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CA Adds New Rules, Members to Board

By Mark Harrington
Staff Writer

May 17, 2002

Computer Associates International Inc., slammed last year by dissident shareholder Sam Wyly for its "rubber stamp” board of directors, yesterday adopted a set of "guiding principles” to ensure its board conforms to the "best corporate governance.”

The board also named Lewis Ranieri, former vice chairman of Salomon Brothers, as lead independent director, a post that is expected to serve as a counterweight on the board to CA chairman Charles Wang. It named Walter Schuetze, a former Securities and Exchange Commission accounting chief, as chairman of its audit committee. Schuetze had been a consultant to CA prior to joining the board, as had Jay Lorsch, a corporate governance expert, who is also a board member.

In an interview, Ranieri said CA directors have debated the issue of Lorsch and Schuetze's previous consulting work for CA, a fact that some view as a potential compromise to their independence.

Ram Kumar, director of U.S. research for Institutional Shareholder Services and a governance expert, said since neither currently consults for CA they are technically independent. But he issued a caution.

"Obviously, it's a fair point that if consultants until recently were working for a company, they're not as ‘outside' as they could be,” he said.

"We talked a great deal about that,” Ranieri said of the board, adding he believed that since Schuetze and Lorsch no longer are consultants, the board decided that "if you get the two best guys you can find” in their field, it outweighs other factors.

Former SEC commissioner Arthur Levitt, in an interview earlier this week, said he was "quite surprised” that Schuetze took the board post given the SEC investigation of CA's accounting. Schuetze wasn't available for an interview.

Other guiding principles for CA's board include procedures for annual CEO evaluations and annual board self-evaluations, a formal agenda for board meetings, and a policy of setting limits on the length of service for independent directors, among others.

On the latter point, Ranieri said there were "some directors who have exceeded their time” on the board and will be replaced. He declined to name them.

Ranieri, who heads CA's compensation committee, said the federal probes of CA remain a weighty topic of discussion for the board. He said he was surprised that the Islandia company's improved financial picture didn't get more play in the media following release of fourth-quarter earnings Tuesday. Most coverage centered on the SEC probe reaching out to unnamed third parties.

Asked if CA's reticence in discussing the probe was at issue, Ranieri said, "I was not aware there was a feeling we were not disclosing” all the company knows. Chief executive Sanjay Kumar has only said the company's revenue recognition practices were under review but has declined to engage in a "public debate” about the probe.

Copyright © 2002, Newsday, Inc.


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