Kumar and CA Get Rare Second Chance

Sanjay Kumar may believe that his resignation as chairman of Computer Associates and his appointment as its chief software architect is the best thing that ever happened to him. He gets to go back to his roots as a technologist, and CA gets another chance

Its a rare occasion when a company decides to create a new position for a deposed corporate chairman, rather than dispatch the big boss to a well-heeled, if early, retirement. Its even more rare for a former chairman to willingly hang around after losing the top job.

But that is what Computer Associates International Inc. has chosen to do for Sanjay Kumar, who resigned this week as chairman and CEO. He will stay on as chief software architect, which will enable him to continue formulating CAs product strategy.

Clearly, the board and Kumar believe that he will help the company keep growing once it finally resolves all of the legal issues resulting from the boards review of the companys accounting practices. The board also must have concluded that Kumar isnt likely to be held criminally liable as a result of the ongoing investigation of CAs accounting practices.

/zimages/3/28571.gifClick here to read about Kumars resignation as CA chairman.

Though on a far smaller scale, the accounting scandals at CA are based on the same systemic problems that ruined Enron Corp. and WorldCom Inc. Corporate financial executives were determined to do whatever it took to prop up their companies stock prices by puffing up quarterly statements with financial skullduggery.

That shouldnt happen if the chairmen and corporate boards are doing their jobs by mandating that every penny or revenue their companies book is bona fide.

Thus, there is no question that Kumar had to take the fall for failing to set a high standard for honest accounting after he became chairman and CEO in late 2002. Kumar resigned the chairmanship in the wake of the firings of four employees from the companys legal department and five from its finance department.

Doubtless more shoes will drop in the continuing investigation of CAs accounting misconduct. A very big shoe may fall after federal authorities finish investigating this debacle if an aggressive prosecutor decides that Kumar was more than morally responsible for the actions of his subordinates.

There is no guarantee that federal authorities will agree with the CA boards decision to forgive Kumars failure to closely review the companys accounting practices by retaining him in the company.

Next Page: To accept the position is to accept direct responsibility for the accuracy of all financial statements.

John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s eWEEK.com since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...