|
Shareholder Proposal to Remove Directors
(March 28 - June 26, 2006)
Copied below is a shareholder proposal and supporting
statement submitted to CA by Amalgamated Bank LongView Collective Investment
Fund on March 28, 2006,
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, for
inclusion in the company's proxy statement for the next annual meeting of
stockholders.
The proposal seeks the removal of two CA directors, Alfonse
M. D'Amato and Lewis S. Ranieri, according to shareholder rights provided in
section 141(k) of the Delaware General Corporation Law:
|
Any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.... |
(The provision is modified for boards that are classified or
elected by cumulative voting.)
The supporting statement refers to conduct that led to the
company's acceptance of a
Deferred Prosecution Agreement ("DPA"), as
described in that document and its "Information" exhibit. References are also
made to Mr. Ranieri's statements at the 2004
annual meeting and to management's
refusal to comply with acknowledged obligations in response to shareholder
demands for information about director performance.
Responding to the proposal, CA management sought SEC staff
approval to exclude it from the company's proxy
statement so that the proposal would not be presented for shareholder voting.
Following an Amalgamated response and another letter from CA, the staff issued a
brief statement dated June 20, 2006 accepting the CA argument that a shareholder
proposal to remove directors could be considered "as relating to an election for
membership on its board of directors" and therefore excluded under Rule 14a-8(i)(8),
a provision intended to make director nominations subject to a separate
set of requirements for candidate disclosures. Amalgamated requested full Commission review
of the staff decision, based on policy and
legal issues which had not been resolved by the Commission, and on
the importance of shareholder rights to remove directors according to the laws
of Delaware and other states. CA management responded with a letter to the
SEC conceding that there was no need to treat removal proposals differently from
other shareholder proposals, but arguing that
allowing "any shareholder" to freely question the qualifications of directors
"could have profound, far-reaching consequences for corporate governance of
public companies." Copies of the letters can be downloaded from the following links:
-
April 21, 2006 letter with exhibits from
Lawrence M. Egan, Jr., Director of Corporate Governance, Vice President, Senior
Counsel and Assistant Secretary of CA Inc., to the Securities and Exchange
Commission (7
pages, 293 KB, in
PDF
format)
-
May 13, 2006 letter with exhibits from
Cornish F. Hitchcock, on behalf of Amalgamated Bank LongView Collective
Investment Fund, to the Securities and Exchange Commission
(20
pages, 1,417 KB, in
PDF
format)
-
June 1, 2006 letter from Mr. Egan of CA Inc. to
the Securities and Exchange Commission (4
pages, 211 KB, in
PDF
format)
-
June 20,
2006 letter from the staff of the Securities and Exchange Commission (1
page, 18
KB, in
PDF
format)
-
June 23, 2006 letter with exhibits from
Mr. Hitchcock, on behalf of Amalgamated Bank LongView Collective
Investment Fund, to the Securities and Exchange Commission
(59
pages, 3,348 KB, in
PDF
format); also available,
letter without exhibits (7 pages,
591 KB, in
PDF
format)
-
June 26, 2006 letter from Mr. Egan of CA Inc. to
the Securities and Exchange Commission (3
pages, 171 KB, in
PDF
format)
Subsequently, in February 2007, the issue of shareholder rights to remove
directors was resolved by the CA board's
agreement to adopt majority voting for future elections.
|
RESOLVED: That pursuant to
section 141(k) of the Delaware General Corporation Law, the shareholders of
CA, Inc. hereby remove from the Board of Directors Alfonse M. D'Amato and
Lewis S. Ranieri or whichever of them should be serving as directors at the
time this resolution is adopted.
SUPPORTING STATEMENT
Over two years have passed since
Computer Associates (as CA was then known) announced the need to restate
financial results because of significant accounting irregularities. Since
then, several top executives have been indicted and pled guilty, and the
Company's former CEO is awaiting trial on criminal charges. CA was forced
to enter into a Deferred Prosecution Agreement (“DPA”) in order to avoid a
criminal trial. CA acknowledged making false and misleading statements to
the SEC and to obstructing a government investigation into accounting and
financial fraud. CA paid $225 million in restitution to shareholders.
Although CA has made some
governance changes to satisfy the DPA, we believe that more change is
needed. In particular, we deem it important to replace those directors who
served during the period of misconduct, who continued on the board during
the board’s failure to effectively investigate accounting issues that were
raised in 2001 newspaper reports and government investigations, and whose
initial response was merely to demote the CEO and offer a $10 million
payment to end the law enforcement inquiries.
Despite the DPA, we believe that
the CA board has been unable to break with the past. For example, Chairman
Ranieri stated at the 2004 annual meeting that shareholders should "be
patient" and that CA would not tolerate former executives retaining "ill
gotten gains" that were paid as bonuses based on false numbers. However, CA
has not undertaken to recover money from any executives who received
unjustified compensation.
Moreover, within the past year, CA reversed
the position of its attorneys and refused to disclose the minutes of board
meetings that had been requested by shareholders under a Delaware law
providing access to such records.
We believe that this failure to
make a clean break may be delaying CA’s financial recovery. As of March 23,
2006, CA stock has trailed the S&P 500 index for the preceding one-, two-,
and five-year periods; a share of CA stock was worth 10% less than it was
ten years ago, whereas the S&P 500 index has risen 100%.
We believe that an effective
turnaround and a restoration of investor confidence will require the service
of directors who bear no responsibility for management before 2002. We thus
propose removing those directors who served during that period. At present,
that group includes Messrs. D’Amato and Ranieri.
The law of Delaware, where CA is
incorporated, expressly authorizes shareholders to remove directors. This
resolution is the only cost-effective way to raise this issue, since CA
shareholders do not have the right to call a special meeting.
We urge you to vote FOR this
proposal.
|
|