BY ALAN J. WAX AND CARRIE MASON-DRAFFEN
STAFF WRITERS
November 25, 2004
Computer Associates' new president and chief-executive designate will
receive a pay package worth more than $8.6 million from the embattled
software company.
John Swainson, 50, the former IBM executive who joined Islandia-based CA on
Monday, will receive a package that includes a $2.5 million cash signing
bonus, a base salary of $1 million, a stock grant of 100,000 shares for
signing with the company and options to buy an additional 350,000 shares
over 10 years. The shares were worth at more than $3 million at the close of
trading yesterday.
Under Swainson's five-year contract he also will be paid $2.8 million for
benefits he would have received from IBM, which he left after 26 years. CA
spokeswoman Shannon Lapierre said the payment could be in cash, various
forms of stock or different option types.
Swainson also will get an annual bonus of at least $333,334 for the rest of
the company's 2005 fiscal year, no matter what his performance. His bonuses
could go as high as $3.5 million in cash and restricted stock.
"I thought it was very reasonable," James Reda, managing director or James
F. Reda & Associates, a Manhattan-based executive-compensation consulting
firm, said of Swainson's package. "He basically left a really good a career
at IBM ... I am impressed with the fact that they were able to get a quality
executive like they got considering the position of the company."
However, Nell Minow, editor of The Corporate Library, a Portland,
Maine-based group whose reports focus on corporate governance, was critical
of the deal.
"Even a signing bonus should be tied to performance, and that is especially
true in a situation like this one where the company has a history of so much
trouble," she said. "You are really looking for someone who can show some
signs of leadership. You want him to communicate to the employees and the
investors what the priorities are. The signals are all in the wrong
direction."
Minow said Swainson's package raises concerns about the company's board of
directors. "This pay package has done nothing to make us feel better about
this board."
Swainson will take over from its interim chief executive, Kenneth Cron,
within six months.
Four CA executives made guilty pleas in connection with the $2.2 billion
accounting fraud, and former chief executive Sanjay Kumar, who left in
April, was indicted.
In fiscal 2004, Kumar received base pay of $1 million and stock grants for
281,000 shares worth more than $7.5 million. The stock grant, however, was
forfeited when Kumar left the company on June 30.
Computer Associates shares closed up 46 cents at $30.62, a new 52-week high
in trading on the New York Stock Exchange.
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