Cisco officials had dual interest in some late '90s acquisitions

Cisco Systems' Chief Executive Officer John Chambers recused himself from voting on the networking giant's largest acquisition because he owned part of the company Cisco was buying, a spokesman said Tuesday.

The $7 billion deal in 1999 was one of several acquisitions Cisco made during the late 1990s involving companies in which Chambers and other Cisco officers and directors held stakes. The Cisco officials owned the stakes through personal investments in venture capital partnerships, including some tied to Cisco Vice Chairman Donald Valentine, a longtime Silicon Valley venture capitalist.

The valley's fast-paced entrepreneurial climate during the tech boom of the 1990s fostered tight relationships between venture capitalists, entrepreneurs and executives. But such dual-interest deals are drawing increased scrutiny as investors call for tighter controls on possible ethical conflicts of interest in the wake of scandals such as Enron.

Cisco said its executives acted ethically and that personal gain had no bearing on its corporate deals. Chambers gave all the proceeds he received in such transactions to charity ``to avoid the appearance'' of any impropriety, said spokesman Steve Langdon.

But others say that when executives have a financial stake in both sides of a transaction, the potential risks to shareholders outweigh possible benefits. ``At least this behavior is insensitive and at worst perilous,'' said Nell Minow, editor of the Corporate Library, a Web site that tracks corporate governance issues.

Details of the transactions were first reported in the New York Post.

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