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September 18, 2006 Annual Meeting

Glass Lewis & Co.

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CA, investors gear up to meet

Sagging stock prices and activists urging shareholders to withhold votes for board members promise a lively Monday session
Newsday Staff Writer

September 15, 2006

After a tumultuous year in which financial restatements, executive departures and a sagging stock price continue, the company formerly known as Computer Associates is set to meet with shareholders Monday to report on its progress.

If reports of several shareholder advising firms are any indication, the session at the Roosevelt Hotel in Manhattan could be lively. Each of three top firms has advised shareholders to withhold votes for one or several CA Inc. board members. One firm is calling for the company's outside auditor, KPMG, to be fired, and there's mixed support for a new poison-pill proposal.

Three shareholder advising firms are calling for the ouster of director Alfonse D'Amato, a former U.S. senator, pointing to his presence on the board since 1999 and the board's failure to detect past improprieties. D'Amato next year would have been subject to the eight-year term limits CA instituted several years ago, but last year directors approved a provision for the limits to be waived depending on the "evolving needs of the company and other relevant factors."

In a statement yesterday, the company indicated it stands in support of the 11 directors. (Board member Kenneth Cron will not stand for re-election.)

"Each member of CA's board has been invaluable to the company in their capacity as a director," spokeswoman Jennifer Hallahan said in an e-mail. "We firmly believe that shareholders will be well served by their continued contributions and recommend that shareholders vote for the re-election of all eleven directors."

Glass, Lewis & Co., a proxy advising service in San Francisco, recommended withholding votes for D'Amato, chairman Lewis Ranieri, former Securities and Exchange Commission chief accountant Walter Schuetze and Robert LaBlanc, and ousting the auditor. In its report, it pointed to the 27.8 percent drop in CA's share price since Ranieri became chairman.

"The precipitous decline in the company's stock since the beginning of this year, under the leadership of Mr. [John] Swainson, who became CEO under chairman Ranieri's guidance, supports our view that the current board has not performed effectively," the service said.

CA shares closed up seven cents yesterday at $24.28. In the last 52 weeks, the stock has ranged between $18.97 and $29.71.

Other critics say the board missed red flags that could have led to earlier detection of the improprieties, but now has other priorities. "The existing board continues to be more concerned with protecting their own positions than with protecting the business and shareholder interests," said investment banker Gary Lutin, who runs a CA shareholder forum.

CA spokesman Dan Kaferle yesterday defended the company's progress. "The past year has been both an exciting and challenging time for CA," he said in an e-mail. "We made great progress in our multi-year task of transforming the company, while also encountering some challenges and problems along the way, which we are addressing. We firmly believe we are on the right track."

Meanwhile, CA said yesterday the independent examiner, part of its deferred prosecution agreement with federal authorities after its $2.2-billion accounting scandal, will remain until as late as next May 1; Lee Richards' term was to expire tomorrow.

In a statement, CA said federal authorities, the examiner and CA "all agreed the extension was appropriate" given material weaknesses the company cited in its annual report and "issues concerning the reorganization of CA's finance department."


Copyright Newsday Inc.



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