Computer Associates is losing is chairman and founder after 26 years as Charles Wang steps down into retirement in the shadow of an Securities and Exchange Commission investigation.
Wang, 58, is replaced by current CA president and chief executive Sanjay Kumar, who will now combine all three roles. Kumar has been heir apparent to Wang for many years and now takes total control of the $9 billion company. Kumar, 40, joined CA in 1987 and has served as president and chief executive since August 2000.
In many ways Wang is living testament to the so-called American Dream. Born in Shanghai in 1944, Wang moved to the US with his family in 1952 launching CA in 1976. "I never imagined that the company that I started with three colleagues and one product over 25 years ago would reach such great heights in this exciting industry," he said.
"I am pleased to have completed the transition of leadership to Sanjay, who has been a trusted colleague and a valuable partner, in a smooth and orderly way," he said. "It is very gratifying to have completed his important step successfully by grooming and recommending my successor."
But Kumar takes over at a difficult time for CA. This summer it fought off a proxy challenge from Texas billionaire Sam Wyly, who had attempted to oust several members of the current board - including Wang and Kumar. That challenge came after the revelation that they had taken hefty bonuses shortly before a profits warning sent the company's share price into sharp decline. That meant a $670 million payday for Wang alone.
The company is also the subject of a formal Securities and Exchange Commission investigation following allegations of improper accounting. A company spokesman said Wang's resignation was not related to the continuing investigations. "His successor was in place," said the spokesman. "He had worked on the transition for two years."
The Securities and Exchange Commission and federal prosecutors in Brooklyn are examining whether CA inflated its reported profits from 1995 through 1998, when Wang stood to receive a grant of 12.15 million shares of stock if the price reached $53.33 a share. The Commission is also looking into an accounting change that CA made in 2000 that effectively permitted the company to report some sales and profits twice.
With Kumar simply adding chairman to his list of titles, analysts expect customers to see little change in the way the company operates. "Wang's resignation as chairman should lead to no significant change in direction for CA," predicted Gartner Group's Betsy Burton. "Senior management understands the need to focus on customer relations and marketing. But it has yet to drive a vision that uses a marketing focus and growth strategy to counteract the revenue inertia from its customer base."