As expected, the board and management team at Computer Associates International Inc. are showing stiff resistance to Texas entrepreneur Sam Wyly's bid to oust them.
First, they filed a lawsuit trying to block Wyly's takeover attempt. Then, last week, they moved to boost CA's bottom line by announcing that top executives won't receive any bonuses in fiscal 2002.
In a press release on its Web site regarding its preliminary proxy statement, CA said company President and CEO Sanjay Kumar and founder and Chairman Charles Wang this year will have their compensation limited to base salary, benefits and stock options. Wang's salary is US$1 million, and Kumar's is $900,000.
The move appears to be an attempt to win the favor of shareholders, who have seen CA's top executives receive massive compensation during a time of lackluster revenue growth. Shareholders are scheduled to vote Aug. 29 on whether to keep the existing board or replace it with a board and management team led by Wyly.
But a spokesman for the Islandia, N.Y.-based company said the bonus cuts had nothing to do with the pending vote. Wang and Kumar didn't receive performance-based awards because of a "change in the firm's business model, which changed revenue recognition and resulted in a net loss for the year," according to a statement issued by CA.
Wyly, who last year sold his software firm, Sterling Software Inc., to CA, last month announced his intentions to replace Wang as chairman and to break the company into four independent units. CA quickly fought back by filing a lawsuit to block Wyly, based in part on a noncompete clause in the Sterling sales agreement.
A spokesman for Wyly's Dallas-based investment company, Ranger Governance Ltd., which is spearheading the proxy fight, called CA's lawsuit baseless and said it involves a "tortured misreading of the noncompete agreement." He said the decision not to award executive bonuses is immaterial.
"There are documented years of shareholder abuse, and one instance of their changing their egregious compensation does not change years of lackluster performance," the spokesman said.
In the proxy statement, Kumar said Wyly's plans to break the company into four organizations just don't make sense.
"In addition to decreasing the company's ability to offer integrated software solutions and engage in cross-selling, Mr. Wyly's plan would increase overhead costs and potentially be disruptive to employees," he stated.
Analyst Rick Ptak at Hurwitz Group Inc. in Framingham, Mass., agreed. "Wyly's plan sounds like a 'small is beautiful' fantasy," he said. "Customers are looking for solutions to comprehensive business problems, not a bunch of independent tools they have to assemble into a solution."