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New CEO to get $8.6M


November 25, 2004

Computer Associates' new president and chief-executive designate will receive a pay package worth more than $8.6 million from the embattled software company.

John Swainson, 50, the former IBM executive who joined Islandia-based CA on Monday, will receive a package that includes a $2.5 million cash signing bonus, a base salary of $1 million, a stock grant of 100,000 shares for signing with the company and options to buy an additional 350,000 shares over 10 years. The shares were worth at more than $3 million at the close of trading yesterday.

Under Swainson's five-year contract he also will be paid $2.8 million for benefits he would have received from IBM, which he left after 26 years. CA spokeswoman Shannon Lapierre said the payment could be in cash, various forms of stock or different option types.

Swainson also will get an annual bonus of at least $333,334 for the rest of the company's 2005 fiscal year, no matter what his performance. His bonuses could go as high as $3.5 million in cash and restricted stock.

"I thought it was very reasonable," James Reda, managing director or James F. Reda & Associates, a Manhattan-based executive-compensation consulting firm, said of Swainson's package. "He basically left a really good a career at IBM ... I am impressed with the fact that they were able to get a quality executive like they got considering the position of the company."

However, Nell Minow, editor of The Corporate Library, a Portland, Maine-based group whose reports focus on corporate governance, was critical of the deal.

"Even a signing bonus should be tied to performance, and that is especially true in a situation like this one where the company has a history of so much trouble," she said. "You are really looking for someone who can show some signs of leadership. You want him to communicate to the employees and the investors what the priorities are. The signals are all in the wrong direction."

Minow said Swainson's package raises concerns about the company's board of directors. "This pay package has done nothing to make us feel better about this board."

Swainson will take over from its interim chief executive, Kenneth Cron, within six months.

Four CA executives made guilty pleas in connection with the $2.2 billion accounting fraud, and former chief executive Sanjay Kumar, who left in April, was indicted.

In fiscal 2004, Kumar received base pay of $1 million and stock grants for 281,000 shares worth more than $7.5 million. The stock grant, however, was forfeited when Kumar left the company on June 30.

Computer Associates shares closed up 46 cents at $30.62, a new 52-week high in trading on the New York Stock Exchange.

Copyright 2004, Newsday, Inc.


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