Wyly Looms Large Over CA Shareholder Vote

As the enterprise software vendor prepares to host its annual shareholder meeting Wednesday, Wyly's investment firm said in a report this week that Wyly rejected an offer for a seat on CA's board prior to reaching a $10 million settlement with CA in July.

The document, entitled Ranger Endowment Report, posted on the Ranger Governance Web site, said two unidentified CA directors extended an offer to Wyly for a seat on CA's board, an offer the report said Wyly declined.

A CA spokesperson said the board never offered a seat to any dissident candidate, including Wyly.

In June, Wyly's Ranger Governance unveiled plans to launch a second proxy fight for a minority slate of five seats on CA's board. Last summer Ranger lost a caustic battle for four seats on CA's board.

Last month, CA, Islandia, N.Y., agreed to pay $10 million in exchange for Wyly's agreement to a five-year standstill from engaging in proxy contests for CA board seats and to extend Wyly's non-compete agreement with CA for another five years.

The non-compete agreement was implemented after Wyly sold Sterling Software to CA in April 2000.

CA now faces questions about the impropriety of its $10 million settlement with Wyly.

Calling the settlement "greenmail," Institutional Shareholder Services (ISS), a Rockville, Md.-based proxy consulting and services firm, recently recommended that its client base of pension plans, investment managers and bank trust departments withhold their votes for all seven of the incumbent CA directors for approving the payment.

Greenmail is the practice of paying a corporate raider to terminate a hostile takeover attempt.

"We cannot ignore the board's latest action whereby the incumbent board unanimously agreed to pay $10 million to Mr. Wyly to essentially leave the company and the board alone for five years," ISS said in report issued to investors. "This act of greenmail gravely departs from the company's good governance practices, overall."

The seven incumbent directors are Charles Wang, CA chairman; Sanjay Kumar, president and CEO; Russell Artz, executive vice president; Jay Lorsch, Harvard Business School professor; Walter Schuetze, former chief accountant to the Securities and Exchange Commission; former U.S. Senator Alfonse D'Amato and Lewis Ranieri, former vice chairman of Salomon Brothers.

ISS supported the election of new directors Kenneth Cron, Robert La Blanc, Alex Serge Vieux and Thomas Wyman.

Anthony Ferrigno, CTO of AlphaNet Solutions, a Cedar Knolls, NJ-based solution provider, said Wyly's acceptance of the payment diminished his credibility.

"If he was really out for the truth and betterment of the company, he wouldn't have taken the money," Ferrigno said.

Both CA and Ranger have defended the settlement, disagreeing with the "greenmail" characterization.

"This was the best decision for all of CA's shareholders. Given the difficult economic environment in which we are conducting business, the distractions to senior management and CA employees generally associated with a proxy contest, and the known substantial expense of a proxy contest, it was best to put this matter behind us," the CA spokesperson said.

CA previously said it spent $12 million last summer fighting Wyly's first attempt to gain seats on the board. Ranger said it has spent $14 million.

Ranger's report emphasized that the payment was for both the non-compete extension and the proxy fight cease-fire, calling the non-compete agreement "a good deal for CA shareholders."

Shares of CA Tuesday closed down 15 cents at $11.71.