformed world.

Directing any competitive instincts outwards rather than internally towards others at the firm is also core to how we practice, and is both an operating value and a personal mindset to embrace.

LD: What else have you been thinking about in advising companies?

SN: We're guiding companies on finding ways to be more proactive and go more on the offensive when anticipating or facing an activist attack, corporate crisis or technological and competitive threats. Sometimes this involves legal tools, but more broadly we're encouraging companies and CEOs to develop and embrace an effective role for the board on these issues, including reconfiguring board and committee agendas and addressing board development and refreshment opportunities over time head-on. A strong, high-performing board of directors, a high-quality management team leading an engaged workforce committed to a vibrant corporate culture, and sound governance structures supporting all of the above, are strategic, highly valuable assets to a company and all stakeholders. Developing the right board-level and C-suite level frameworks and personnel to oversee strategy and risk is critical in enabling companies to see around corners, guarding against the risks that can emerge to the enterprise and to corporate health if a company has blind spots.

Some years ago, I had an opportunity to help develop, with Marty Lipton and other brilliant colleagues, a new paradigm for corporate governance under the auspices of the World Economic Forum’s International Business Council. The principles espoused in this effort – known as The New Paradigm: A Roadmap For An Implicit Corporate Governance Partnership Between Corporations And Investors To Achieve Sustainable Long-Term Investment And Growth – has been embraced by a wide range of market participants, and it continues to serve as a very helpful guidepost for major companies and institutional investors.

It's an incredible time to be practicing and partnering with our clients in the midst of all these interesting, tectonic forces.

LD: How about in the Delaware courts, what are you seeing there?

SN: There’s an evolution underway in Delaware case law, and most U.S. companies are incorporated in Delaware, meaning fiduciary challenges to director and officer conduct are generally governed by Delaware law, alongside the corporate charter and bylaws. We’ve been developing new protocols for how companies navigate the new landscape of increased risk, including litigation challenges under Caremark-related doctrines of risk oversight and breach of fiduciary duty. In this regard, boards and management teams have powerful tools at their disposal to defend proactively against Caremark risk oversight claims.

Generally speaking, the best preventive medicine at the board level in preparing for such fiduciary litigation in advance of a crisis include developing company-calibrated risk-management protocols, designing innovative board committee architecture updated to reflect the company’s risk profile, and engaging in faithful record-keeping that properly reaches serious deliberation on important business, strategic and risk-related issues. Not only will this minimize fiduciary risk, it should also improve actual business decisions and the velocity of wise decision-making. There are also important Delaware law amendments that would address exculpation of corporate officers from certain kinds of liability, with exceptions that are more analogous to the protections available to directors, as well as officer-specific items.

LD: For law students or young associates, what does it take to succeed at a firm like Wachtell?

SN: Our pursuit of excellence, differentiated advice and service levels and our unwavering commitment to our clients are some unifying principles. Our people are diverse in so many ways, and I learn so much from our associates every day. Just the other day, I was sitting down with one of our associates, and she brought a new perspective to a problem we were trying to solve for a client. Our associates are core, contributing members of every client team, as are our partners.

I mentioned earlier that we often tackle matters using an internal task force, cross-functional approach. This prioritizes teamwork and facilitates good judgment, coupled with speed, accuracy and effectiveness. Directing any competitive instincts outwards rather than internally towards others at the firm is also core to how we practice, and is both an operating value and a personal mindset to embrace. We're all in this together, in this common enterprise upholding the principles of the legal profession as a profession and calling, serving and innovating for the benefit of our clients. Whether our colleagues continue with us for many decades, join clients and continue their partnership with us that way or go off to other ventures, we are always strengthened by the time they choose to spend working and learning with us, deeply and intensively, as one team and one firm.

There is a seriousness of purpose. A dedication, a discipline. Having – or discovering! – a real love and passion for what we do is a common attribute, and it’s also okay if that takes time to develop. A deep and abiding curiosity for what it takes to develop into the go-to, trusted advisor to top corporations, founders, general counsels, CEOs, chief financial officers and boards of directors, in America and globally, is part of the journey. Working mindfully with other world-class advisors, consultants and co-counsel where applicable is also important. Our associates develop the skills to think, innovate and execute effectively, responsibly and accurately across any type of context, on matters of significance for the firm’s clients.

Sophisticated organizations will be well-advised to partner with companies who embed clear values and principles into AI product governance, design and roll-out strategies.

It does take a certain approach, commitment and mindset, and we want to see everyone succeed as we help our clients succeed.

Anyone who brings that level of commitment, openness to feedback and willingness to grow – which is where humility comes in, for all of us, at any level ­– they can find success here. We derive an intellectual and practical enjoyment and energy from our work and often develop close friendships with each other and our clients, especially as a result of difficult and hard fought matters. We hope that all of our people find it energizing to grapple with a client’s most complex problems and most exciting opportunities.

LD: Where do you put your energies when it comes to the community and broader impact?

SN: The firm and our colleagues are major participants in community philanthropy and active in the community, and the firm also devotes substantial time, energy and funds to pro bono matters. With respect to non-profits in which I am involved, one of them is Literacy Partners. Literacy Partners is a really terrific organization, bringing a multi-generational approach to family and adult literacy, something that it is far too easy to take for granted and fail to realize the stakes and challenges where literacy has not been achieved and championed. We’re celebrating Literacy Partners’ fiftieth-anniversary of impact in changing the lives of children, parents and grandparents and family trajectories through the power of literacy, and I’m honored to be a member of the board.

I’m also very passionate about wellness and mental health, which has become an emerging investor, corporate and human capital priority that I have written and spoken about, including by invitation at the National Press Club last year. Advancing mental health and wellbeing in the context of high performing organizations will continue to be a big focus moving forward – after all, well-being and empathy, in addition to being core elements of kindness and a human-centered approach to life, are foundational to innovation, teamwork, recruitment and retention of top talent and achieving sustained outperformance, as well as central to realizing the promise of inclusion and belonging and preserving the health of our communities. And as we’ve talked about before, alongside sound public policy and law, the private sector has a very powerful and important role to play in solving the problems of people and planet, and we should all be focused on being part of that.

LD: Imagine you’re not in your current role, and you could do anything – what would you do?

SN: Haha, I don’t think you are supposed to ask that. But seriously, while I am not sure anymore that I will wait until 95 to retire, I could see myself working, learning, listening and leading even more deeply with a world-class company unified by a caring, unique and authentic culture. A place where the people, CEO, board of directors, vision and mission inspire, charting the future of an impactful, important enterprise together with brilliant, hard-working and innovative colleagues. I could bring to bear the full creativity and force of my leadership style, legal skills and multi-stakeholder mindset to innovate, collaborate and advance a well-conceived, high-trust, high-integrity and inclusive corporate transformation that melds profitability, purpose, governance and impact agendas in the face of technological change, challenge, opportunity and disruption. That sure could be a lot of fun!

LD: That’s certainly one definition of fun. What do you do for real fun when you’re not in the office?

SN: I maintain a mindfulness practice, including when racing to the gym on a CitiBike, or chasing my latest green smoothie and fresh ginger shot fix. My wife and I are raising three wonderful daughters in New York. So we have fun as a family together and are grateful for all that we have. Being a father, and striving to be a really terrific and consistent partner to my wife, are incredibly important to me. Rina is my life partner and my greatest source of inspiration, support and perspective. Family is foundational, at the core, and a never-ending fount of humility.

On that note, my kids give me a lot of feedback, encouragement, and constructive criticism, and not only on my ever-evolving definition of fun. Children bring such a wonderful perspective. Seeing how they grow, and reason, and manage frustration and joy, encourages my own growth mindset. Their sparks of creativity and innovation are ones I always want to encourage, and I hope they will always see us as a source of strength and support as they too discover their own unique passions and priorities and the joys of commitment and find ways to demonstrate empathy, to contribute and to serve and ultimately to do their part in making the world a better place.