Note: As indicated in the report below, the current interim CEO of Computer Associates was formerly associated with the article's publisher.

Fueling the anger and distrust voiced by attendees of CA's annual meeting of shareholders in Hauppauge, N.Y., Wednesday was a proposal related to hefty bonuses paid to CA executives, even while the company lost money over the past three years.

Stockholders hissed when the meeting's sole stockholder proposal -- a request that CA return to shareholders bonuses paid to executives who failed to hit performance targets while the company lost money -- was struck down by a margin of 76 to 24. The proposal was submitted by Amalgamated Bank Long View Collective Investment Fund, New York, which holds some 245,530 shares of CA stock. In its proxy statement, CA recommended shareholders vote against Amalgamated's proposal.

Cornish Hitchcock, a lawyer representing Amalgamated, charged CA executives with dragging their feet when it came to producing sales records and compensation details that would shed light on unfair executive compensation that should be paid back to CA shareholders. CA lost $591 million in 2001, $1.1 billion in 2002 and $267 million in 2003, yet rewarded its executives with bonuses along the way.

"If you didn't earn it, you shouldn't keep it," Hitchcock said. "We urge the board to provide something that has been absent for years -- leadership. Instead what we are hearing makes us sit around and wonder what else is going to pop up."

Hitchcock criticized CA for citing technicalities related to an ongoing federal investigation into the company's accounting practices as reason for not supporting Amalgamated's proposal.

CA, Islandia, N.Y., has publicly stated that an internal investigation into accounting practices that took place during the tenures of former chairman and CEO Charles Wang and former chairman and CEO Sanjay Kumar is complete. However, current CA Chairman Lewis Ranieri said several times during the course of the meeting that because the federal investigation continues, CA must continue to temper its disclosures of executive compensation and performance targets.

CA's internal investigation did uncover unethical accounting practices at the company, and Ranieri opened his remarks by saying, "The actions that occurred during the period under investigation were wrong. The individuals responsible are no longer with the company."

Hitchcock said that without access to CA's compensation committee minutes, it is impossible to tell how many millions of dollars in bonuses were paid to CA executives while the company lost money.

Looking forward, CA COO Jeff Clarke said the company intends to hire 150 new people to work with channel partners this year. Clarke said the hires will be worldwide, and that the figure will include call center personnel that mine sales leads. He said two out of three of the 150 new hires would "touch resellers directly."

Clarke said he expects CA's billing to be "modestly up" this year, moving to the "mid to high single digits" in 2005.

CA remains in search of a permanent CEO following the departure of Kumar in April. Shareholders voiced their approval of interim CEO Ken Cron, and some questioned why CA didn't just hand Cron the full CEO position in light of Cron's approval rating from both shareholders and CA management.

Ranieri said CA has interviewed more than a dozen potential CEO candidates and that Cron is in the running. But he said the search is ongoing with no deadline for completion.

Asked if the ongoing federal investigation of CA made the CEO job impossible to fill, Ranieri said, "It's hard to tell."

Rumor had it that CA would use the shareholder meeting to announce the selection of a permanent CEO, or put the choice of Cron up for a vote.

Some CA partners suggested that Cron's continued limbo as interim CEO perhaps weakened his pro-channel message. Others, such as Drew Sellers, president of SSG Consulting, Cleveland, saw the delay in appointing a permanent CEO as little more than "high level shenanigans" that threatened to distract CA customers from more important issues like product roadmaps.

Cron, the original publisher of CRN, said "it would be better if a permanent CEO were here." But he emphasized that CA was firing on all cylinders regardless of his ongoing interim CEO status. "We are not waiting around mindlessly for a permanent CEO," he said.

The continued compensation of Kumar was another topic that had some CA investors fuming. Though severance payments to Kumar have been deferred until the completion of the federal investigation, the ex-chairman and CEO continues to receive home security services at an annual cost to CA of about $9,000, and medical insurance for himself and his family for a period of 20 years. Kumar also can make use of off-premises office space and one assistan, according to the proxy statement.

The Wednesday shareholder meeting also served to re-elect KPMG LLP as CA's registered public accountant through the fiscal year ending March 31, 2005. Nine directors also were voted onto the board. The incumbents were Walter Schuetze, Lewis Ranieri, Jay Lorsch, Robert La Blanc, Gary Fernandes, Alfonse D'Amato, Ken Cron, and Russell Artzt. New to the board is Laura Unger, a former SEC commissioner.

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