A Dallas investment group yesterday announced it is launching a proxy fight designed to replace Computer Associates International's current board of directors in an effort to right what it believes is a sinking ship.
This investment company, Ranger Governance, is proposing that CA's board of directors be replaced by its own set of nominees. A proxy fight is an attempt to convince the majority of shareholders in a company to vote for a specific proposal. Gaining control of a company by winning a proxy fight prevents the acquiring company from paying a premium price for the acquired company, according to Barron's Dictionary of Finance and Investment terms. CA's annual stockholder's meeting is slated for August 29.
Ranger Governance is led by Sam Wyly, an influential Dallas investor who has sold two of his companies to Computer Associates (CA); Sterling Software in 2000 and University Computing Company in 1987. The Sterling acquisition was a stock swap, giving Wyly $US4 billion worth of CA stock.
Wyly is attempting this corporate coup because he says mismanagement of CA has led to significant under-performance in the market and a negative affect on stockholder value.
"Simply stated, Computer Associates has unnecessarily conceded key advantages to its competitors and let the best software market in history pass it by," Wyly said in a written statement. Ranger Governance is accusing CA of awarding egregious compensation packages to top executives, abusing employees and customers "to produce an atmosphere of fear and intimidation within the company," and of weakening its balance sheet through excessive debt and poor working capital.
CA, in response, issued a statement saying that it is committed to shareholder value. "The strategy that we have in place, including the product focus areas and the new business model, will yield substantial dividends for our shareholders, customers, and employees," the statement said.
Ranger Governance proposes that CA's existing board, which includes three company executives, be replaced by a group of eight "high-quality executives with decades of management and investment experience" including Wyly himself, according to a Ranger Governance press release. Wyly would agree to serve as chairman of the board, replacing the current chairman Charles Wang, if this proposed board nominated him, the release said.
The investment company says that this new board would break CA down into four independent groups that would focus on storage management, security management, systems management, and knowledge management. The proposed board would evaluate if any of these groups should be spun off or sold to improve CA shareholder value, the release said. The new board would also recruit or promote from within four CEOs to lead the units who would not have seats on the company's board, "ensuring the board's ability to provide independent oversight," the release said. CA's current CEO, Sanjay Kumar, has a seat on the company board.
This proposed board would also revise the company's corporate governance to "restore credibility" through the revision of the company's policies of auditing, human resources and compensation, and others, the release said.
Ranger Governance plans to lobby large shareholders of CA stock between now and the company meeting at the end of August. "We intend to fight very aggressively to make this case and win (shareholder) support," said Eric Andrus, a spokesperson with the investment group.