CA
Investors Weigh Plan
On Scandal-Tainted Pay
By CHARLES FORELLE
Staff Reporter of THE WALL STREET JOURNAL
August 25, 2004; Page B7
Over the past several years, Computer Associates
International Inc. paid millions of dollars in salary, bonuses and
stock awards to executives who have been fired, indicted or both as a
result of the software maker's accounting scandal.
Shareholders assembling today at the company's annual
meeting will be debating how they can claw back some of that
compensation. At the meeting, to be held near CA's headquarters in
Islandia, N.Y., shareholders will consider a proposal that says the
board "should undertake to recoup money that was not earned or
deserved."
The shareholder proposal has slim odds, as CA's board
has recommended that holders vote against it. But it illustrates the
pressure the board faces to pursue compensation paid to former Chief
Executive Sanjay Kumar and several former executives.
When executives are given bonuses based on performance
figures that turn out to be wrong, they are "paid money that they've
never earned," said Charla Myers, a spokeswoman for Amalgamated Bank
Long View Collective Investment Fund, which submitted the proposal. "It
should go back to the company; otherwise, they are getting a free ride."
One major shareholder, Private Capital Management, has
said the proposal is too broad and could undermine the morale of
employees. Still, in a letter to CA's chief executive, Private Capital's
president, Gregg J. Powers, wrote, "We agree in spirit with
Amalgamated's concern," adding, "it is reasonable and appropriate to
expect the Board to review remuneration achieved under false or
misleading circumstances." Private Capital controls about 10% of CA's
shares outstanding.
Another shareholder, Ranger Governance Ltd., which is
controlled by investor and longtime CA critic Sam Wyly, has filed a suit
on behalf of shareholders seeking a return of compensation to the
company.
CA says it is reviewing compensation paid to Mr. Kumar
and others and is deferring decisions on what to do until after the
review is complete. A continuing federal investigation of CA's
accounting has led to guilty pleas from four former executives, and the
company has forced out more than a dozen employees. CA has restated more
than $2 billion in revenue as wrongly booked.
But others have been more aggressive. When Nortel
Networks Corp. announced last week that it fired seven employees in
connection with its accounting troubles, the company said it would
"demand repayment" of their 2003 bonuses.
Paul Hodgson, a compensation expert at the Corporate
Library in Portland, Maine, says it can be difficult to recover payments
because employment agreements and bonus policies often don't include
forfeiture language related to accounting restatements.
In the fiscal year ending March 31, 2000, the period in
which much of the accounting trouble occurred, Mr. Kumar received a
salary of $900,000 and a bonus of $3.16 million, as well as grants of
restricted stock and stock options. Mr. Kumar has denied wrongdoing in
the accounting matter.
Write to Charles Forelle at
charles.forelle@wsj.com1
