CA Board Ponders Fate Of KumarCA Board Ponders Fate Of Kumar
Computer Associates fired nine employees Monday. Will chairman and CEO Sanjay Kumar be next?
Will Sanjay Kumar survive? As the board of directors of Computer Associates meets Tuesday to review an internal investigation surrounding the long-running Securities and Exchange Commission accounting probe, analysts are predicting that the embattled chairman and CEO will hold on to his job. The lack of a successor is one reason.
The company fired nine employees Monday, four in its legal department and five in finance. Earlier this month, Ira H. Zar, the company's former CFO, pleaded guilty to fraud and obstruction charges. He has been cooperating with investigators and has said two other senior executives conspired in manipulating the company's earning statements.
The analysts say the board will be reluctant to fire Kumar because of the overall improvement in the company from both a shareholder and customer perspective that has occurred since Kumar replaced Charles Wang as CEO in 2000.
"As a company, Computer Associates is stronger than it has been in years," says John DiFucci, an analyst with Bear, Stearns & Co. "There has been a change in culture at Computer Associates, which doesn't happen overnight, and there is no one within the company now you could point to and say this person has similar strength and charisma. There is no heir-apparent."
DiFucci says it appears likely that CA will eventually be hit with a multimillion-dollar fine from the SEC, "but I don't think it will be something that will be cripple the company."
Richard Ptak, an industry analyst and consultant with Ptak, Noel & Associates, who has worked with CA in the past, says it's possible the board might move to "slap his wrist" and place Kumar on a sabbatical for several weeks or several months.
"There is really a pretty compelling case to keep Sanjay on board," Ptak says. "He was the driving force behind the changes to the company's accounting practices and has gone a long way in improving the corporate position with its employees, clients and customers, and stockholders."
The board is in a no-win situation, he says, and will receive criticism with what ever decision it makes.
"If the head gets chopped off, there is going to be a problem," Ptak says. "No one has been identified as a clear-cut successor."
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