CA Board To Ranger: We Support Our Execs

Computer Associates International letter

The letter was written in response to a dispatch sent last month by Stephen Perkins, managing director at Dallas-based investment firm Ranger Governance, calling on the board to fire Chairman Charles Wang, President and CEO Sanjay Kumar, and CFO and Senior Vice President of Finance Ira Zar.

In the letter, CA board members affirmed their support of the trio, saying Ranger's claims that CA management lacks integrity and has failed to perform "are not supported by the facts as we know them."

Ranger, founded by entrepreneur Sam Wyly, last summer launched a failed proxy bid to oust members of CA's board. Perkins spoke with CRN Section Editor Jennifer Hagendorf Follett about the board's response and about Ranger's future course of action.

CRN: What is your reaction to the board members' response to your letter?

Stephen Perkins: It's certainly not the response we were hoping for, but at minimum I think it will keep these issues in the spotlight. On the specifics, we probably could debate each of the items and, needless to say, we would be in disagreement from a logical point of view or perception. From a factual point of view, there are many areas where the facts say the difference is there. On the trust issue, CA's own GuideStar study showed there are CIOs that have issues with CA regarding their dissatisfaction with products as well as distrust of management.

[Editor's Note: A report commissioned by CA and prepared by GuideStar Communications in June 2001, showed that out of 144 CIOs surveyed, 29 percent rated CA software value as good or excellent, while 48 percent said it was fair or poor.

Obviously, they have some work to be done in that area, and frankly I think change is called for ... As far as transparency about the business, I still think it's missing. There are analysts that think [CA is giving a clear picture, but there are many that disagree, and I disagree. ... I think that overall the issues we presented still require that the independent directors get independent information and stop relying on management's views to reflect their views. ... One thing is for sure: We're not going to go away.

CRN: You said it wasn't the response you were hoping for, but was it the response you expected?

Perkins: It certainly was the response I expected from management. In some areas I expected there would be more commitment to providing some transparency, some independence from management's views. Particularly in the area of governance, I expected more specifics as to what policies or changes might be put in place.

CRN: What is your opinion of the two new board members CA recently appointed?

[Editor's note: Effective April 1, CA's board includes Walter Schuetze, former chief accountant to the SEC, and Professor Jay Lorsch, a corporate governance expert and professor of human relations at Harvard Business School. Nine-month board member Linus W. L. Cheung, deputy chairman of Pacific Century Cyberworks, resigned.

Perkins: I think they appear to be good choices. They appear to have good credentials. The point I'm interested in is their independence from management. I was a little surprised that some [board members that have been on there a substantial time weren't replaced. Instead, one of the newer members stepped down.

CRN: Which board members would you like to see gone?

Perkins: There have probably been some people on there for some period of time that I think it might be better if they were gone.

CRN: But are there specific individuals?

Perkins: That probably points to some individuals, without naming names.

CRN: What is Ranger's next step?

Perkins: We're evaluating whether a proxy solicitation will be in order, and we haven't made that decision yet. We have established dialogue with other shareholders and hope that results in pressure either through a solicitation or a more vocal opinion of what change [is required.

CRN: So you're currently contacting other investors?

Perkins: We are reaching out to them and trying to get some of that dialogue going. The letter we sent to the board was also sent to some institutional shareholders, and we've had some response.

CRN: Have the responses you've gotten been in agreement with your views?

Perkins: Most of the people who have gotten back to us have been sharing some of our concerns.

CRN: As you're deliberating on whether or not to launch another proxy bid, what are the issues you're considering?

Perkins: Whether we could win or not. We're thinking also about what our expectations should be for change at CA and how other people view that with us. We want to make sure the changes we propose would result in improvement and growth over the long-term.

CRN: If you do launch another proxy bid, would you seek to oust a small number of board members or the entire board?

Perkins: We haven't drawn any conclusions in that area.

CRN: What about last summer's strategy to split CA into four separate divisions?

Perkins: On the four-division split, I don't think we're adamant about that. ... It's obvious to us that it's more important to put a management team in place that has the proper focus, attitude and ethics we think will be successful rather than a wholesale takeover.

CRN: When will you make your decision whether or not to pursue a proxy solicitation at this year's shareholders meeting [on Aug. 28?

Perkins: It probably won't be for a couple of months. Last year we decided in June, so I suspect you should look for something around that time.

CRN: Was that enough time last year to fight the proxy battle?

Perkins: Yes, I think it was enough time. It comes down to being able to express the alternatives people can take action on.