Tuesday, July 12, 2005
ORG -- Charles Wang's Early Exit from Computer Associates
Charles Wang's Early Exit from Computer Associates
(Updated Thursday, Jan 2, 2003, 09:53:46 AM)
He's brash, hard-nosed, touchy, greedy and hated. He's also playful, generous, loyal and filthy rich. He lives in a magnificent Oyster Bay estate, owns the New York Islanders and plies the world in a Gulfstream IV.
In short, Charles Wang is an outsized embodiment of the Asian American Dream.
But his 26-year dream seemed to come to an abrupt end on November 18 when Wang resigned the chairmanship of Computer Associates (CA), the company he had founded and built into the world's third biggest independent software company. For several months he had been under federal investigation for possible improprieties connected with CA's May 1998 grant of $1.1 billion worth of stock options to Wang, then-COO Sanjay Kumar and then-EVP of R & D Russ Artzt. What amounted to a $670 million payday for Wang had come on the heels of four consecutive years as America's highest-paid CEO. Eyebrows were really raised when, a month later, CA's stock plunged from $58 to $30.
Multiple shareholder suits followed. Based on the company's failure to follow a procedural technicality, Wang was ordered to return a quarter of the stocks acquired in the option grant. In mid-2001 Wang faced a proxy fight by combative Texas billionaire Sam Wyly following CA's $4 billion acquisition of Wyly's Sterling Software. Wang emerged with his control intact thanks to the support of CA's biggest shareholder. The 90-year-old Swiss multi-billionaire rejected Wyly's plea for votes on the ground that Wang had caused his 21% stake in CA to increase tenfold since 1987. Wyly began a second proxy contest in early 2002 but withdrew after CA paid him off $10 million.
Most worrisome, for the past few months the Justice Department and the SEC have begun investigating CA's accounting procedures, especially as they relate to the granting of the 1998 stock options. Regardless of the probe's ultimate merits, a shrewd operator like Charles Wang could not have failed to recognize in himself a prime candidate for a highly telegenic media lynching. In building a software empire valued at $50 billion as recently as January of 2000, Wang has engaged in 50 takeovers followed by immediate firing of top management and key employees. His strategies had provoked descriptions like "rapacious", "heartless" and "Attila-the-Hun".
Charles Wang had also alienated many in and out of CA by his paternalistic, family-oriented management style. In 1979, three years after CA's founding, Wang had installed his older brother Tony, a onetime corporate lawyer, as president and COO. It was a post Tony was to keep until he retired in 1992 to make way for Sanjay Kumar. None too early, in the opinion of an investment community mistrustful of such cozy arrangements. It was no less leery when Nancy Li, Charles Wang's second wife, was named CA's chief technology officer in 1997. It didn't help when in August of 2000 she was named CEO of iCan-ISP Inc, CA's initiative into the fast-growing field of application service provision. The fact that Li had been an unusually capable CA employee since 1980 didn't seem to matter. Wang must have sensed that the investment community was punishing CA's stock because of his refusal to override his sense of familial loyalty to avoid the appearance of nepotism.
In the quarter century since he took CA public, his paternalistic style had become an anachronism.
One more factor may have influenced Wang's decision to bow out. Despite his enormous success and wealth, Charles Wang had tasted the power of racial prejudice. In 1998 Wang had initiated a $9 billion hostile tender offer for the shares of Computer Sciences Corporation (CSC). The Washington Post weighed in on the side of CSC's management by alluding to CA's "ties to foreigners". It was a pointed reference to Wang's origin and CA's clients in China. The suggestion was that becoming linked with CA would jeopardize CSC's contracts with U.S. government agencies. After much agonizing, Wang dropped the tender offer. The episode remained in his mind as his first encounter with overt racial discrimination in the business world. That his ethnicity might negatively influence the government's pending investigation would certainly have entered his mind.
To stay on as CA's chairman under a cloud, Wang seems to have concluded, might well invite doom for the company he founded.
But for CA's press release he put a happy face on his resignation.
"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,² Wang is quoted as saying. ³It is very gratifying to have completed this important step successfully by grooming and recommending my successor.... I am confident that Computer Associates, with a new generation of strong leadership, is well positioned for its next great period of growth and success."
There's little doubt that Wang accelerated his departure to defuse mounting pressures. As recently as March of 2000 he had told BusinessWeek that he had no intention of kicking himself upstairs to chairman as Bill Gates had done that January. "I feel like I'm just starting my business," he said, ''except that the opportunity is greater now."
But by August 2000 he had named Sanjay Kumar President and CEO. When he took the final step of giving up his chairmanship on November 18, investment community observers applauded the move as beneficial for the company in which Wang still retains 28 million shares, slightly less than 5%.
But Wang won't be lacking ways to keep busy. At around the time he gave up the CEO title to Kumar in August 2000, he became majority owner of the New York Islanders, a hockey team in need of much work to return to anything like its 1980s championship glory. Through his namesake charitable foundation, Wang has donated generously to numerous causes benefitting children, education and Asian Americans. The most visible among these is the 120,000-square-foot Charles B. Wang Center at New York State University at Stony Brook. The $40-million Center is the biggest single private gift ever received by the university and will be used in part to promote Asian culture. Wang has also contributed several million dollars to build schools in rural Cambodia.
Yet after a lifetime of success, being forced to leave one's own company prematurely and under a shadow will surely strike some as a bitter and regretful end. Should Charles Wang have retained his chairmanship until after the conclusion of the federal investigation? Or was his early departure really the best move for all concerned?
(Updated Thursday, Jan 2, 2003, 09:53:46 AM)
He's brash, hard-nosed, touchy, greedy and hated. He's also playful, generous, loyal and filthy rich. He lives in a magnificent Oyster Bay estate, owns the New York Islanders and plies the world in a Gulfstream IV.
In short, Charles Wang is an outsized embodiment of the Asian American Dream.
But his 26-year dream seemed to come to an abrupt end on November 18 when Wang resigned the chairmanship of Computer Associates (CA), the company he had founded and built into the world's third biggest independent software company. For several months he had been under federal investigation for possible improprieties connected with CA's May 1998 grant of $1.1 billion worth of stock options to Wang, then-COO Sanjay Kumar and then-EVP of R & D Russ Artzt. What amounted to a $670 million payday for Wang had come on the heels of four consecutive years as America's highest-paid CEO. Eyebrows were really raised when, a month later, CA's stock plunged from $58 to $30.
Multiple shareholder suits followed. Based on the company's failure to follow a procedural technicality, Wang was ordered to return a quarter of the stocks acquired in the option grant. In mid-2001 Wang faced a proxy fight by combative Texas billionaire Sam Wyly following CA's $4 billion acquisition of Wyly's Sterling Software. Wang emerged with his control intact thanks to the support of CA's biggest shareholder. The 90-year-old Swiss multi-billionaire rejected Wyly's plea for votes on the ground that Wang had caused his 21% stake in CA to increase tenfold since 1987. Wyly began a second proxy contest in early 2002 but withdrew after CA paid him off $10 million.
Most worrisome, for the past few months the Justice Department and the SEC have begun investigating CA's accounting procedures, especially as they relate to the granting of the 1998 stock options. Regardless of the probe's ultimate merits, a shrewd operator like Charles Wang could not have failed to recognize in himself a prime candidate for a highly telegenic media lynching. In building a software empire valued at $50 billion as recently as January of 2000, Wang has engaged in 50 takeovers followed by immediate firing of top management and key employees. His strategies had provoked descriptions like "rapacious", "heartless" and "Attila-the-Hun".
Charles Wang had also alienated many in and out of CA by his paternalistic, family-oriented management style. In 1979, three years after CA's founding, Wang had installed his older brother Tony, a onetime corporate lawyer, as president and COO. It was a post Tony was to keep until he retired in 1992 to make way for Sanjay Kumar. None too early, in the opinion of an investment community mistrustful of such cozy arrangements. It was no less leery when Nancy Li, Charles Wang's second wife, was named CA's chief technology officer in 1997. It didn't help when in August of 2000 she was named CEO of iCan-ISP Inc, CA's initiative into the fast-growing field of application service provision. The fact that Li had been an unusually capable CA employee since 1980 didn't seem to matter. Wang must have sensed that the investment community was punishing CA's stock because of his refusal to override his sense of familial loyalty to avoid the appearance of nepotism.
In the quarter century since he took CA public, his paternalistic style had become an anachronism.
One more factor may have influenced Wang's decision to bow out. Despite his enormous success and wealth, Charles Wang had tasted the power of racial prejudice. In 1998 Wang had initiated a $9 billion hostile tender offer for the shares of Computer Sciences Corporation (CSC). The Washington Post weighed in on the side of CSC's management by alluding to CA's "ties to foreigners". It was a pointed reference to Wang's origin and CA's clients in China. The suggestion was that becoming linked with CA would jeopardize CSC's contracts with U.S. government agencies. After much agonizing, Wang dropped the tender offer. The episode remained in his mind as his first encounter with overt racial discrimination in the business world. That his ethnicity might negatively influence the government's pending investigation would certainly have entered his mind.
To stay on as CA's chairman under a cloud, Wang seems to have concluded, might well invite doom for the company he founded.
But for CA's press release he put a happy face on his resignation.
"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,² Wang is quoted as saying. ³It is very gratifying to have completed this important step successfully by grooming and recommending my successor.... I am confident that Computer Associates, with a new generation of strong leadership, is well positioned for its next great period of growth and success."
There's little doubt that Wang accelerated his departure to defuse mounting pressures. As recently as March of 2000 he had told BusinessWeek that he had no intention of kicking himself upstairs to chairman as Bill Gates had done that January. "I feel like I'm just starting my business," he said, ''except that the opportunity is greater now."
But by August 2000 he had named Sanjay Kumar President and CEO. When he took the final step of giving up his chairmanship on November 18, investment community observers applauded the move as beneficial for the company in which Wang still retains 28 million shares, slightly less than 5%.
But Wang won't be lacking ways to keep busy. At around the time he gave up the CEO title to Kumar in August 2000, he became majority owner of the New York Islanders, a hockey team in need of much work to return to anything like its 1980s championship glory. Through his namesake charitable foundation, Wang has donated generously to numerous causes benefitting children, education and Asian Americans. The most visible among these is the 120,000-square-foot Charles B. Wang Center at New York State University at Stony Brook. The $40-million Center is the biggest single private gift ever received by the university and will be used in part to promote Asian culture. Wang has also contributed several million dollars to build schools in rural Cambodia.
Yet after a lifetime of success, being forced to leave one's own company prematurely and under a shadow will surely strike some as a bitter and regretful end. Should Charles Wang have retained his chairmanship until after the conclusion of the federal investigation? Or was his early departure really the best move for all concerned?
# posted by J.C. : 2:22 PM
