BY JAMES BERNSTEIN
james.bernstein@newsday.com
April 17, 2007
A
special litigation committee of the board of CA Inc., the Islandia-based
software giant, released a scathing 390-page report Friday night accusing
former chairman Charles Wang of instilling a "culture of fear" during his
tenure at the software manufacturer. The report paints a picture of a
company mired at the time in wrongdoing at the top.
Newsday spoke yesterday to Gary Lutin, a Manhattan-based investment banker
who has headed a shareholder forum on CA matters, about the outlook for
the company.
What happens to CA stock?
Well, I expect investors to be somewhat encouraged by the committee's
apparent appreciation of its responsibilities for oversight. Nonetheless,
investors need to look for more signs of progress. But the committee's
report provides some basis for optimism.
How so?
The committee's report indicates at least some board members now
appreciate the requirements of effective management oversight and the need
to break away from the old CA way. That, in turn, may empower [John]
Swainson [CA president and chief executive] and other members of
management to thoroughly clean things out rather than sweep things under
the rug.
What specifically do you think management and the board need to do?
They mostly need to consider whether shareholder interests would be best
served by trying to grow the company on a foundation of corporate
integrity and credibility or whether it should be sold to an entity that
can establish that critical foundation.
Do you think a sale is the best course for the company?
That's something that needs to be considered and evaluated by a board of
fully informed directors, not someone like me ... [who can only]
speculate.
But do you think CA can survive independently?
Fixing a company burdened by the traditions of the old CA way is a real
challenge.
What has surprised you most about the CA scandal?
The thing that's surprised me most is how long it's taken for the board to
respond effectively. CA is not the first company that's had management
fraud, and it isn't the biggest fraud.
You referred to "the CA way." How do you define that?
It was a myth machine. Its existence depended on getting people to believe
things or do things that didn't make sense, whether that was getting
people to buy stocks at prices that weren't based on reality or signing
contracts for software based on negotiations or threats. Management had to
become increasingly aggressive in defending those myths to protect their
positions.
How much blame should be placed on CA's board?
It's hard to imagine how such worldly board members could have missed all
the clues. [The special litigation committee's report absolved all board
members - with the exception of former chairman Charles Wang - of
financial damages tied to the derivative lawsuits against the company.]
Do you think the current management is doing a good job?
That's still an open question. We'll have to see whether Mr. Swainson is
able to do what needs to be done without worrying about protecting
anybody's legal position or credibility.
