UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

INFORMATION

 

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934 (Amendment No.     )

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.

 

CA, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

July 24, 2008

 

To Our Stockholders:

 

On behalf of the Board of Directors and management of CA, Inc., we are pleased to invite you to the 2008 Annual Meeting of Stockholders. The meeting will be held at the Company’s headquarters located at One CA Plaza, Islandia, New York 11749 on September 9, 2008 at 10:00 a.m. Eastern Daylight Time.

 

Additional details about the meeting, including the formal agenda, are contained in the accompanying Notice of Annual Meeting and Proxy Statement. At the meeting, there also will be management reports on our business and a discussion period during which you will be able to ask questions.

 

Whether or not you plan to attend the meeting in person, please vote your shares by following the instructions in the accompanying materials.

 

Thank you for your consideration and continued support.

 

Sincerely,

 

CA, INC.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To the Stockholders of CA, Inc.:

 

The 2008 Annual Meeting of Stockholders of CA, Inc. will be held on Tuesday, September 9, 2008 at 10:00 a.m. Eastern Daylight Time at the Company’s headquarters located at One CA Plaza, Islandia, New York 11749, for the following purposes:

 

(1) to elect directors, each to serve until the next annual meeting and until his or her successor is duly elected and qualified;

 

(2) to ratify the appointment of KPMG LLP as our independent registered public accountants for the fiscal year ending March 31, 2009; and

 

(3) to transact any other business that properly comes before the meeting and any adjournment or postponement of the meeting.

 

The Board of Directors fixed the close of business on July 11, 2008 as the record date for determining the stockholders who are entitled to notice of and to vote at the meeting and any adjournment or postponement.

 

To enter the meeting, you will need an admission ticket or other proof that you were a stockholder on July 11, 2008. Admission tickets are on the outside back cover of this Notice of Annual Meeting and Proxy Statement. If you hold your shares through a broker or nominee, you will need to bring either a copy of the voting instruction card provided by your broker or nominee, or a copy of a brokerage statement showing your ownership as of July 11, 2008.

 

A list of stockholders entitled to vote at the meeting will be available for inspection upon the request of any stockholder for any purpose germane to the meeting at our principal offices, One CA Plaza, Islandia, New York 11749, during the 10 days before the meeting, during ordinary business hours, and will be available at the meeting location during the meeting.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 9, 2008:

 

The Notice of Annual Meeting, Proxy Statement, and Annual Report to Stockholders
are available on the Internet at www.proxyvote.com.

 

Whether or not you expect to attend, please vote your shares by following the instructions contained in the Proxy Statement.

 

 

Kenneth V. Handal

Executive Vice President, Global Risk &

Compliance, and Corporate Secretary

 

Islandia, New York

July 24, 2008

 

TABLE OF CONTENTS

 

CA, INC.

 

One CA Plaza

Islandia, NY 11749

 

 

GENERAL INFORMATION

 

This Proxy Statement is furnished to the holders of the common stock, par value $.10 per share (“Common Stock”), of CA, Inc. (“we,” “us,” “our” or the “Company”) in connection with the solicitation of proxies by our Board of Directors for use at the 2008 Annual Meeting of Stockholders and any adjournment or postponement of the meeting. The meeting will be held on September 9, 2008, at 10:00 a.m. Eastern Daylight Time. The matters expected to be acted upon at the meeting are set forth in the preceding Notice of Annual Meeting. At present, the Board of Directors knows of no other business to come before the meeting.

 

To enter the meeting, you will have to present an admission ticket or other proof that you were a stockholder of the Company on the July 11, 2008 record date. Admission tickets are on the outside back cover of this Notice of Annual Meeting and Proxy Statement. If you hold your shares of Common Stock through a broker or nominee, you will have to bring either a copy of the voting instruction card provided by your broker or nominee, or a copy of a brokerage statement showing your ownership of the Common Stock as of July 11, 2008. You may also be required to present official identification containing your recent photograph (such as a driver’s license or passport). We may inspect your packages and bags and we may require you to check them, and in some cases, we may not permit you to enter the meeting with them. Please note that, at our discretion, we may exclude cameras, mobile phones, recording equipment and other electronic devices. Please do not bring non-essential packages, bags or other items to the meeting. We may take other security measures in connection with the meeting. Please allow sufficient time and otherwise plan accordingly.

 

If you received a notice regarding the availability of annual meeting proxy materials on the Internet (“Notice of Internet Availability”) for the annual meeting, you will not receive a printed copy of the proxy materials unless you specifically request one. The Notice of Internet Availability provides you with instructions on how to view our proxy materials on the Internet.

 

If you want to receive a paper or e-mail copy of the proxy materials, you may request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed in the Notice of Internet Availability by August 26, 2008 to facilitate timely delivery.

 

We plan to mail the Notice of Internet Availability on or about July 29, 2008. We will mail a printed copy of the proxy materials to certain stockholders, as in prior years, and we expect that mailing to begin on or about July 29, 2008.

 

If your shares of Common Stock are registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, you are considered the stockholder of record with respect to those shares, and the Notice of Internet Availability was sent directly to you. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice of Internet Availability was forwarded to you by that firm. The firm holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that firm on how to vote the shares held in your account. We may reimburse those firms for reasonable fees and out-of-pocket costs incurred in forwarding the Notice of Internet Availability to you.

 

We will bear the cost of our soliciting proxies. In addition to the use of the Internet, our directors, officers and employees may solicit proxies in person and by mailings, telephone, telegram, facsimile, or electronic transmission, for which they will not receive any additional compensation. We will also make arrangements with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation material to the beneficial owners of shares of Common Stock held by such persons, and we may reimburse those custodians, nominees and fiduciaries for reasonable fees and out-of-pocket expenses incurred.

 

The shares of Common Stock represented by valid proxies received and not revoked will be voted at the meeting.

 

If you are a stockholder of record and you:

 

 

then the proxy holders (i.e., the persons named in the proxy card provided by our Board of Directors) will vote your shares in the manner recommended by our Board of Directors on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the meeting.

 

If you are a beneficial owner of shares held in street name and do not provide the firm that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the firm that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the firm that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, it will inform our Inspector of Election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” (Please see “Broker Non-Votes,” below.)

 

When our Inspector of Election tabulates the votes for any particular matter, broker non-votes will be counted for purposes of determining whether a quorum is present, but will not otherwise be counted. We encourage you to provide voting instructions to the firm that holds your shares by carefully following the instructions provided in the Notice of Internet Availability.

 

Please note that if you hold your shares through a bank, broker or other nominee and you want to vote in person at the meeting, you must obtain a proxy from your bank, broker or other nominee authorizing you to vote those shares and you must bring that proxy to the meeting. If any other business properly comes before the meeting or any adjournment or postponement, it is the intention of the proxy holders named in the Board of Directors’ accompanying proxy card to vote the shares represented by the proxy card on those matters in accordance with their best judgment.

 

A “broker non-vote” occurs when your broker submits a proxy for your shares but does not indicate a vote on a particular matter because the broker has not received voting instructions from you and does not have authority to vote on that matter without instructions from you. “Broker non-votes” are treated as present for purposes of determining a quorum, but are not counted as votes “for” or “against” the matter in question or as abstentions, nor are they counted in determining the number of votes present for the particular matter.

 

Under the rules applicable to brokers, if your broker holds shares in your name, the broker, in the absence of voting instructions from you, is entitled to vote your shares on Proposals 1 and 2.

 

You may revoke your proxy at any time before it is exercised by filing a written revocation with the Corporate Secretary at CA, Inc., One CA Plaza, Islandia, NY 11749, submitting a proxy bearing a later date (including by telephone or the Internet), or voting in person at the meeting.

 

Only stockholders of record at the close of business on July 11, 2008 are entitled to notice of and to vote at the meeting or any adjournment or postponement. On July 11, 2008, we had outstanding 518,256,027 shares of Common Stock. Each outstanding share of Common Stock is entitled to one vote. A majority of the outstanding shares of Common Stock, present or represented by proxy at the meeting, will constitute a quorum.

 

Votes cast at the meeting by proxy or in person will be tabulated by the Inspector of Election. The Inspector of Election will treat shares of Common Stock represented by a valid proxy as present at the meeting for purposes of determining a quorum, whether or not the proxy is marked as casting a vote or abstaining on any or all matters. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum.

 

Assuming that a quorum is present at the meeting, a majority of the votes cast at the meeting with regard to a director will be required to elect the director, which means that the number of votes cast “for” the director must exceed the number of votes cast “against” the director. Abstentions and broker non-votes will have no effect on the election of directors since only votes cast “for” and “against” a director will be counted. If a director does not receive the requisite vote, the Board of Directors will have 90 days from the certification of the vote to accept or reject the individual’s irrevocable resignation that all incumbent directors were required to submit before the mailing of this Proxy Statement. For additional information, please see “Proposal 1 — Election of Directors.”

 

Assuming that a quorum is present at the meeting, the affirmative vote of the holders of a majority of the shares of Common Stock present or represented by proxy at the meeting and entitled to vote on the subject matter will be required to approve Proposal 2, the ratification of our independent registered public accountants. In determining whether Proposal 2 has received the requisite number of affirmative votes, abstentions will have the effect of a vote “against” the proposal, and broker non-votes, if any, will reduce the absolute number, but not the percentage, of affirmative votes needed for approval of these proposals.

 

If you and other residents with the same last name at your mailing address own shares of Common Stock in street name, your broker or bank may have sent you a notice that your household will receive only one Notice of Internet Availability or annual report and proxy statement for each company in which you hold stock through that broker or bank. This practice of sending only one copy of proxy materials is known as “householding.” If you received a householding communication, your broker will send one copy of the Notice of Internet Availability or this Proxy Statement and our Annual Report for the fiscal year ended March 31, 2008 to your address unless contrary instructions were given by any stockholder at that address. If you received more than one copy of the Notice of Internet Availability or the proxy materials this year and you wish to reduce the number of copies you receive in the future and save us the cost of printing and mailing these documents, please contact your broker.

 

You may revoke your consent to householding at any time by sending your name, the name of your brokerage firm, and your account number to our Investor Relations Department at the address below. The revocation of your consent to householding will be effective 30 days following its receipt. In any event, if your household received a single set of the Notice of Internet Availability or proxy materials for this year, but you would prefer to receive your own copy, we will send a copy of the Notice of Internet Availability or the Proxy Statement and Annual Report to you if you send a written request to CA, Inc., Investor Relations Department, One CA Plaza, Islandia, NY 11749, or contact Investor Relations at 1-800-225-5224.

 

Our Annual Report for the fiscal year ended March 31, 2008 accompanies this Proxy Statement and is also available on the Internet. Please follow the instructions in the Notice of Internet Availability if you want to review our Annual Report on line. Our Annual Report contains financial and other information about us. The Annual Report is not a part of this Proxy Statement.

 

The following table sets forth information, based on data provided to us, with respect to beneficial ownership of shares of Common Stock as of July 11, 2008 for (1) each person known by us to beneficially own more than five percent of the outstanding shares of Common Stock, (2) each of our directors and nominees for election as directors, (3) the Named Executive Officers set forth in the Fiscal Year 2008 Summary Compensation Table, below (other than Mr. Swainson, who is listed under the “Directors and Nominees” heading) and (4) all of our directors, nominees and executive officers as a group.

 

 

 

On the recommendation of the Corporate Governance Committee, the Board of Directors has nominated the persons named below for election as directors at the meeting, each to serve until the next annual meeting and until his or her successor is duly elected and qualified. Each of the nominees is an incumbent director. Jay W. Lorsch and Walter P. Schuetze, who are currently incumbent directors, have reached age 75. In accordance with our director retirement policy, neither of them will stand for re-election at the annual meeting. The size of the Board will be reduced to 10 directors effective immediately prior to the election of directors at the annual meeting.

 

The Board has determined that nine of the nominees (all of the nominees other than Mr. Swainson) are independent under The NASDAQ Stock Market LLC (“NASDAQ”) listing requirements and our Corporate Governance Principles (the “Corporate Governance Principles”), which are attached to this Proxy Statement as Exhibit A. Mr. Swainson is deemed not to be independent because of his current position as our Chief Executive Officer.

 

In the course of the Board’s determination regarding the independence of each non-employee director, it considers transactions, relationships and arrangements as required by the independence guidelines contained in our Corporate Governance Principles. There were no transactions, relationships or arrangements outside of the independence guidelines that required review by the Board for purposes of determining whether the directors were independent.

 

Each of the nominees has confirmed to us that he or she expects to be able to continue to serve as a director until the end of his or her term. If, however, at the time of the Annual Meeting, any of the nominees named below is not available to serve as a director (an event that the Board does not anticipate), all the proxies granted to vote in favor of that director’s election will be voted for the election of any other person or persons that the Board may nominate.

 

All members of the Audit, Compensation and Human Resources, and Corporate Governance Committees are independent directors as defined by NASDAQ listing requirements and our Corporate Governance Principles. Members of the Audit Committee also satisfy the separate independence requirements of the U.S. Securities and Exchange Commission (“SEC”).

 

Our policy is that all directors and nominees should attend our annual meetings of stockholders. All of our directors then in office attended the 2007 Annual Meeting of Stockholders.

 

Under our majority voting standard for uncontested elections of directors, a director nominee will be elected only if the number of votes cast “for” exceeds the number of votes “against” the director’s election. In contested elections, the plurality voting standard will apply, under which the nominees receiving the most votes will be elected regardless of whether those votes constitute a majority of the shares voted at the meeting. Under our Corporate Governance Principles, if a director does not receive a majority of the votes cast at an annual meeting of stockholders, generally the Board of Directors will have 90 days from the certification of the vote to accept or reject the individual’s irrevocable resignation that all incumbent directors are required to submit before the mailing of the proxy statement for the annual meeting.

 

Set forth below are each nominee’s name, age, principal occupation for the last five years and other biographical information, including the year in which each was first elected a director of the Company.

 

Raymond J. Bromark, 62, has been a director since 2007. He is a retired Partner of PricewaterhouseCoopers LLP (“PwC”). Mr. Bromark was Head, Professional, Technical, Risk and Quality Group of PwC from 2001 to 2006 and provided consulting services to PwC from July 2006 through April 2007. He is a member of the American Institute of Certified Public Accountants (the “AICPA”) and the University of Delaware’s Weinberg Center for Corporate Governance’s Advisory Board. Mr. Bromark was PwC’s representative on the AICPA’s Center for Public Company Audit Firms’ Executive Committee. He was also a member of the Financial Accounting Standards Advisory Council, the Public Company Accounting

Oversight Board’s Standing Advisory Group and the AICPA’s Special Committee on Financial Reporting, its SEC Practice Section Executive Committee and its Ethics Executive Committee.

 

Alfonse M. D’Amato, 70, has been a director since 1999. Senator D’Amato has been Managing Director of Park Strategies LLC, a business consulting firm, since January 1999. Senator D’Amato was a United States Senator from January 1981 until January 1999. During his tenure in the Senate, he served as Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Chairman of the Commission on Security and Cooperation in Europe.

 

Gary J. Fernandes, 64, has been a director since 2003. Mr. Fernandes has been Chairman and President of FLF Investments, a family business involved with the acquisition and management of commercial real estate properties and other assets, since 1999. Mr. Fernandes retired as Vice Chairman of Electronic Data Systems Corporation (“EDS”), a global technology services company, in 1998, after serving on the Board of Directors of EDS since 1981. After retiring from EDS, Mr. Fernandes founded Convergent Partners, a venture capital fund focusing on buyouts of technology-related companies. He also served as Chairman and CEO of GroceryWorks, Inc., an internet grocery fulfillment company, until 2001. He currently serves on the Board of Directors of BancTec, Inc., a privately held systems integration, manufacturing and services company, Blockbuster International, a provider of home entertainment services, and eTelecare Global Solutions, Inc., a provider of complex business process outsourcing solutions. Mr. Fernandes also serves as an advisory director of MHT Partners, a Dallas-based investment banking firm serving mid-market companies. He serves on the Board of Governors of Boys & Girls Clubs of America, and is a director of the Boys & Girls Club of Dallas. He also serves as a trustee of the O’Hara Trust and the Hall-Voyer Foundation.

 

Robert E. La Blanc, 74, has been a director since 2002. He has been Founder and President of Robert E. La Blanc Associates, Inc., an information technologies consulting and investment banking firm, since 1981. Mr. La Blanc was previously Vice Chairman of Continental Telecom Corporation and, before that, a general partner of Salomon Brothers, Inc. He is also Chairman and a director of Fibernet Telecom Group, Inc. and a director of a family of Prudential Mutual Funds.

 

Christopher B. Lofgren, 49, has been a director since 2005. He has been President and Chief Executive Officer of Schneider National, Inc., a provider of transportation, logistics and related services, since 2002. Prior to being appointed CEO, Mr. Lofgren served as Chief Operating Officer from 2000 to 2002, and Chief Information Officer from 1996 to 2002. Mr. Lofgren also serves on the Advisory Board of the School of Industrial and Systems Engineering at Georgia Tech, as a board member of the Green Bay, Wisconsin Boys & Girls Club, the Executive Committee and the Board of Directors of the American Trucking Associations, Inc. (“ATA”) and the Board of Directors of the American Transportation Research Institute, a research trust affiliated with the ATA.

 

William E. McCracken, 65, has been a director since 2005. He has been President of Executive Consulting Group, LLC since 2002. Mr. McCracken has been Chairman of the Board of the Company since June 2007. During a 36-year tenure at International Business Machines Corporation (“IBM”), Mr. McCracken held several different executive offices, including serving as general manager of the IBM Printing Systems Division and general manager of Worldwide Marketing of IBM PC Company. He is currently a member of the Board of Directors of IKON Office Solutions. He is also Chairman of the Board of Trustees of Lutheran Social Ministries of New Jersey.

 

John A. Swainson, 54, has been Chief Executive Officer of the Company since February 2005 and a director since November 2004. From November 2004 to February 2005, he served as our Chief Executive Officer-elect. From July to November 2004, Mr. Swainson was Vice President of Worldwide Sales and Marketing of the Software Group of IBM, responsible for selling its diverse line of software products through multiple channels. From 1997 to July 2004, he was General Manager of the Application Integration and Middleware division of IBM’s Software Group, a division he started in 1997. He is the lead director of Visa Inc., and is also a director of Cadence Design Systems, Inc., and the Ridgefield, Connecticut Symphony Orchestra Foundation.

Laura S. Unger, 47, has been a director since 2004.  She was a Commissioner of the SEC from November 1997 to February 2002, including Acting Chairperson of the SEC from February to August 2001. From June 2002 through June 2003, Ms. Unger was employed by CNBC as a Regulatory Expert. Before being appointed to the SEC, Ms. Unger served as Counsel to the United States Senate Committee on Banking, Housing and Urban Affairs from October 1990 to November 1997. Prior to working on Capitol Hill, Ms. Unger was an attorney with the Enforcement Division of the SEC. Ms. Unger serves as a director of Ambac Financial Group, Inc., the IQ Funds Complex, and Children’s National Medical Center. She also acts as the Independent Consultant to JP Morgan Chase for the Global Analyst Conflict Settlement.

 

Arthur F. Weinbach, 65, has been a director since April 2008. He has been Executive Chairman and Chairman of the Board of Broadridge Financial Solutions, Inc., a financial services company, since April 2007. Mr. Weinbach was associated with Automatic Data Processing, Inc. (“ADP”), the predecessor of Broadridge Financial Solutions, Inc., from 1980 to 2007, serving as Chief Executive Officer from 1998 to 2006 and as Chairman until November 2007. He is also a director of Schering-Plough Corporation. He is also currently a Trustee of New Jersey SEEDS, a non-profit organization.

 

Renato (Ron) Zambonini, 61, has been a director since 2005. He was Chairman of the Board of Cognos Incorporated, a developer of business intelligence software, from May 2004 until January 2008, and a director from 1994 until January 2008. Mr. Zambonini was Chief Executive Officer of Cognos from September 1995 to May 2004 and President from January 1993 until April 2002.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES LISTED ABOVE (PROPOSAL 1).

 

The Board has adopted a Related Person Transactions Policy (the “Policy”), which is a written policy governing the review and approval or ratification of Related Person Transactions, as defined in SEC rules.

 

Under the Policy, each of our directors, nominees for director and executive officers must notify the General Counsel and/or the Office of Corporate Secretary of any potential Related Person Transaction involving that person or an immediate family member of that person. The General Counsel and/or the Office of Corporate Secretary will review each potential Related Person Transaction to determine if it is subject to the Policy. If so, the transaction will be referred for approval or ratification to the Corporate Governance Committee, which will approve or ratify the transaction only if it determines that the transaction is in, or is not inconsistent with, our best interests and the best interests of our stockholders. In determining whether to approve or ratify a Related Person Transaction, the Corporate Governance Committee may consider, among other things:

 

 

The Corporate Governance Committee will administer the Policy and may review, and recommend amendments to, the Policy from time to time.

 

Since the beginning of fiscal year 2008, there has been one Related Person Transaction. Erica Christensen La Blanc, a daughter-in-law of Mr. La Blanc, was hired as a non-executive employee of the Company. She receives an annual salary and employee benefits valued at approximately $134,000. This Related Person Transaction was approved in accordance with the Policy.

 

Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 — Background

 

The Company, its former Chairman and CEO Charles B. Wang, its former Chairman and CEO Sanjay Kumar, its former Chief Financial Officer Ira Zar, and its Vice Chairman and Founder Russell M. Artzt were defendants in one or more stockholder class action lawsuits filed in July 1998, February 2002, and March 2002 in the United States District Court for the Eastern District of New York (the “Federal Court”), alleging, among other things, that a class consisting of all persons who purchased the Company’s Common Stock during the period from January 20, 1998 until July 22, 1998 were harmed by misleading statements, misrepresentations, and omissions regarding the Company’s future financial performance.

 

In addition, in May 2003, a class action lawsuit captioned John A. Ambler v. Computer Associates International, Inc., et al. was filed in the Federal Court. The complaint in this matter, a purported class action on behalf of the CA Savings Harvest Plan (the “CASH Plan”) and the participants in, and beneficiaries of, the CASH Plan for a class period from March 30, 1998 through May 30, 2003, asserted claims of breach of fiduciary duty under the federal Employee Retirement Income Security Act (“ERISA”). The named defendants were the Company, the Company’s Board of Directors, the CASH Plan, the Administrative Committee of the CASH Plan, and the following current or former employees and/or former directors of the Company: Messrs. Wang, Kumar, Zar, Artzt, Peter A. Schwartz, and Charles P. McWade; and various unidentified alleged fiduciaries of the CASH Plan. The complaint alleged that the defendants breached their fiduciary duties by causing the CASH Plan to invest in Company securities and sought damages in an unspecified amount.

 

A stockholder derivative lawsuit was filed by Charles Federman against certain current and former directors of the Company, based on essentially the same allegations as those contained in the February and March 2002 stockholder lawsuits discussed above. This action was commenced in April 2002 in the Delaware Chancery Court, and an amended complaint was filed in November 2002. The defendants named in the amended complaint were current Company director The Honorable Alfonse M. D’Amato and former Company directors Shirley Strum Kenny and Messrs. Wang, Kumar, Artzt, Willem de Vogel, Richard Grasso, Roel Pieper, and Lewis S. Ranieri. The Company was named as a nominal defendant. The derivative suit alleged breach of fiduciary duties on the part of all the individual defendants and, as against the former management director defendants, insider trading on the basis of allegedly misappropriated confidential, material information. The amended complaint sought an accounting and recovery on behalf of the Company of an unspecified amount of damages, including recovery of the profits allegedly realized from the sale of Common Stock.

 

On August 25, 2003, the Company announced the settlement of the above-described class action lawsuits against the Company and certain of its present and former officers and directors, alleging misleading statements, misrepresentations, and omissions regarding the Company’s financial performance, as well as breaches of fiduciary duty. At the same time, the Company also announced the settlement of a derivative lawsuit, in which the Company was named as a nominal defendant, filed against certain present and former officers and directors of the Company, alleging breaches of fiduciary duty and, against certain management directors, insider trading, as well as the settlement of an additional derivative action filed by Charles Federman that had been pending in the Federal Court. As part of the class action settlement, which was approved by the Federal Court in December 2003, the Company agreed to issue a total of up to 5.7 million shares of Common Stock to the stockholders represented in the three class action lawsuits, including payment of attorneys’ fees. The Company has completed the issuance of the settlement shares as well as payment of $3.3 million to the plaintiffs’ attorneys in legal fees and related expenses.

 

In settling the derivative suits, which settlement was also approved by the Federal Court in December 2003, the Company committed to maintain certain corporate governance practices. Under the settlement, the Company, the individual defendants and all other current and former officers and directors of the Company were released from any potential claim by stockholders arising from accounting-related or other public statements made by the Company or its agents from January 1998 through February 2002 (and from

March 11, 1998 through May 2003 in the case of the employee ERISA action). The individual defendants were released from any potential claim by or on behalf of the Company relating to the same matters.

 

On October 5, 2004 and December 9, 2004, four purported Company stockholders served motions to vacate the Order of Final Judgment and Dismissal entered by the Federal Court in December 2003 in connection with the settlement of the derivative action. These motions primarily sought to void the releases that were granted to the individual defendants under the settlement. On December 7, 2004, a motion to vacate the Order of Final Judgment and Dismissal entered by the Federal Court in December 2003 in connection with the settlement of the 1998 and 2002 stockholder lawsuits discussed above was filed by Sam Wyly and certain related parties (the “Wyly Litigants”). The motion sought to reopen the settlement to permit the moving stockholders to pursue individual claims against certain present and former officers of the Company. The motion stated that the moving stockholders did not seek to file claims against the Company. On June 14, 2005, the Federal Court granted movants’ motion to be allowed to take limited discovery prior to the Federal Court’s ruling on these motions (the “60(b) Motions”).

 

The Government Investigation — DPA Concluded

 

In September 2004, the Federal Court approved a deferred prosecution agreement (“DPA”) between the Company and the United States Attorney’s Office (“USAO”) and a consent to enter into a final judgment (“Consent Judgment”) in a parallel proceeding brought by the SEC regarding certain of the Company’s past accounting practices, including its revenue recognition policies and procedures during certain periods prior to the adoption of the Company’s new business model (as described in the Company’s Annual Report on Form 10-K) in October 2000. The DPA and the Consent Judgment resolved the USAO and SEC investigations into those past accounting practices and obstruction of their investigations. In May 2007, based upon the Company’s compliance with the terms of the DPA, the Federal Court ordered dismissal of the charges that had been filed against the Company in connection with the DPA and the DPA expired. The injunctive provisions of the Consent Judgment permanently enjoining the Company from violating certain provisions of the federal securities laws remain in effect.

 

Derivative Actions Filed in 2004

 

In June and July 2004, three purported derivative actions were filed in the Federal Court by Ranger Governance, Ltd. (“Ranger”), Bert Vladimir and Irving Rosenzweig against certain current or former employees and/or directors of the Company (the “Derivative Actions”). In November 2004, the Federal Court issued an order consolidating the Derivative Actions. The plaintiffs filed a consolidated amended complaint (the “Consolidated Complaint”) on January 7, 2005. The Consolidated Complaint names as defendants Messrs. Wang, Kumar, Zar, Artzt, D’Amato, Stephen Richards, Ranieri and Steven Woghin; David Kaplan, David Rivard, Lloyd Silverstein; Michael A. McElroy; Messrs. McWade and Schwartz; Gary Fernandes; Robert E. La Blanc; Jay W. Lorsch; Kenneth Cron; Walter P. Schuetze; Messrs. de Vogel and Grasso; Roel Pieper; KPMG LLP; and Ernst & Young LLP. The Company is named as a nominal defendant. The Consolidated Complaint seeks from one or more of the defendants (1) contribution towards the consideration the Company had previously agreed to provide current and former stockholders in settlement of certain class action litigation commenced against the Company and certain officers and directors in 1998 and 2002 (see “— Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004”), (2) compensatory and consequential damages in an amount not less than $500 million in connection with the USAO and SEC investigations (see “— The Government Investigation — DPA Concluded”), (3) unspecified relief for violations of Section 14(a) of the Exchange Act for alleged false and material misstatements made in the Company’s proxy statements issued in 2002 and 2003, (4) relief for alleged breach of fiduciary duty, (5) unspecified compensatory, consequential and punitive damages based upon allegations of corporate waste and fraud, (6) unspecified damages for breach of duty of reasonable care, (7) restitution and rescission of the compensation earned under the Company’s executive compensation plan and (8) pursuant to Section 304 of the Sarbanes-Oxley Act, reimbursement of bonus or other incentive-based equity compensation and alleged profits realized from sales of securities issued by the Company. Although no relief is sought from the Company, the Consolidated Complaint seeks monetary damages, both compensatory and consequential, from

the other defendants, including current or former employees and/or directors of the Company, Ernst & Young LLP and KPMG LLP, in an amount totaling not less than $500 million.

 

The consolidated derivative action was stayed pending resolution of the 60(b) Motions, which have been denied (see “— Current Procedural Status of Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 and Derivative Actions Filed in 2004”). On February 1, 2005, the Company established a Special Litigation Committee of independent members of its Board of Directors to, among other things, control and determine the Company’s response to the Consolidated Complaint and the 60(b) Motions. On April 13, 2007, the Special Litigation Committee issued its reports, which announced the Special Litigation Committee’s conclusions, determinations, recommendations and actions with respect to the claims asserted in the Derivative Actions and in the 60(b) Motions. Also, in response to the Consolidated Complaint, the Special Litigation Committee served a motion which seeks to dismiss and realign the claims and parties in accordance with the Special Litigation Committee’s recommendations. As summarized below, the Special Litigation Committee concluded as follows:

 

 

The Special Litigation Committee has served motions which seek dismissal of the Director Claims, the claims against Ernst & Young LLP and KPMG LLP, Michael McElroy and certain other claims. In addition, the Special Litigation Committee has asked for the Federal Court’s approval for the Company to be realigned as the plaintiff with respect to claims against certain other parties, including Messrs. Wang and Schwartz.

 

Current Procedural Status of Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 and Derivative Actions Filed in 2004

 

By letter dated July 19, 2007, counsel for the Special Litigation Committee advised the Federal Court that the Special Litigation Committee had reached a settlement of the Derivative Actions with two of the three derivative plaintiffs — Bert Vladimir and Irving Rosenzweig. In connection with the settlement, both of these plaintiffs have

agreed to support the Special Litigation Committee’s motion to dismiss and to realign. The Company has agreed to pay the attorney’s fees of Messrs. Vladimir and Rosenzweig in an amount up to $525,000 each. If finalized, this settlement would require approval of the Federal Court. On July 23, 2007, Ranger filed a letter with the Federal Court objecting to the proposed settlement. On October 29, 2007, the Federal Court denied the Special Litigation Committee’s motion to dismiss and realign, without prejudice to renewing the motion after a decision by the appellate court regarding the Federal Court’s decisions concerning the 60(b) Motions (see “— Stockholder Class Action and Derivative Lawsuits Filed Prior to 2004 — Background”).

 

In a memorandum and order dated August 2, 2007, the Federal Court denied all of the 60(b) Motions and reaffirmed the 2003 settlements (the “August 2 decision”). On August 24, 2007, Ranger and the Wyly Litigants filed notices of appeal of the August 2 decision. On August 16, 2007, the Special Litigation Committee filed a motion to amend or clarify the August 2 decision, and the Company joined that motion. On September 12, 2007 and October 4, 2007, the Federal Court issued opinions denying the motions to amend or clarify. On September 18, 2007, the Wyly Litigants and Ranger filed notices of appeal of the September 12 decision. The Company filed notices of cross-appeal of the September 12 and October 4 decisions on November 2, 2007. On December 3, 2007, Ranger filed a motion to dismiss the Company’s cross-appeals. By Order dated December 7, 2007, all of the appeals and cross-appeals were stayed pending a decision on Ranger’s motion to dismiss. By an Order filed on May 21, 2008, the U.S. Court of Appeals for the Second Circuit denied Ranger’s motion to dismiss, having determined that the Company’s cross-appeals were timely filed.

 

Texas Litigation

 

On August 9, 2004, a petition was filed by Sam Wyly and Ranger against the Company in the District Court of Dallas County, Texas, seeking to obtain a declaratory judgment that plaintiffs did not breach two separation agreements they entered into with the Company in 2002 (the “2002 Agreements”). Plaintiffs seek to obtain this declaratory judgment in order to file a derivative suit on behalf of the Company (see “— Derivative Actions Filed in 2004”). On February 18, 2005, Mr. Wyly filed a separate lawsuit in the United States District Court for the Northern District of Texas (the “Texas Federal Court”) alleging that he is entitled to attorneys’ fees in connection with the original litigation filed in Texas. The two actions have been consolidated. On March 31, 2005, the plaintiffs amended their complaint to allege a claim that they were defrauded into entering the 2002 Agreements and to seek rescission of those agreements and damages. On September 1, 2005, the Texas Federal Court granted the Company’s motion to transfer the action to the Federal Court. On November 9, 2007, plaintiffs served a motion to reopen discovery for 90 days to permit unspecified additional document requests and depositions. The Company served its opposition to plaintiffs’ motion on November 16, 2007. The Federal Court has not yet decided the motion.

 

General

 

The Company is obligated to indemnify its officers and directors under certain circumstances to the fullest extent permitted by Delaware law. As a part of that obligation, the Company has advanced and will continue to advance certain attorneys’ fees and expenses incurred by current and former officers and directors in various litigations and investigations arising out of similar allegations, including the litigation described above under the caption “Litigation Involving Directors and Executive Officers.”

 

Additional information about litigation involving the Company’s directors and executive officers is contained in our periodic and other reports filed with the SEC.

 

The Board of Directors has established three principal committees — the Audit Committee, the Compensation and Human Resources Committee and the Corporate Governance Committee — to carry out certain responsibilities and to assist the Board in meeting its fiduciary obligations. These committees operate under written charters, which have been adopted by the respective committees and by the Board. All the members of these committees are “independent” under both our Corporate Governance Principles and NASDAQ listing requirements. In June 2008 (fiscal year 2009), the Board of Directors established a Compliance and Risk Committee and modified the responsibilities of the Audit and Compliance Committee (renamed, the Audit Committee) to transfer some responsibilities to the Compliance and Risk Committee. Also in June 2008, the Board dissolved its Strategy Committee. The charters of the current committees can be reviewed on our website at investor.ca.com and are also available free of charge in print to any stockholder who requests them in the same manner as for our Corporate Governance Principles or the Code of Conduct described below. The current members of the committees are as follows:

 

 

 

 

Information about the principal responsibilities and meetings of these committees appears below.

 

The general purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities with respect to: (1) the audits of our financial statements and the integrity of our financial statements and internal controls; (2) the qualifications and independence of our independent registered public accountants (including the Committee’s direct responsibility for the engagement of the independent registered public accountants); (3) the performance of our internal audit function and independent registered public accountants; (4) our accounting and financial reporting processes; and (5) the activity of our internal control function, including reviewing decisions with respect to scope, risk assessment, testing plans, and organizational structure. The Board has determined that Messrs. Bromark and Schuetze each qualify as an “audit committee financial expert” and that all members of the Committee are independent under applicable SEC and NASDAQ rules. During fiscal year 2008, the Audit and Compliance Committee met 12 times and acted by unanimous written consent on one occasion. Additional information about the responsibilities of the Audit Committee is set forth in the Audit Committee charter.

 

The general purpose of the Compensation and Human Resources Committee is to assist the Board in fulfilling its responsibilities with respect to executive compensation and human resources matters, including: (1) reviewing and approving corporate goals and objectives relevant to the compensation of the Chief

Executive Officer; in coordination with the Corporate Governance Committee, evaluating his or her performance in light of those goals and objectives; and determining and approving his or her compensation, including determinations regarding equity-based and other incentive compensation awards, based upon such evaluation and (2) overseeing the evaluation of senior officers other than the Chief Executive Officer in connection with its oversight of senior management development and succession planning, and determining the compensation of senior officers, including determinations regarding equity-based and other incentive compensation awards. During fiscal year 2008, the Committee met seven times. Additional information about the Committee’s responsibilities is set forth in the Compensation and Human Resources Committee charter.

 

The general purpose of the Corporate Governance Committee is to assist the Board in fulfilling its responsibilities with respect to our governance, including making recommendations to the Board concerning: (1) the size and composition of the Board, the qualifications and independence of the directors and the recruitment and selection of individuals to stand for election as directors; (2) the organization and operation of the Board, including the nature, size and composition of committees of the Board, the designation of committee chairs, the designation of a Lead Independent Director, Chairman of the Board or similar position, and the distribution of information to the Board and its committees; and (3) the compensation of non-employee directors. During fiscal year 2008, the Committee met seven times and acted by unanimous written consent on one occasion. Additional information about the Committee’s responsibilities is set forth in the Corporate Governance Committee charter.

 

During fiscal year 2008, the Compensation and Human Resources Committee and the Corporate Governance Committee met once in a joint session to discuss management succession planning, as contemplated by their respective charters.

 

The general purpose of the Compliance and Risk Committee is to: (1) provide general oversight to our Global Risk and Compliance Department; (2) provide input to our management in the identification, assessment and mitigation of enterprise-wide risks faced by the Company both internally and externally; and (3) provide recommendations to the Board with respect to its review of our business practices and compliance activities and enterprise risk management. The Compliance and Risk Committee was formed in June 2008, during fiscal year 2009.

 

In June 2008 (fiscal year 2009), the Board dissolved its Strategy Committee and the Committee’s responsibilities were reassumed by the Board. The general purpose of the Strategy Committee was to provide input to management in their development of our corporate strategy and to provide recommendations to the Board with respect to its review and approval of the corporate strategy. The members of the Strategy Committee during fiscal 2008 were Messrs. Lofgren (Chair), Bromark, Fernandes, McCracken, Swainson and Zambonini. During fiscal year 2008, the Committee met five times.

 

During fiscal year 2008, the Board of Directors met 12 times and acted by unanimous written consent on two occasions. The independent directors meet at all regular Board meetings in executive session without any non-independent director present. The Chairman of the Board, who is an independent director, presides at these executive sessions. During fiscal year 2008, each director attended, in the aggregate, more than 75% of the Board meetings and meetings of the Board committees on which the director served.

 

The Corporate Governance Committee will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Committee will take into consideration the factors specified in our Corporate Governance Principles, which are attached to this Proxy Statement as Exhibit A, as well as the current needs of the Board and the qualifications of the candidate. The Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To recommend a candidate for consideration by the Committee, a stockholder must submit the recommendation in writing, including the following information:

 

 

Recommendations and the information described above should be sent to the Corporate Secretary at CA, Inc., One CA Plaza, Islandia, New York 11749.

 

Once a person has been identified by the Corporate Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further; request additional information from the candidate and the proposing stockholder; contact references or other persons to assess the candidate; and conduct one or more interviews with the candidate. The Committee may consider that information in light of information regarding any other candidates that the Committee may be evaluating at that time. The evaluation process generally does not vary based on whether or not a candidate is recommended by a stockholder; however, as stated above, the Committee may take into consideration the number of shares held by the recommending stockholder and the length of time that these shares have been held.

 

In addition to recommending director candidates to the Corporate Governance Committee, stockholders may also nominate candidates for election to the Board at the annual meeting of stockholders. These nominations must be received by the Corporate Secretary not less than 90 days or more than 120 days before the anniversary date of our most recent annual meeting of stockholders and must provide certain information specified in our By-laws. See “Advance Notice Procedures for 2009 Annual Meeting,” below, for more information.

 

In addition to stockholder recommendations, the Corporate Governance Committee may receive suggestions as to nominees from our directors, officers or other sources, which may be either unsolicited or in response to requests from the Committee for these suggestions. In addition, the Committee may engage search firms to assist it in identifying director candidates.

 

The Board of Directors is interested in receiving communications from stockholders and other interested parties, which would include customers, suppliers and employees. These parties may contact any member (or members) of the Board or any committee, the non-employee directors as a group, or the Chair of any committee, by mail or electronically. In addition, the Audit Committee of the Board of Directors is interested in receiving communications from employees and other interested parties, which would include stockholders, customers, suppliers and employees, on issues regarding accounting, internal accounting controls or auditing matters. Any such correspondence should be addressed to the appropriate person or persons, either by name or title, and sent by postal mail to the office of the Chief Compliance Officer at CA, Inc., One CA Plaza, Islandia, New York 11749, or by e-mail to directors@ca.com.

 

The Board has determined that the following types of communications are not related to the duties and responsibilities of the Board and its committees and are, therefore, not appropriate: spam and similar junk mail and mass mailings; product complaints, product inquiries and new product suggestions; résumés and other job inquiries; surveys; business solicitations or advertisements; and any communication that is unduly hostile, threatening, illegal or similarly unsuitable. Each communication received as described in the preceding paragraph will be forwarded to the applicable directors, unless the Chief Compliance Officer determines that the communication is not appropriate. Regardless, certain of these communications may be forwarded to other employees in the Company for review and action, when appropriate, or to the directors upon request.

 

We have undertaken several corporate governance initiatives during fiscal year 2008. Directly and through the Corporate Governance Committee, the Board periodically reviews corporate governance developments.

 

We periodically consider and review our Corporate Governance Principles. In April 2008, we adopted amendments to our Corporate Governance Principles relating to the guidelines for director independence and related matters, principally in connection with the transfer of the listing of our Common Stock to NASDAQ. Our Corporate Governance Principles are attached to this Proxy Statement as Exhibit A and can be found, together with other corporate governance information, on our website at investor.ca.com. For additional information, see the “Corporate Governance Committee Report” below. The Board also evaluates the principal committee charters from time to time, as appropriate. In April 2008, the Board reviewed and approved amendments to all of the principal committee charters, principally in connection with our move to NASDAQ.

 

We maintain a code of conduct entitled “Business Practices Standard of Excellence: Our Code of Conduct” (the “Code of Conduct”), which is applicable to all employees and directors, and is available on our website at investor.ca.com. Any waiver to the Code of Conduct that applies to our directors or executive officers will be contained in a report filed with the SEC on Form 8-K or will be otherwise disclosed as permitted by law or regulation.

 

Each of our Corporate Governance Principles and the Code of Conduct is available free of charge in print to any stockholder who requests a copy by writing to Kenneth V. Handal, our Executive Vice President, Global Risk & Compliance, Chief Compliance Officer, and Corporate Secretary, at CA, Inc., One CA Plaza, Islandia, New York 11749.

 

The general purpose of the Corporate Governance Committee is to make recommendations to the Board concerning (1) the size and composition of the Board, the qualifications and independence of the directors and the recruitment and selection of individuals to stand for election as directors; (2) the organization and operation of the Board, including the nature, size and composition of committees of the Board, the designation of committee chairs, the designation of a Lead Independent Director, Chairman of the Board or similar position and the distribution of information to the Board and its committees; and (3) the compensation of non-employee directors. Additionally, the Committee, in coordination with the Compensation and Human Resources Committee, is responsible for evaluating the performance of the Chief Executive Officer and for overseeing management development and succession planning.

 

During fiscal year 2008, the Committee reviewed our Corporate Governance Principles. After the review, the Committee recommended and in April 2008 the Board approved amendments to our Corporate Governance Principles principally to reflect the transfer of the Company’s listing from the New York Stock Exchange to NASDAQ. Additionally, the Committee participated in a joint review of the Chief Executive Officer with the Compensation and Human Resources Committee of the Board. The Committee also led the annual self-assessment of the Board. In June 2008 (fiscal year 2009), the Committee reviewed the responsibilities of the Company’s Strategy Committee and recommended to the Board that the full Board should reassume those responsibilities. The Committee also recommended to the Board the creation of the Compliance and Risk Committee, whose responsibilities are generally to oversee the function of the Company’s Global Risk and Compliance Department.

 

The Committee considers and makes recommendations to the Board concerning the appropriate size and needs of the Board, taking into account the Board’s ability to function effectively and with appropriate diversity and expertise. The Committee is continuously considering potential candidates to serve as directors. As a result of an extensive search process conducted during fiscal year 2008 and fiscal year 2009, in April 2008, the Committee recommended and the Board approved the election of Arthur F. Weinbach as an independent member of the Board and his appointment to the Compensation and Human Resources Committee.

 

The Committee considers candidates from a variety of sources and the Committee will consider candidates recommended by stockholders for election as directors. Please see “Nominating Procedures” above and “Advance Notice Procedures for 2009 Annual Meeting” below for more information.

 

Additional information regarding the Company’s corporate governance can be found under the headings “Corporate Governance,” “Board Committees and Meetings,” “Nominating Procedures,” and “Communications with Directors,” above, and “Compensation of Directors,” below.

 

THE CORPORATE GOVERNANCE
COMMITTEE

 

Jay W. Lorsch, Chairman
Alfonse M. D’Amato
Christopher B. Lofgren
Laura S. Unger

 

Only our non-employee directors receive compensation for their services as directors. Their compensation is based on a “director service year” that lasts from annual meeting to annual meeting. Under our 2003 Compensation Plan for Non-Employee Directors (the “2003 Directors Plan”), each non-employee director receives an annual fee that is fixed by the Board and paid in the form of deferred stock units, except that up to 50% of that fee may be paid in cash, if elected by the director in advance. Following termination of service, a director receives shares of Common Stock in an amount equal to the number of deferred stock units in the director’s deferred compensation account. The 2003 Directors Plan also allows the Board of Directors to authorize the payment of additional fees to any eligible director who chairs a committee of the Board of Directors or to an eligible director serving as the lead director or Chairman of the Board. Currently, all of our non-employee directors receive compensation pursuant to the 2003 Directors Plan.

 

Each non-employee director receives an annual director fee of $175,000. In addition, the Chair of the Audit Committee receives an annual Chair’s fee of $25,000 and each non-employee Chair of each other committee of the Board of Directors receives an annual Chair’s fee of $10,000. During fiscal 2008, the Corporate Governance Committee reviewed the increased responsibilities of the non-executive Chairman of the Board in relation to the annual compensation of the Chairman. The Committee was assisted by Towers Perrin, outside executive compensation consultants, who analyzed relevant market competitive data. Based on this review, and the recommendations of Towers Perrin and the Corporate Governance Committee, the Board approved an increase in the annual Chairman’s fee from $50,000 to $175,000, effective as of June 12, 2007. These additional fees are also payable in deferred stock units, unless the director elects to receive up to 50% in cash, as described above for annual fees.

 

In addition to director fees, to further our support for charities, non-employee directors are able to participate in our Matching Gifts Program. Under this program, we match, on a one-for-one basis, contributions up to an aggregate annual amount of $25,000 by a director to charities approved by us.

 

We also provide directors with, and pay premiums for, director and officer liability insurance and we reimburse directors for reasonable travel expenses incurred in connection with Company business.

 

The following table includes information about compensation paid to our non-employee directors for the fiscal year ended March 31, 2008.

 

Fiscal Year 2008 Director Compensation Table

 

 

 

 

 

 

 

 

 

The Compensation and Human Resources Committee of the Board of Directors (the “Compensation Committee”) is made up entirely of independent directors. The Compensation Committee’s responsibilities include overseeing our compensation plans and policies, establishing the performance measures under our annual and long-term incentive programs that cover executive officers, approving executive officer compensation and authorizing awards under our equity-based plans, in consultation with the Chief Executive Officer and executive management, when appropriate.

 

Although the Compensation Committee has delegated its authority to the Chief Executive Officer with respect to equity grants and compensation matters in certain circumstances, the Compensation Committee has not delegated such authority with respect to the compensation matters of our executive officers under the Exchange Act, including the Named Executive Officers (as shown in the Fiscal Year 2008 Summary Compensation Table, below).

 

The Compensation Committee’s Chairman regularly reports to the Board on Compensation Committee actions and recommendations of the Compensation Committee. The Compensation Committee’s charter reflects these responsibilities and reporting relationships, and the Board and Compensation Committee periodically review and revise the charter. The Compensation Committee is also charged with oversight of senior management development and succession issues, along with the Corporate Governance Committee, on behalf of the Board.

 

As described in additional detail in “Compensation Discussion and Analysis,” below, the Compensation Committee makes the final determinations about the amount and form of the executive officers’ base salaries and incentive and equity compensation. In making these determinations, the Compensation Committee considers input from a number of sources.

 

The Compensation Committee considers the views and insights of management, including executive officers, in making compensation decisions for Named Executive Officers and others, while ensuring that no Named Executive Officer provides input into his or her own specific compensation. Since the input of executive officers with respect to the business environment and competitive status in various business areas is an essential component of the Compensation Committee’s process, the input of executive officers is critical.

 

In particular, in fiscal year 2008, our Chief Executive Officer (the “CEO”) and our Executive Vice President of Global Human Resources (the “EVP-HR”) made recommendations to the Compensation Committee with regard to base salary levels and individual compensation targets for each executive officer (i.e., annual performance bonus target and long-term incentive plan (LTIP) target amounts), based on each executive’s experience, importance of his or her individual role, knowledge and performance. The CEO separately discussed with, and made recommendations to, the Compensation Committee regarding the compensation of the EVP-HR. The EVP-HR and Towers Perrin, outside executive compensation consultant to the Compensation Committee, discussed with the Compensation Committee the CEO’s compensation, without the CEO being present.

 

As described below, these recommendations of the CEO and EVP-HR were reviewed and compared with competitive market data based on publicly-available data for a select peer group, as well as survey data of companies in the computer and software industries, before the Compensation Committee made its decisions.

 

In addition to approving the base salary and target incentive compensation amounts, the Compensation Committee also determines the form in which the compensation will be paid — e.g., cash or equity (and for equity, stock options, stock appreciation rights, restricted stock or restricted stock units or performance shares). Starting with fiscal year 2006, the Compensation Committee approved a compensation program that the Compensation Committee believes (i) incorporates a well-balanced mix of short-term and long-term incentives and cash and non-cash components, (ii) links pay to the achievement of goals that are tied to our operational

performance and (iii) helps achieve the objectives described in “Compensation Discussion and Analysis” below with respect to compensation. As detailed below, this compensation program was also followed in fiscal year 2008.

 

Early in fiscal year 2008, the CEO and the Chief Financial Officer made a recommendation to the Compensation Committee for the performance metrics and targets for the annual and long-term incentive components of the fiscal year 2008 compensation program, which were then approved by the Compensation Committee. These recommendations were consistent with and based on the corporate targets and goals set for fiscal year 2008 at that time.

 

In fiscal year 2008, in addition to working with our internal human resources department, finance and legal personnel, as well as external counsel to the Compensation Committee, the Compensation Committee retained the services of Towers Perrin to assist in the Compensation Committee’s review of management compensation levels and programs. After reviewing Towers Perrin’s services and fee arrangement in fiscal year 2008, the Compensation Committee determined to continue to engage Towers Perrin, based on their experience, expertise and familiarity with the Company. Towers Perrin has been advising the Compensation Committee since 2001. Towers Perrin advised the Compensation Committee on the design of the current compensation program for executives, which the Compensation Committee has followed since fiscal year 2006 and which is described in more detail below under “Compensation Discussion and Analysis.” Towers Perrin continues to advise the Compensation Committee on the program, including with regard to performance measures and targets set from year to year for the executive officers.

 

The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section of this Proxy Statement. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

THE COMPENSATION AND
HUMAN RESOURCES COMMITTEE

 

Gary J. Fernandes, Chair
Jay W. Lorsch
William E. McCracken
Arthur F. Weinbach

 

Our objective is to attract, retain and motivate executives to enhance the Company’s profitability and to maximize stockholder value in the software marketplace. Our philosophy is to:

 

 

The Compensation Committee believes that this approach will:

 

 

Elements of Compensation

 

Aggregate compensation approved by the Compensation Committee at the beginning of fiscal year 2008 was generally targeted to be between the 50th and 75th percentile of compensation of a select computer software and services industry group if predetermined performance objectives were attained at the target level. The elements of compensation used were base salary, annual performance bonus and long-term incentive compensation. Executives were also eligible to participate in certain broad-based employee plans and receive certain perquisites as described below.

 

As described above under “Compensation and Human Resources Committee — Processes and Procedures for Determination of Executive Compensation,” the recommendations regarding aggregate compensation — including base salary amounts and annual and long-term incentive target levels — were made by the CEO and EVP-HR for senior executives. These recommendations were then reviewed by the Compensation Committee with the assistance of Towers Perrin and compared with competitive market data for the CEO and key executives of certain peer companies based on, among other things, compensation information disclosed in publicly filed documents. The peer companies used were Acxiom Corp., Adobe Systems Inc., Autodesk Inc., BEA Systems, Inc., BMC Software Inc., Business Objective S.A., Cadence Design Systems, Inc., Citrix Systems Inc., Compuware Corporation, Intuit Inc., McAfee Inc., Novell Inc., Symantec Corp. and Verisign, Inc.

 

In addition, the Compensation Committee, with Towers Perrin’s assistance, compared the pay of our senior executives with the pay of executives in similar roles elsewhere in the industry. The Compensation Committee also considered a second survey of market-based data. These surveys were generally based on pay practices in industries with which we compete for executive talent — principally the computer and software industries.

 

Each of these elements, as well as their general purpose and the factors used by the Compensation Committee in its deliberation, are described below.

Base Salaries.  Base salaries are intended to attract and retain talented, high-performing executives. Salaries are determined by evaluating the following:

 

 

Base salaries for our Named Executive Officers were paid out in the amounts approved by the Compensation Committee, as reflected in the Fiscal Year 2008 Summary Compensation Table, below.

 

Annual Performance Bonus.  The annual performance bonus rewards executives for achieving annual financial, operational, strategic and customer satisfaction objectives. For fiscal year 2008, the annual performance bonus provided rewards for achieving key corporate measures related to profitability. More details about the fiscal year 2008 annual performance bonus, including results and payouts, are provided below under “Performance Targets and Actual Results for Fiscal Year 2008.”

 

Long-Term Incentive Plan (LTIP).  Generally, the LTIP constitutes the largest component of each executive’s compensation with the intent to promote behavior that aligns the interests of executives with the long-term performance of the Company and interests of stockholders. This alignment is reinforced by our stock ownership guidelines described below.

 

Equity constitutes a significant component of total compensation because we do not provide traditional pension or defined benefit plans for our executives. We believe that equity-based compensation serves as a vehicle for long-term wealth accumulation that is performance-based.

 

As described below, the Compensation Committee believes the components of the LTIP work together in three-year overlapping cycles to promote strong corporate performance and executive retention through equity ownership and long-term wealth creation. The value of these equity awards is ultimately influenced by the achievement of pre-established goals and our share price.

 

This LTIP design was first implemented in fiscal year 2006. The components of the LTIP compensation opportunities awarded in fiscal year 2008 were:

 

 

The Compensation Committee approves the aggregate target amounts of these LTIP awards, their respective apportionment between the one-year and three-year performance share awards and the applicable performance targets.

 

Our Named Executive Officers participate in the LTIP that spans one-year and three-year performance cycles because the Compensation Committee believes that the executive officers are principally responsible for long-term strategy and decision making.

The following table shows the Compensation Committee’s targeted value for base salary, annual performance bonus and one-year performance shares for each Named Executive Officer for fiscal year 2008, as well as the value actually earned based on performance. The table also shows the targeted percentage of total direct compensation represented by each of these components (although the percentages do not add up to 100% because total direct compensation also includes the three-year performance shares, which will not be earned until after the end of the three-year performance cycle in fiscal year 2010). For more information, see “Performance-Based Compensation — Annual and Long-Term Incentives” below.

 

 

 

 

Performance-Based Compensation — Annual and Long-Term Incentives  

 

Annual Performance Bonus Program.  Early in fiscal year 2008, the Compensation Committee approved proposed performance measures for executive officers, including the Named Executive Officers, that were based 90% on financial measures and 10% tied to the achievement of certain pre-established customer satisfaction targets, which were monitored by an independent third party and intended to measure the likelihood of current customers recommending the Company to others.

 

The Compensation Committee always retains discretion to reduce the amount of any incentive payout for any reason. With regard to the Compensation Committee’s past practices in exercising such discretion, the Compensation Committee did not pay any fiscal year 2006 annual performance bonus to the CEO and many other senior executives due to the Company’s overall performance in that fiscal year.

 

Executive compensation is also tied to the achievement of ethical standards. A failure to complete annual Company-wide ethics training results in a mandatory 10% reduction of an executive’s annual performance bonus payout. In addition, the Compensation Committee reserves discretion to reduce or eliminate an executive’s annual performance bonus for any reason. In determining whether to exercise this discretion with respect to ethical standards, the Compensation Committee considered each executive’s contribution to the establishment and maintenance of high ethical and compliance standards throughout his or her organization and, in general, throughout the Company. In this regard, the Compensation Committee also received a report of a designated management committee, chaired by our Chief Compliance Officer, which assured the Compensation Committee that it knew of no unethical behavior or other misconduct. No reductions were made to any executive’s annual performance bonus for ethical or other reasons with respect to the fiscal year 2008 payout.

 

The Compensation Committee approved the following definitions for the performance measures for the fiscal year 2008 annual performance bonus program:

 

 

In meetings held in May and June 2008, the Compensation Committee decided to pay the fiscal year 2008 annual performance bonuses based on the achievement of the previously established targets (without any reductions). The annual performance bonus amounts paid to the Named Executive Officers are reflected in the “Non-Equity Incentive Plan Compensation” column of the Fiscal Year 2008 Summary Compensation Table, below, and in the Performance Targets and Actual Results for Fiscal Year 2008 table, above.

 

Long-Term Incentives.  

 

One-Year Performance Shares.  Under the LTIP program, the issuance of restricted stock or restricted stock units after the one-year performance cycle from April 1, 2007 to March 31, 2008, was dependent on the

achievement of specified performance targets set at the beginning of fiscal year 2008 by the Compensation Committee. The performance metrics for fiscal year 2008 were:

 

 

The threshold target and payout factors for fiscal year 2008 one-year performance shares are shown in the Relationship of Actual Performance to Payouts for Performance-Based Compensation for Performance Cycles Ending in Fiscal Year 2008 table, below. The actual number of shares issued under this award is shown in the Performance Targets and Actual Results for Fiscal Year 2008 table, above.

 

Three-Year Performance Shares.  The number of three-year performance shares that the Named Executive Officers may earn for the fiscal year 2008-2010 performance cycle are reflected in the “Estimated Future Payouts under Equity Incentive Plan Awards” column of the Fiscal Year 2008 Grants of Plan-Based Awards table, below. The number of three-year performance shares that the Named Executive Officers actually earned for the fiscal year 2006-2008 performance cycle are reflected in the Base Salary Plus Performance-Based Compensation Earned for Performance Cycles Ending March 31, 2008 table, below, which also identifies the range of shares that could have been earned as well as the achievement of specified performance goals for that performance cycle.

 

The performance metrics for the fiscal year 2006-2008 three-year performance cycle, which concluded on March 31, 2008, were based on (i) Average Three-Year Adjusted Net Income and (ii) Average Three-Year Return on Invested Capital, which were defined as follows:

 

 

If an executive’s employment is terminated prior to the end of the applicable performance cycle for this LTIP component, the executive is generally not eligible for any portion of the award. If employment is terminated due to disability or by us without “cause,” an executive may be eligible for a pro-rated portion of the award after the performance cycle, in accordance with the terms of the program. All determinations are at the Compensation Committee’s discretion. In the event of death, the executive’s estate would receive a pro-rated portion of the target award (based on the portion of the period completed through the date of death).

The following table reflects the relationship of (i) actual performance against the Company’s performance goals to (ii) payouts for LTIP awards, which include the annual performance bonus and the one-year performance share programs for fiscal year 2008 and the three-year performance share program for fiscal years 2006-2008. For each of these components of the LTIP awards, total payouts are based on a weighted average of each performance metric (each component of the LTIP has performance metrics as indicated in the table below). The performance measures for each metric range from “threshold” (the minimum level at which an executive may earn the relevant portion of the award) to “maximum” (either 150% or 200% of the targeted value of the relevant portion of the award, as shown below). These measurements are weighted and averaged to produce a “Total Payout Factor,” which is shown in the following table. The Total Payout Factor is multiplied by each executive’s target award value (in dollars or number of shares) to produce the executive’s final award. For more information, see the Base Salary Plus Performance-Based Compensation Earned for Performance Cycles Ending March 31, 2008 table, below.

 

 

 

 

Because the performance cycle for fiscal year 2008-2010 three-year performance share awards ends with fiscal year 2010, the results for that performance cycle are not yet available and no payout will occur until after fiscal year 2010. The financial objectives for the fiscal year 2008-2010 three-year performance cycle reflected our internal, confidential business plan at the time the awards were established. We believe that the disclosure of these objectives and targets could result in competitive harm, particularly since disclosure may provide insight to our competitors about our capital allocation strategy and cash flow and income growth objectives. We believe that the objectives for this component of the LTIP are designed to require strong performance relative to past years to meet the threshold level, but are also designed to reward exceptional outcomes with higher levels of earnings. The aforementioned discussion and analysis contains statements regarding individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. The Company specifically cautions investors not to apply these statements to other contexts.

The following table summarizes the Compensation Committee’s view of total base salary plus performance-based compensation earned by each Named Executive Officer for performance cycles ending in fiscal year 2008. We provide this table because the Fiscal Year 2008 Summary Compensation Table (that is mandated under SEC rules) reflects the accounting charges for all of our stock-based awards, including performance shares earned (but unvested) for performance cycles that ended in prior years and performance shares that may be earned for performance in the future, as well as the accounting charge for option awards previously granted to the Named Executive Officers. The following table shows the market value of shares earned for performance in fiscal year 2008, including the three-year performance shares for the fiscal year 2006-2008 performance cycle. The Compensation Committee believes this view to be a meaningful representation of the LTIP compensation earned and the manner in which the Compensation Committee determines compensation opportunities. A significant portion of this compensation continues to be at risk because it is paid in shares of our Common Stock, which remain subject to vesting or is subject to our stock ownership guidelines. This table does not include perquisites, contributions to deferred compensation plans or special sign-on grants of equity. For information on these items, see the Fiscal Year 2008 Summary Compensation Table and the Fiscal Year 2008 Grants of Plan Based Awards table, below.

 

 

 

 

 

Other Compensation Arrangements

 

The Named Executive Officers are eligible to participate in our 401(k) plan, a broad-based, tax-qualified employee retirement plan. Under this plan, we match up to 50% of the first 5% of an employee’s contribution (a maximum match of 21/2% of an employee’s base salary). In addition, the Named Executive Officers participate in two supplemental plans that were created for the purpose of benefiting participants in our tax-qualified 401(k) plan who are unable to receive a full allocation of employer contributions due to compensation limitations imposed under the applicable tax rules. The Named Executive Officers participate in all of these plans under the same terms and conditions as other eligible employees of the Company.

 

The Named Executive Officers are also eligible to participate in our benefit programs on the same terms and conditions as those made available to other U.S. full-time employees. Basic health benefits, life insurance, disability benefits and similar programs are provided. Under these plans, higher paid employees are required to pay a higher proportion of the total premiums. In addition, we also pay for annual physical examinations for certain Named Executive Officers.

 

Certain Named Executive Officers also have employment agreements and deferred compensation arrangements with the Company and some participate in our Change in Control Severance Policy. These agreements and arrangements provide for certain benefits upon a termination of employment, including in the event of a change in control. See discussion below in this Compensation Discussion and Analysis under “Employment Agreements; Deferred Compensation Arrangements; and Change in Control Arrangements.”

 

Policy on Adjustments or Recovery of Compensation

 

In April 2007, the Compensation Committee approved a compensation recovery policy that is applicable in the event of a substantial restatement of our financial statements that is a direct result of the intentional misconduct or fraud of an executive officer or other senior executive. Under this policy, the Compensation Committee can, in its discretion, direct that we recover all or a portion of any award made to any executive officer or other senior executive who engaged in such intentional misconduct and/or fraud for any fiscal year that is negatively affected by such restatement. The amount the Compensation Committee can seek to recover is the amount by which the affected award exceeds the amounts that would have been payable to such person had the financial statements been initially filed as restated, or any greater or lesser amount (but not greater than the entire affected awards in the given period). The Compensation Committee will determine how we may recover this compensation, including by seeking repayment, reduction of any potential future payments and/or an adjustment of what otherwise might have been a future increase in compensation or a compensatory grant.

 

Tax Deductibility of Incentive Compensation

 

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to the CEO and to the other three highest-paid executive officers (other than the Chief Financial Officer) unless this compensation qualifies as “performance-based.” For purposes of Section 162(m), compensation derived from the exercise of stock options generally qualifies as performance-based. In addition, we generally intend that incentive compensation paid in cash or in the form of restricted stock or restricted stock units or performance shares qualify as performance-based and we believe that for fiscal year 2008 incentive compensation paid to the Named Executive Officers in cash and equity qualified as performance-based. However, the Compensation Committee is not precluded from approving or revising annual, long-term or other compensation arrangements in a manner that does not permit the compensation to qualify for tax deductibility under Section 162(m).

Stock Ownership Guidelines

 

In 2006, the Compensation Committee adopted Stock Ownership Guidelines, which are applicable to executives including the Named Executive Officers. The objective of the Stock Ownership Guidelines is to align certain executives’ interests with those of stockholders and encourage growth in stockholder value. Under the Stock Ownership Guidelines, the amount of Common Stock each executive is targeted to own, which is stated as a multiple of the executive’s base salary, reflects each executive’s role and level of responsibility at the Company. The multiples applicable to the Named Executive Officers are as follows: (i) the CEO is expected to accumulate and retain Common Stock valued at four times his base salary, (ii) the President and Chief Operating Officer and the Chief Financial Officer, three times base salary and (iii) the other Named Executive Officers two times base salary. The executives are generally allowed a three-year period to accumulate these shares.

 

Employment Agreements; Deferred Compensation Arrangements; and Change in Control Arrangements

 

Many of the current executive officers, including most of the Named Executive Officers, have employment agreements with the Company. The use of employment agreements was necessary to recruit and retain executives due to previous high turnover in executive management. Generally, these employment agreements are standard employment agreements, with a few variations to deal with specific circumstances. The standard terms for an employment agreement generally provide for severance upon a termination of employment without “cause” or a resignation for “good reason” (as defined in the agreements) equal to one times base salary, although this can vary depending on specific circumstances. The details of the contracts with each of our Named Executive Officers are provided below under “Compensation and Other Information Concerning Executive Officers — Change in Control Severance Policy; Employment Agreements; Deferred Compensation Arrangements; 401(k) Supplemental Plans.”

 

We also maintain an Executive Deferred Compensation Plan, under which our executive officers may be eligible to defer a portion of their annual performance bonus. In addition, at the time of hire of the CEO and Chief Financial Officer, we credited certain amounts to deferred compensation accounts for the benefit of these executives to make up for retirement and other benefits that were being left behind with their prior employers. In addition, we adopted the Change in Control Severance Policy to help recruit executives and to help maintain continuity of management in the event of a change in control. The Board has broad latitude to amend this policy and to add or remove executives as participants under the policy, as it deems appropriate. Details about these deferred compensation and change in control arrangements are provided below under “Compensation and Other Information Concerning Executive Officers — Change in Control Severance Policy; Employment Agreements; Deferred Compensation Arrangements; 401(k) Supplemental Plans.”

 

 

The following table includes information concerning compensation paid to or earned by our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers (the “Named Executive Officers”) for the fiscal year ended March 31, 2008.

 

 

 

 

 

 

 

 

 

 

The following table provides additional information about stock and option awards, equity incentive plan and non-equity incentive plan awards granted to the Named Executive Officers during the fiscal year ended March 31, 2008. The compensation plans under which the grants in the following table were made are described in the Compensation Discussion and Analysis section above.