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ISS Report of Voting Recommendations

(September 10, 2006)

Institutional Shareholder Services (ISS), a proxy adviser to institutional investors, recommended in its August 31, 2006 report that CA shareholders vote against director candidate D'Amato based on his membership of CA's Compensation Committee which "failed to provide adequate oversight to the option grant process" requiring a recent restatement of $342 million compensation expense.  The firm recommended voting in favor of all other director candidates and also for the ratification of KPMG as the company's auditor.

With ISS's permission, the section of their report addressing director election is copied below and the full report can be downloaded from the following link:


Publication Date : August 31, 2006


CA Inc

Recommendations - US Standard Policy


Item Code*  Proposal Mgt. Rec.

ISS Rec.


M0201 Elect Director Alfonse M. D'Amato




M0201 Elect Director Gary J. Fernandes




M0201 Elect Director Robert E. La Blanc




M0201 Elect Director Christopher B. Lofgren




M0201 Elect Director Jay W. Lorsch




M0201 Elect Director William E. McCracken




M0201 Elect Director Lewis S. Ranieri




M0201 Elect Director Walter P. Schuetze




M0201 Elect Director John A. Swainson




M0201 Elect Director Laura S. Unger




M0201 Elect Director Ron Zambonini




M0101 Ratify Auditors




S0332 Amend Terms of Existing Poison Pill



*S indicates shareholder proposal




[Pages 6-7]


Items 1.1-1.11: Elect Directors



The Corporate Governance Committee serves as the nominating committee.

Board Independence

A substantial majority of the board members are independent outsiders. The key board committees include no insiders or affiliated outsiders.

Option Backdating Issue

Option backdating has serious implications and in some cases have resulted in financial restatements, delisting of companies or termination of executives or directors. Institutional investors are deeply concerned when there is an option backdating allegation. In this case, CA started an internal investigation on its option grant practices and found that certain option grants made between 1996 to 2001 had not been communicated to employees in a timely manner. As a result, CA reported that it will recognize additional stock-based compensation expense of $342 million on a pretax basis.

As disclosed in the company's 10-K, prior to fiscal year 2002, the Stock Option and Compensation Committee generally approved grants to executives and other employees receiving options, the terms of which were generally set on the date that the Committee acted, including the exercise price, vesting schedule and term. However, in a number of cases, these approvals involved pools of options that were not allocated to specific individuals at the time of such approvals. It also appears that communication of these grants by management to individual employees was not made until some time after the Committee acted, including in some cases up to two years after such Committee action. In almost all cases, this earlier date had an exercise price that was lower than the market price of the company’s common stock on the date the award was formally communicated to employees. The grants which were not communicated on a timely basis were made primarily to non-executive employees and this grant practice was changed after fiscal year 2001.

In response to the above issue, the company stated that the problem was not option backdating but delayed communication of grants to employees by management, following the Stock Option and Compensation Committee's authorization of the grants, during fiscal years prior to 2002. The company's internal review did not find any deficiencies in its internal controls and procedures with respect to the granting of options during fiscal 2002 through fiscal year 2006. The company believes that its current policies and procedures with respect to the granting of options are sound.

ISS has concerns with the internal controls and procedures of option grants prior to 2002. The duration of the misdated options is five years and the magnitude of restatement is approximately 9% of 2005 revenue. ISS is concerned that the board would approve option grants that were not allocated to specific individuals. While the company's current practice is to communicate promptly after an option grant is approved by the Committee, the company has not adopted any option grant practices to prevent any misdating or timing of options in the future. ISS recommends a vote to WITHHOLD from members of the compensation committee who failed to provide adequate oversight to the option grant process for the concerned period. Several Compensation Committee members are no longer present on the board with the exception of director nominee, Alfonse M. D'Amato. Mr. D'Amato joined the board towards the end of fiscal year 1999 and was part of the Stock Option and Compensation Committee in 2000.

ISS recommends voting FOR all directors with the exception of Alfonse M. D'Amato for not providing adequate oversight on the approval process of stock options in 2000.

Vote FOR Items 1.2-1.11.

WITHHOLD a vote on Item 1.1.

 US Standard Policy



One, or more, of the proponents of a shareholder proposal at the upcoming meeting may be a client of ISS or the parent of, or affiliated with, a client of ISS. None of the sponsors of the shareholder proposal(s) played a role in preparing this report.

Two of ISS' stockholders, Warburg Pincus Private Equity VIII, L.P. and Hermes USA Investors Venture, L.L.C., are institutional investors whose business activities include making equity and debt investments in public and privately-held companies. As a result, from time to time one or more of ISS' stockholders or their affiliates (or their representatives who serve on ISS' Board of Directors) may hold securities, serve on the board of directors and/or have the right to nominate representatives to the board of a company which is the subject of one of ISS' proxy analyses and vote recommendations. We have established policies and procedures to restrict the involvement of ISS' non-management stockholders, their affiliates and board members in the editorial content of our analyses and vote recommendations.

Institutional Shareholder Services Europe SA ("ISS Europe") is a wholly-owned subsidiary of ISS. Jean-Nicolas Caprasse, the managing director of ISS Europe, is a non-executive partner of Deminor International SCRL ("International"), a company which provides active engagement and other advisory services to shareholders of both listed and non-listed companies. As a result, International may be providing engagement services to shareholders of a company which is the subject of one of our analyses or recommendations or otherwise working on behalf of shareholders with respect to such a company. As a non-executive partner of International, Mr. Caprasse is not involved in the engagement and other services provided to the clients of International. International has no role in the formulation of the research policies, reports and vote recommendations prepared by ISS or ISS Europe. Mr. Caprasse will benefit financially from the success of International's business in proportion to his partnership interest.

Neither ISS' non-management stockholders, their affiliates nor ISS' non-management board members are informed of the contents of any of our analyses or recommendations prior to their publication or dissemination.

CA Inc

August 31, 2006

© 2006, Institutional Shareholder Services Inc. All Rights Reserved. The information contained in this ISS Proxy Analysis may not be republished, broadcast, or redistributed without the prior written consent of Institutional Shareholder Services Inc.



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