CA awards new CEO $12.8 m package

Wei Gu

NEW YORK: Computer Associates International Inc. said it has awarded its new chief executive John Swainson a pay package totaling $12.8 million in signing bonus, salary, stocks and options.

Swainson receives a signing bonus of $2.5 million and $2.8 for benefits he would have received had he remained employed with International Business Machines.

Computer Associates awarded Swainson an annual base salary of $1 million. He is also entitled to earn a bonus equal to 2.5 times of his base pay.

The software maker also agreed to give Swainson 100,000 shares and 350,000 options, both vested over three years.

The stocks and options are valued at $6.5 million based on CA's current stock price of roughly $30 a share, according to James Reda, a compensation expert who authored the Compensation Committee Handbook.

"The salary looks a little high but not horrible," Reda said.

Islandia, New York-based Computer Associates also detailed an employment agreement with Jeff Clarke in a filing, offering him $4.5 million if he voluntarily resigns as chief operating officer for good reason or is terminated other than for cause.

The company originally did not have detailed employment contracts for its executives and has only started doing so after Kenneth Cron become the interim CEO, according to a CA spokeswoman.

"John Swainson's and Jeff Clarke's compensation packages are competitive with the industry," CA said in a statement.

Swainson was brought in to turn around the company after former CEO Sanjay Kumar stepped down seven months ago related to a $2.2 billion accounting scandal.

In a rather unusual arrangement, Swainson will focus on software strategy and let Cron and Clarke manage day-to-day operations for the next four to six months.

CA Chairman Lou Ranieri said the transition gives the new CEO the best chance to succeed and said that he has done it with every company he is involved with.

But management experts disagree.

"I don't think the board can name a single example in history of a turnaround CEO coming in after a scandal, reporting to the past or interim CEO for six months," said Jeffrey Sonnenfeld, associate dean of the Yale School of Management.

Long Island-based newspaper Newsday has reported that CA's board had been divided on whether to hand the reigns to Cron or an outsider. CA said Swainson's appointment was unanimously approved by its board.

"This is a very bazaar political maneuver," Sonnenfeld said. "It shows they are uncertain of him (Swainson), they are also uncertain of the interim leader because they decided not to give him the job."