CA Inc. (NYSE: CA), the software company formerly known as Computer Associates, last week began to speak out against founder Charles Wang about two years too late.
Under Wang's leadership, Computer Associates developed a reputation for accounting shenanigans, shoddy customer service and obscenely high executive compensation, which is why a special board committee urged CA to try and recoup some of Wang's pay. The company should take the advice.
Wang, who also owns the New York Islanders, has denied any wrongdoing. The New York Times reported that he blames CA's problems on his successor Sanjay Kumar, one of many company executives who pled guilty to securities fraud following a federal investigation.
Considering how close the two men were and Wang's autocratic management style, Wang's denials are hard to believe. If this fight goes to court, this will get nasty very quickly. CA has tried for years to undo the damage done by Wang and his associates. The New York Times pointed that the company has had to spend $500 million on fines ad internal investigations.
Shareholders suffered too because of Wang. Over the past 10 years, CA shares have dropped 6 percent while shares of other software companies such as Microsoft Corp. (NASDAQ: MSFT) and Symantec Corp. (NYSE: SYMC) soared. The shares have rebounded this year, gaining 16 percent, and should do even if the company follows the advice of the committee of the board that investigated Wang and goes after him.
As the Times points out, this could be big money.
"In 25 years running Computer Associates, Mr. Wang built a fortune estimated at about $1 billion, including a bonus in 1998 of $670 million that was issued shortly before its stock plunged 31 percent in a day," the paper said.
The fight between Wang and CA will get really nasty. But it's a case that the company has to bring in order to distance itself from its founder, who the board report accused of establishing a "culture of fear" at the software company.
Wang never was charged in the criminal case that brought down Kumar and other top company officials. The statute of limitations for securities crimes is five years and Wang stepped down as chairman in 2002. He quit as chief executive two years earlier.Computer Associates was one of the weirdest companies I've ever covered in my career as a journalist.
When I interviewed Kumar for Bloomberg News, the federal investigations were still under way. The federal investigations were still going on and I asked Kumar if he'd hired a lawyer. He looked at me like I was an idiot for suggesting such a thing.
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Reader Comments (Page 1 of 1)
4-16-2007 @ 4:19PM
Frank said...
"CA has tried for years to undue the damage..."
Undue? This is just one example of how poorly written (and edited) this piece is. See also "plead" instead of "pled," and more.
This sort of poor quality reflects on your veracity.
Frank
4-16-2007 @ 4:25PM
jonathan berr said...
Thanks for pointing that out.
Jonathan Berr
7-06-2007 @ 4:36PM
Old Soldier said...
Have I missed something?
Isn't Charles Wang the founder and principal contributor to the charitable foundation known as the "The Smile Train"?
According to their ads, Smile Train uses 100% of donations to correct cleft lips and palates of destitute children all over the world.
The principals and board members pay all fund raising and administrative expenses for the organization, and their system allows it to operate with about only 25 employees.
Seems odd that a man with this much altruism could be guilty of significant chicanery inside the organization he founded and developed.
Comments??
Old Soldier
6-22-2007 @ 1:28AM
Andreas said...
I had worked for CA between 1994-2000. It was the time that the major accounting scandals had occured. Even though I was not in sales, nor in an executive position, I can tell you that everything I read is true. There was a "Charles" culture embedded in everything, but that included good and bad things. Charles had extremely good inter-personal skills and he was very generous when it came to charity work and employee perks. However, he was extremely aggressive as a business man and he would push hard in order to get sales happening. He was not an email-voicemail person, so it will be very hard to find any evidence against him.
5-11-2007 @ 1:08PM
George said...
Sanjay took the fall for Charles and will come out of jail with plenty of money from Charles. You won't get anything out of Charles you need to get to all the VPs of sales that will tell you what Charles directed them to do. Booking orders late was totally acceptable as was forcing money out of clients when they really didn't owe anything. Dig deep into the EVP from that time.