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August 30, 2001

Tech Center

Computer Associates Management
Wins Over Sam Wyly in Proxy Battle


Computer Associates International Inc. beat back a bid to unseat four incumbent directors after promising large shareholders it would make the board more independent and would share more strategic information with investors.

The big Islandia, N.Y., software maker said its 10 incumbent directors won more than 75% of the votes cast in the proxy fight mounted by Texas investor Sam Wyly, who had accused CA and its current managers of poor performance, overcompensation, an overly cozy board and an accounting system that obscured deteriorating results.

The preliminary count, subject to official certification, was made at CA's annual shareholders' meeting in Islandia Wednesday. The company said it had received votes from holders of more than 80% of its 577 million shares outstanding.

In an interview after the vote, CA Chief Executive Officer Sanjay Kumar confirmed that he had pledged to shareholders during the campaign that he would address concerns raised by Mr. Wyly and the candidates backed by his Ranger Governance Ltd. He said CA expects to add a new board member by the end of the year and hopes two will sign on by year end. Both would be independent directors who wouldn't be employed by CA. Just after the proxy fight began, CA added two independent members to its board. Three of the current members are CA employees.

The result was a victory for Mr. Kumar and CA Chairman Charles Wang. Still, Mr. Wang, who helped found the fourth-largest software maker 25 years ago and became one of Mr. Wyly's main targets in the takeover battle, said in an interview that the two-month-long contest was "a sobering experience."

[Computer Associates' Shares]

While he pledged to be more open with investors about the company, Mr. Wang noted that the victory was by "a significant margin" and said "it feels good" because the results showed "shareholders understand the value of experienced, knowledgeable directors in maintaining CA's competitive advantage and success."

Mr. Kumar, who says he spent the past several weeks on the road campaigning "just about every day" for votes from major shareholders, also pledged to share company-funded customer-survey and product reviews with analysts and the investment community; to outline specific growth targets for niche software markets such as data-storage, security and mainframe-systems management; and to be more regularly in touch with large holders.

[Go]1Shareholders Shy From Board Ousters, Instead Opting for Dissident Members

[Go]2Computer Associates Management Is Likely to Win in Wyly Proxy Battle (Aug. 29)

[Go]3Computer Associates' Kumar Defends Chairman Wang (Aug. 23)

People familiar with the matter said CA won the critical support of Fidelity Investments, the money-management titan, whose 9.7% holding is the largest of any institution; and of No. 3 holder State Street Corp., which has 2.2%. Others who also sided with incumbents were Swiss investor Walter Haefner, who acquired his 21% stake through the 1986 sale of his firm to Computer Associates and other company insiders, who had 7%.

In an interview, Mr. Wyly credited the proxy fight for CA's board reforms and moves toward more openness. He said shareholders extracted these as concessions from CA during the campaign. "The largest institutions knew from the beginning" that the slate would be hard-pressed to win, he said, but they "used the power we gave them to get something they could see would be a significant change."

Mr. Wyly, who last year sold a software firm he ran to CA for $3.9 billion, maintained that Mr. Kumar also made specific pledges to replace certain board members, an accusation CA denies. "We made no specific commitments," said Mr. Kumar, who said he knew of "no plans for anyone to retire."

Gary Lutin, a shareholder activist who organized an electronic forum to debate the corporate-governance issues raised by Mr. Wyly's proxy bid, said he was surprised by the support that institutions gave to CA. He has estimated Mr. Wyly had the backing of as many as three-quarters of shareholding institutions after Ranger scaled back its proxy slate to four members from the full 10 necessary to replace the entire board.

Write to Jerry Guidera at jerry.guidera@wsj.com4

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Copyright 2001 Dow Jones & Company, Inc. All Rights Reserved.


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