HEATED WORDS AT CA MEETING

Shareholders reject plan to recoup bonus

BY JAMES BERNSTEIN
STAFF WRITER

August 26, 2004

At a raucous annual meeting yesterday, Computer Associates International's new top management team got an earful from shareholders, many of whom loudly complained about what they viewed as excessive bonuses and salaries to executives fired in a financial scandal that has shadowed the software giant for two years.

Despite the sharp criticism from many of the approximately 450 people at the meeting at a hotel in Islandia near CA's headquarters, shareholders defeated a proposal that could have forced senior management to return performance-based bonuses tied to financial results that were later restated.

Only 76 percent of the voting shares cast their ballots against the measure, proposed by Amalgamated Bank of New York.

In contrast, 95 percent of the voting shares re-elected all eight directors standing for re-election, and 96 percent backed the appointment of KPMG as CA's public accountant.

During the nearly two-hour meeting at the Hyatt Wind Watch Hotel, loud applause greeted shareholders' calls that CA recoup compensation given to executives implicated in the broad accounting scandal.

Cornish Hitchcock, attorney for Amalgamated, rose from his seat and said that a single phrase had become a mantra to him and his supporters: "If you didn't earn it, don't keep it."

CA's new top management team, chairman Lewis S. Ranieri and interim chief executive Kenneth Cron, sought to assure shareholders that the company would recoup money, if investigations showed the compensation had been improperly gained. "We are examining the findings" of an internal probe, said Ranieri. "You will simply have to be patient," he told the audience. "Any money we're talking about getting back will be from ill-gotten gains, gotten by evil deeds." Ranieri said the company's own investigation "resulted in a change of management, including Sanjay Kumar."

Kumar, who had risen rapidly through the company and had been founder Charles Wang's hand-picked successor, was chairman and chief executive when he quit in April as the scandal grew. Kumar became CA's chief software architect, but left the company in June. Ranieri, who had been CA's lead independent director, was immediately named chairman. Cron was named interim chief executive soon after.

CA is still under investigation by the Justice Department and the Securities and Exchange Commission. A total of 14 employees have been fired in relation to the accounting fraud. In April, CA restated more than $2.2 billion in misreported sales dating back to 2000. Kumar has not been charged with any wrongdoing.

Ranieri was asked repeatedly when a permanent chief executive would be named, but he declined to put a date on any selection. Ranieri and Cron also refused to comment on any aspect of the ongoing federal investigations. But shareholders kept peppering the board and top executives with questions about recouping pay and CA's ethics.

One elderly shareholder said he had been investing in CA for years and had lost money. He drew laughter and applause when he asked when he might see returns.

Ranieri shot back: "I'm a shareholder. I have the same concerns you do. My objective is simply to deliver shareholder value."

Copyright © 2004, Newsday, Inc.

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