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Computer Associates International Inc. bought peace from dissident shareholder Sam Wyly for $10 million. In exchange, Wyly agreed to desist from all proxy battles for five years and to extend an existing non-compete agreement to five years. CA also agreed to add one more independent board member.
Wyly, through his firm, Ranger Governance Ltd. of Dallas, had been seeking to displace five CA board members, including CA founder and Chairman Charles Wang, President and CEO Sanjay Kumar, and Executive Vice President Russell Artzt. The proxy fight followed by a year Wyly and Rangers failed attempt to replace the entire board of directors. This years fight cited many of the same issues as last years, key among them the poor performance of CAs stock. Wyly, whose firm was acquired by CA, owns millions of CA options. His options are unaffected by the deal.
CA announced that its Corporate Governance Committee will nominate an additional independent director and the entire board will vote on the nomination, most likely before the end of the calendar year.
Despite the payoff, both parties sought to clothe the deal in language of corporate governance reform. In a prepared statement, Kumar said, “We are pleased to put this matter behind us. In conversations with Ranger over the last few days, it has become clear that Ranger and we are largely in agreement on corporate governance issues. And we are pleased that many of their suggestions have already been incorporated in our Corporate Governance Principles announced in May and contained in our recently filed preliminary proxy. In particular, we agree with Rangers thesis that companies with good corporate governance will in the long run be awarded a premium by shareholders.”
CA previously added four new board directors. In response to Wylys battle last year, CA hired a corporate governance consultant to suggest improvements to the companys governance procedures.
Perkins
: CA Made Great Strides”>
Perkins: CA Made Great Strides
Stephen Perkins, president of Ranger Governance, said in a statement, “At a time when many boards are being broadly criticized for having failed to exercise good oversight, we are pleased to see that CA has made great strides in the corporate governance area. We believe Ranger has played a very important role in raising important issues at CA and in encouraging them to focus on good corporate governance. We believe that the Companys new independent directors–and its process for identifying new directors–will ensure that the Company adheres to its stated principles and that this will benefit shareholders. Our goal has always been to focus on providing value for all shareholders and we are confident that CAs Board is well positioned to do just that.”
Wyly offered this statement, “With the changes that CA has made, and under the leadership of Sanjay Kumar and his management team, I am confident that CA is on a course to being recognized as the gold standard in good corporate governance. CAs new business model and demonstrable focus on corporate governance should yield good results for all shareholders in the future. I am proud of Rangers role in this process of shareholder democracy.”
“Wyly dropping the proxy fight is a positive for the company. CAs business needs focus in a very challenging competitive environment,” said Damian Rinaldi, an analyst at First Albany Corp. in Stamford, Conn.
“Wylys pressure was a catalyst to get the CA management team to be more forthright. In the grand scheme of things, Wylys influence was positive, although more recently it was less positive,” Rinaldi said, adding, “CA still has to execute.”
Another observer said the battle had positive results. “You can look at it as a reimbursement for the cost of last years battle, which has produced improvements in CAs governance,” said John Wilcox, vice chairman at Georgeson Shareholder Communications Inc., a proxy solicitation firm in New York. “I dont think its greenmail at all. There is a quid pro quo for the $10 million. There was a change in the behavior and attitude of CA.”
Related stories:
- Investors Raise Heat on CA
- Rangers Perkins Seeks to Rescue CA
- CA Adopts New Structure for Its Board
- Interview: Kumar on CAs Battle Strategy
- Commentary: CA Must Walk the Walk