Kick Conway off PeopleSoft board, urges pension fund

A leading shareholder advisory firm wants PeopleSoft's chief executive Craig Conway kicked off the board of directors at this weeks annual meeting.

Glass Lewis & Co., which advises pension fund and portfolio managers on how to vote on proxy matters, cited Conway's "exorbitant" compensation package. Last year, Conway received a compensation package that included $1 million in salary, a $2.3 million bonus and 1.5 million stock options, according to the company's proxy. "The company's compensation to its CEO was significantly more than the median compensation for CEOs at companies" in the same sector, Glass Lewis stated.

The firm also criticised PeopleSoft for its controversial customer assurance program introduced as a defence against Oracle's hostile takeover bid. It named Conway as the "architect" of the scheme.

"The potential cost of the program exceeds PeopleSoft's total cash and short-term investments balance of $1.4 billion as of year-end 2003," Glass Lewis said in a report to clients. "All of this dampens the ardor of potential PeopleSoft suitors, which clearly is to the detriment of shareholders."

Four of PeopleSoft's board members will be up for re-election thisweek at the company's annual shareholders meeting. Glass Lewis is also advising its clients not to vote for directors George "Skip" Battle and Cyril Yansouni. The two directors served on the board's compensation committee, which awarded Conway his compensation package in fiscal 2003.

Both - along with a third director Frank J. Fanzilli Jr - have also lost the support of the US's pensions fund CalPERS which withdrew its backing for them for allowing PeopleSoft's auditor, KPMG, to perform other consulting services. This poses potential conflict of interest problems, said a CalPERS spokesman. "We don't like auditors performing not-audit services," he said. "Because these directors allowed them to do that, we are withholding (our votes for Battle, Yansouni and Fanzilli)."

A third firm, Institutional Shareholder Services, which advises investors on their proxy votes, has endorsed PeopleSoft's board for acting in the shareholders' best interests during its fight against Oracle.

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