Key Advisory Firm Opposes Wang
Switches to Wyly slate in proxy battle
By Mark Harrington
August 21, 2001
A refusal by Computer Associates International Inc.'s board of directors
to consider replacing founder Charles Wang as chairman may have cost it
critical support from an influential advisory firm for institutional
stockholders in the fight for control of the company.
Institutional Shareholder Services of Rockville, Md., yesterday switched
its previous backing of CA management and said it would now support the
shorter, four-member slate of Sam Wyly's Ranger Governance Ltd. in the
summer-long proxy fight. Ranger initially sought all 10 CA board seats.
Explaining ISS' decision, Pat McGurn, its vice president, said CA's board
was unwilling to concede on the subject of Wang's stepping down, which ISS
considered important to good-governance changes at CA. ISS in a report
earlier this month called CA's corporate governance practices
"deplorable," pointing to a stock award to top managers, including Wang,
of more than $1 billion in 1998.
"Number one on our list [of needed changes] was Wang going," McGurn said,
but he noted that it was "the one step the board of CA was unwilling to
CA spokesman Owen Blicksilver said CA "is not going to comment at all on
our private discussions with ISS." In a statement yesterday, Wang said he
was "disappointed" by the reversal and slammed Ranger's plan, saying it
would "hurt the company and its shareholders."
A Ranger spokesman yesterday said the ISS endorsement "gives us real
momentum heading into next Wednesday's vote" at CA's annual shareholder
In reversing itself, ISS joins another influential firm, Proxy Monitor of
Manhattan, which Friday switched its previous support of CA management and
now backs Ranger. Also last week, CalPERS, the nation's largest pension
fund, which owns 3 million CA shares, backed Ranger's board slate.
CA had discussed a series of concessions with ISS, including unspecified
changes to its "poison pill" defense against hostile takeovers and the
addition of one or two new directors, McGurn said. But "it was clear that
[removing Wang] was not going to be one of them." While noting CA under
chief executive Sanjay Kumar "does appear to have embarked on a sincere
campaign to revamp the constitution of the board," ISS ultimately found
that the pace of change wasn't quick enough.
CA noted the fact that it had retained a recruitment firm that was
interviewing one or two prospective new board members as evidence of a
plan to diversify its board, McGurn said, adding that CA started the
recruitment effort during the proxy battle.
But while Blicksilver confirmed that CA is recruiting one or two new
directors, he denied the recruitment began during the proxy fight.
McGurn called ISS' decision to reverse itself "unprecedented."
ISS has 700 institutional clients, many of whom are key holders of CA
stock. Collectively, institutional shareholders control two-thirds of CA's
In Wang's statement, he noted that management was "disappointed by the ISS
and Proxy Monitor decisions." "Under Mr. Wyly's latest scheme," the
statement continued, "the Board would include four of Wyly's own
hand-picked appointees who would be likely to push a plan designed by Wyly
that, in our view, has been discredited"
Observers said the backing of all three groups is crucial for Ranger's
"It's significant in that it reflects a virtually consistent view among
professional investors that some change is needed," said investment banker
Gary Lutin, who is leading a shareholder forum on the CA proxy fight.
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