Below is an excerpt from the governance risk profile of CA, Inc.
We continue to have high concerns related to the company’s long-term incentive plan (LTIP), which includes one-year performance shares and three-year performance shares. The performance periods for these equity awards are too short to consider long-term. While three years' time would be more accurately considered medium-term, we are especially surprised that a committee of directors would categorize the one-year performance shares as part of the LTIP program. Overall, this is an LTIP in name only and not in content. Moreover, the one-year performance shares are based on the achievement of operating income growth and annualized booking and the three-year performance shares for the 2009-2011 performance period are based on cash flow from operations and average three-year total revenue growth, the same metrics used in the annual performance cash incentive. An arrangement where executives receive more than one separate set of compensation based on the achievement of the same performance measures should not be considered an acceptable compensation technique.
On a positive note, meanwhile, we note that the board is entirely independent except for the CEO, includes two female members, and has a mandatory retirement provision after ten years of service. This unusual provision may help to avoid board entrenchment and stimulate succession planning.
To read the full analysis, including more on our analysts’ compensation concerns and the company’s governance risk rating for stock screening, download the company profile from our online store. It is available at a discount of more than 75% until the CA, Inc. annual meeting on September 14.
