CA Stock Rises On Accounting Policy Shift

Computer Associates International

"CA's decision to expense stock options is part of our ongoing commitment to adhere to best practices in everything we do," said Sanjay Kumar, president and CEO of CA, in a statement. "The new policy puts options on an equal footing with other kinds of compensation and will allow us to continue to design compensation packages that motivate employees and align their interests with those of all share owners," he said.

CA shares closed up $1.05 at $9.75 Tuesday. The company disclosed its plans after the close of the market on Monday.

The company said it would implement the new policy in its next fiscal year, which begins April 1, 2003.

CA said it expects the new accounting methodology to lower its earnings by 2 cents per share in the initial year following its adoption.

The move is the latest in a string of corporate governance policy revisions at CA, including the implementation of term limits for its independent directors, which recently led the company to replace three board members.

CA last week said it would pay $10 million in exchange for entrepreneur and Ranger Governance founder Sam Wyly's agreement that his firm would not launch another proxy contest against CA for five years. In addition, Wyly agreed to extend a non-compete agreement implemented after he sold Sterling Software to CA in April 2000.

One of Ranger Governance's criticisms of CA was that the company lacked strong corporate governance policies.

CA is in the midst of a federal inquiry, launched in February, into its accounting practices.

The enterprise software vendor joins companies such as Coca-Cola and Amazon.com in adopting the accounting procedure.

Meanwhile, Microsoft executives last week disclosed that the Redmond, Wash.-based company is not in favor of standardizing the accounting practice of listing stock options as an expense. While Microsoft lists the number on its quarterly 10-Q filings, the company said it is not in favor of regulation requiring the practice, as of yet, but is awaiting industry consensus before reaching a final decision.

In the wake of the high-profile Enron accounting scandal, several U.S. senators earlier this year, including Sen. Carl Levin (D-Mich.) and Sen. John McCain (R-Ariz.), proposed a bill that would require companies to treat stock options for employees as an expense for bookkeeping purposes if they want to claim the expense as a tax deduction.

PAULA ROONEY contributed to this story.