The seesaw battle that could determine the fate of Computer Associates International Inc.'s future took a surprising twist on Monday, as Institutional Shareholders Services (ISS) announced it was changing course and now supports efforts by the group led by investor Sam Wyly to wrestle control of the software giant away from company Chairman Charles Wang.
In a report released on Monday, ISS said it agrees with significant changes the dissident group made on Aug. 17 to its bold proxy bid to take over CA. After reviewing the changes, Rockville, Maryland-based ISS is recommending CA shareholders to elect a pared-down four-member dissident slate on the impending Aug. 29 proxy voting date.
CA officials could not be reached for comment.
Among the significant changes undertaken by Dallas-based Ranger Governance and the group's principal leader, Texas billionaire Wyly, include the election of four dissident nominees as opposed to its previous "total control" plan to oust the entire ten-member board of directors. The revised nominee slate features Richard Agnich, Stephen Perkins, Cece Smith, and Elizabeth VanStory. Only Perkins and VanStory have prior histories with Wyly, notes ISS.
The fact that the outspoken Wyly would not be on the nominee list helped sway ISS to reverse its earlier stance in supporting CA and urge shareholders to vote against Wyly and Ranger Governance, said Ram Kumar, senior analyst at ISS. The ISS is an influential proxy voting consultant given weight by shareholders during takeover battles.
"Since [Ranger Governance] was seeking full control, we thought that was too much. They're now seeking minority representation, we always thought that would be warranted," Kumar said. "CA indisputably has had problems in the past. [Shareholders] probably need some fresh air and some new perspectives on [the company]."
According to ISS, Ranger Governance's motivation to opt for the minority slate of nominees was prompted by criticism of its original coup outline from investors and analysts who believed that the plan was far too risky and was not deemed urgent enough due to recently promising revenue results.
Ranger Governance has said the four incumbent directors it would like to oust are Charles Wang, Alfonse D'Amato, Russel Artzt, and Willem de Vogel. ISS' report notes that Artzt, who founded CA in 1976 with Wang, was one of the beneficiaries of the company's maligned and highly criticized grant of US$1 billion in stock to senior executives in 1998.
Although Islandia, New York-based company president and Chief Executive Officer (CEO) Sanjay Kumar was also on the receiving end of the stock grant as the ISS report notes, Wyly has said that he has would like to keep Kumar on the CA board for at least one year if the proxy attempt proves successful. Originally, Wyly asked shareholders to remove both Wang and Kumar.
"I think that everyone is pretty agreed that CA probably needs to break its ties to the past, and the past has been Charles Wang. As long as he's on the board he's going to have too much say on the remainder of the board," Kumar said.
Kumar suggested that shareholders may elect Wang to stay involved with CA in a consultation-related mode, citing his importance to CA efforts in Asia and abroad.
By limiting the new short-slate nominee candidates to only a quartet of seats on the CA's board, ISS says Ranger Governance will not have the authority to implement immediate radical changes to the industry giant. Wyly has outlined to shareholders in detail his plan to break up CA into four different businesses based on the company's primary product lines.
Although he lauds recent attempts by CA management to try and inject new life and enthusiasm onto CA's current board, Kumar says shareholders can ill afford to wait for the "incremental evolutionary" process to commence.
"Here shareholders have the opportunity in one fell swoop to significantly change the look of the board by putting four new clearly impressive directors on the board, where current management will put one at a time at best," Kumar said. "In everyone's eyes [a quick solution is] exactly what CA needs at this time."