Computer Associates International (CA) avoided a revolt at its annual meeting on Wednesday, when shareholders voted down a proposal requesting that the company's board adopt a policy of revoking executive bonuses paid based on financial results that are later revised.
Submitted by the Amalgamated Bank Long View Collective Investment Fund, the proposal came in the wake of a devastating accounting scandal that wiped out CA's management ranks and forced the company to restate US$2.2 billion of its past revenue.
Amalgamated Bank cited CA's accounting scandal in a regulatory filing supporting its proposal. The fund took issue with the millions paid to executives -- specifically, to former chief executive officer (CEO) Sanjay Kumar, who served as CA's president and chief operating officer during the fraud -- and with CA's board's silence about whether it will attempt to recoup those bonuses. Not doing so would be "a serious omission," the fund argued.
At the meeting, 76 percent of votes cast sided with CA, which opposed the proposal.
Unlike scandals at other companies, CA's did not involve fictitious revenue. Rather, to meet analysts' and investors' expectations, the company prematurely recognized sales that should have been booked later. Based on targets that, in retrospect, turned out not to have been met, CA awarded bonuses to top executives on its sales and management teams.
Amalgamated Bank faced long odds on winning passage of the proposal. A small number of investors hold a significant percentage of CA's shares and traditionally vote with the company's management. One investor with a 10 percent stake in the company, Private Capital Management, said earlier this month that while it agreed in spirit Amalgamated Bank, it did not want to see a mandatory policy enacted because it could devastate employee morale. Private Capital Management said it would vote against the proposal.
Also at CA's meeting, company chairman Lewis Ranieri said CA is considering interim CEO Kenneth Cron for the permanent spot. Cron, who took over CA's reigns in April after Kumar stepped down under fire, initially said he would not be a candidate in the company's CEO search. A company spokeswoman confirmed that he is now under consideration.
Islandia, New York-based CA is unlikely to fill its CEO vacancy before it resolves the continuing government investigation of its accounting fraud. The company has now expelled every executive implicated in the fraud and those in a top management role at the time it was perpetrated, but CA remains subject to fines or other sanctions the government may impose as penalty for the corporate wrongdoing.
Four former CA executives, including its ex-chief financial officer, have pleaded guilty to criminal charges including securities fraud.
Ranieri said he is continuing to work with the government toward a settlement. Earlier this year, CA offered US$10 million to settle the charges against it, but the company has not commented on the government's response to the offer.
Ranieri also said CA is reviewing the issue of compensation paid to "certain officers" in prior years.