Computer Associates International Inc said Thursday that it will appeal a ruling by a Delaware court which ordered three of the company’s top executives to return nearly $560m in stock paid to them last year as part of a 1995 compensation plan. A special compensation committee of the CA board of directors has reaffirmed its support for the plan, which awarded CEO Charles Wang, president and COO Sanjay Kumar and vice president Russell Artz 20.25 million shares of stock. In addition, the company asserted that the ruling will have no adverse impact on its business or its management team.
A Delaware Chancery Court judge on Tuesday ordered the return of 9.5 million of the shares in question after a group of stockholders filed suit, claiming the payments were excessive. The initial plan had provided for a payment of 6 million shares to the three executives, but the larger amount, worth about $1.1bn, was awarded to them as an adjusted total after three consecutive three-for-two stock splits since the plan was approved four years ago. The judge’s ruling was based on the fact that shareholders had never voted on whether to adjust the number of shares for stock splits.
The compensation committee argues, however, that the plan, which had been overwhelmingly approved by CA’s shareholders, was designed to reward key executives if they succeeded in increasing shareholder value by improving operating results. It accuses the presiding judge of a narrow reading of the plan. The most fair and logical reading of the plan requires adjusting the number of shares to be awarded to account for any stock splits, the chairman of the committee said in a statement. That is what we intended.
