Release Date: August 23, 2004
New York, NY An Amalgamated Bank proposal regarding bonuses to senior executives will come to a vote at Computer Associates International (NYSE: CA) this Wednesday. Filed by the bank's LongView Collective Investment Fund®, the measure asks the board to adopt a policy that if financial results are restated, the board will review any executive bonuses that were awarded for meeting performance targets and recoup for the company any bonuses that were not, in fact, earned.
"To the extent that people were paid bonus money and don't deserve it, then the money should go back to the company," said Amalgamated's legal counsel Cornish Hitchcock.
The proposal was submitted following Computer Associates' disclosure last October that it had inflated revenue in the fiscal year that ended March 31, 2000, by reporting profits from contracts before they were signed. Bonuses for top executives in that year were based on the amount that net income exceeded goals. This was one of several years for which Computer Associates had to restate its financial reports because of accounting issues.
Chief Operating Officer Sanjay Kumar received a bonus of 80,000 shares of stock and $3.2 million for 2000, the period concerning the financial misstatements. Mr. Kumar, who eventually became the company's chief executive and chairman, did not return his bonus after last autumn's earnings restatement. Following investigations by the SEC and the U.S. Department of Justice, the dismissal of 14 executives, plus the settlement of shareholder lawsuits totaling more than $100 million, Kumar resigned in April 2004.
"Computer Associates response in the proxy does not explicitly embrace the principle of this proposal beyond stating that the board will review bonuses connected with financial restatements and 'take appropriate action' following that review," said Hitchcock. "The problem, of course, is that what's 'appropriate' may be in the eye of the beholder, which is why we deem it important to have a benchmark so that any such review by the board may be measured."
"It would show commitment to addressing shareholder concerns if the board were to adopt the basic policy we're advocating the board has the power to do this in any case, whether we file a shareholder proposal or not," noted Chief Economist Melissa Moye of Amalgamated's Trust & Investment Group.
The LongView Funds currently hold 247, 730 shares of Computer Associates International common stock. The shareholder meeting will be held this Wednesday morning in Hauppauge, New York.
Founded in 1923, Amalgamated Bank invests workers' retirement savings through its LongView Funds. With $9 billion in assets under management, LongView works to enhance shareholder value through corporate governance reforms at portfolio companies. Amalgamated Bank is available online at www.amalgamatedonline.com.
