Setting a New Course

By John Pallatto  |  Posted 2004-04-20 Print this article Print

It is astonishing that—after the prolonged turmoil that resulted in the retirement of CA founder Charles Wang in late 2002 and his replacement as board chairman by Sanjay Kumar—the company utterly failed to make fundamental changes to its corporate culture and accounting practices.

When he became chairman, customers and investors believed that Kumar, who joined the company in 1987, had the experience and credibility to set a new course for the company while staying close to its technological roots. Kumar restructured CAs product line, selling off its application-software holdings and concentrating on IT management and security systems.

But apparently, he didnt keep a tight rein on CAs accounting practices, and for that, he deserves to lose his job. He had to know that federal authorities and investors would keep CAs financial statements and its corporate conduct under a microscope. His failure to ensure that CA accounting procedures were conducted according to the highest standards is inexcusable.

While the board of directors appears to be doing its job by ferreting out the latest instances of accounting misconduct, it shares the blame by failing to ensure that its accounting practices were honest to begin with.

The best way for CA to recover at this point is to bring in a highly effective outsider with no connections to the old culture who is prepared to make whatever changes are necessary to keep the companys accounting practices honest.

Appointing another insider–a product of the entrenched culture of fraud and deception–will call into question whether CA is serious about reforming its finances and capable of any semblance of corporate integrity.

There is yet another basic question that has to be answered: whether CA can actually function and survive as an independent, profitable company without doctoring its books quarter after quarter.

Future events may prove that successive generations of CA financial managers felt compelled to resort to fraud because without such shenanigans the company would have collapsed years ago.

In that case, the task of any new chief executive will be to sell off the company and its technology holdings to realize the best shareholder value and for the good of the software industry.

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John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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