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Corporate
Governance
D'Amato, Others
Under Fire at CA
By WILLIAM M. BULKELEY
September 16, 2006; Page A2
Another board showdown looms next week, with former
Sen. Alfonse D'Amato expected to come under attack from
corporate-governance types at Monday's annual meeting of CA Inc.
-- formerly known as Computer Associates -- where he's been a director
since 1999.
The CA meeting gives governance advocates an
opportunity to go after the board and accountant KPMG for their
perceived failures to halt accounting fraud in 2000 and 2001, or a stock
slide since then. In those years, the company regularly exaggerated
quarterly results, booking a total of $2.2 billion in revenue after a
quarter ended in what were known as "35-day months."
Former Chief Executive Sanjay Kumar heads a list of
former CA executives and employees who have pleaded guilty to federal
charges of fraud and obstruction of justice. Mr. Kumar is scheduled to
be sentenced Oct. 12. Until he left the company, Mr. Kumar promoted CA
as a paragon of corporate governance.
Starting in 2004, the board of the big software company
replaced many top executives, while new management asserted CA had
finally cleaned up its books. But this year, it reported several
more-recent accounting shortcomings that required restatements, admitted
to material weaknesses in its systems, and uncovered some older
problems, including stock-options misdating, that altogether required
$342 million in earnings restatements.
Now, three proxy-advisory firms -- Institutional
Shareholder Services, Proxy Governance Inc. and Glass Lewis & Co. -- are
recommending that shareholders withhold a vote next week for Mr.
D'Amato, CA's longest-serving director and a member of its audit
committee.
The vote to withhold is nonbinding. Earlier this year,
the Securities and Exchange Commission rejected one shareholder group's
attempt to hold a binding motion removing Mr. D'Amato and nonexecutive
Chairman Lewis Ranieri from the board.
However, Shirley Westcott, director of policy at Proxy
Governance, said, "If he got a significant withhold vote, probably the
board would ask him to resign, or he would resign." Mr. D'Amato's office
referred calls to CA, where a spokesman declined to "speculate" on the
matter.
Glass Lewis recommends withholding votes from Mr.
Ranieri, a former investment banker who joined the board in 2001, saying
he "should be held accountable for failing to put in place an effective
management team." Glass Lewis also recommends withholding votes for two
other members of the board's audit committee who have served since 2002.
And it advises voting against keeping KPMG, which has been CA's auditor
for seven years.
The other advisory firms recommend voting for all the
directors except for Mr. D'Amato and keeping KPMG.
Institutional Shareholder and Glass Lewis also go
against management by backing a contentious binding resolution that
would require a unanimous vote by directors or a shareholder vote to
continue the company's poison-pill antitakeover provision. CA tried to
keep the resolution, proposed by Harvard Law professor and
corporate-governance expert Lucian Bebchuk, off the proxy. However, a
Delaware judge said CA could challenge its legality if it passes. CA
declined to say if it would go back to court if shareholders approve the
proposal.
Write to William M. Bulkeley at
bill.bulkeley@wsj.com3
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