SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Computer Associates International, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required.
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0-11.
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COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11788-7000
1-516-342-5224
July 7, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Computer Associates International, Inc. (the Company), to be held
at 10:00 a.m. Eastern Daylight Time on Wednesday, August 13, 1997 at our
world headquarters, One Computer Associates Plaza, Islandia, New York.
The Board of Directors urges you to read the accompanying Notice of
Annual Meeting and Proxy Statement and recommends that you vote (1) for
the election of the directors nominated, and (2) for ratification of the
Board s appointment of Ernst & Young LLP as the company s independent
auditors for the 1998 fiscal year.
The vote of every stockholder is important. Whether or not you plan to
attend the meeting, it is important that your shares be represented.
Accordingly, we urge you to sign, date, and mail the enclosed proxy in
the envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ Charles B. Wang
------------------------
Charles B. Wang
Chairman of the Board and
Chief Executive Officer
COMPUTER ASSOCIATES INTERNATIONAL, INC.
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-----------------------------
To the Stockholders of Computer Associates International, Inc.:
The Annual Meeting of Stockholders of Computer Associates
International, Inc. (the Company) will be held on Wednesday, August
13, 1997, at 10:00 a.m. Eastern Daylight Time at the Company's world
headquarters, One Computer Associates Plaza, Islandia, New York, for the
following purposes:
1. To elect directors to serve for the ensuing year and until
their successors are elected;
2. To ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
March 31, 1998; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 20,
1997 as the record date for determination of those stockholders who will
be entitled to notice of and to vote at the meeting and any adjournment
thereof.
If you plan to attend the meeting, please bring the admission ticket
attached to your proxy card.
Whether or not you expect to attend, STOCKHOLDERS ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE
PROVIDED. No postage is required if mailed in the United States.
By Order of the Board of Directors
/s/ Michael A. McElroy
----------------------
Michael A. McElroy
Secretary
Islandia, New York
July 7, 1997
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11788-7000
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of the Common Stock,
par value $.10 per share (Common Stock), of Computer Associates
International, Inc. (the Company) in connection with the solicitation
of proxies on behalf of the Board of Directors of the Company for use at
the Annual Meeting of Stockholders to be held on Wednesday, August 13,
1997, and at any adjournment thereof. The purposes of the meeting and
the matters to be acted upon are set forth in the accompanying Notice of
Annual Meeting of Stockholders. At present, the Board of Directors knows
of no other business which will come before the meeting.
The Notice of Annual Meeting, Proxy Statement and form of proxy will
be mailed to stockholders on or about July 7, 1997. The Company will
bear the cost of its solicitation of proxies. In addition to the use of
the mails, proxies may be solicited by personal interview, telephone,
telegram, and telefax by the directors, officers, and employees of the
Company. Arrangements will also be made with brokerage houses and other
custodians, nominees, and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held by such persons, and the
Company may reimburse such custodians, nominees, and fiduciaries for
reasonable out-of-pocket expenses incurred.
Revocability and Voting of Proxy
A form of proxy for use at the meeting and a postpaid return envelope
for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with the Secretary of the Company a written
revocation or duly executed proxy bearing a later date or by voting in
person at the meeting. Shares of Common Stock represented by executed
and unrevoked proxies will be voted in accordance with the instructions
shown on the proxy. If no instructions are given, the proxies will be
voted (1) FOR the election of management's nominees for election as
directors, and (2) FOR ratification of the appointment of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending
March 31, 1998.
Record Date and Voting Rights
Only stockholders of record at the close of business on June 20, 1997
are entitled to notice of and to vote at the meeting or any adjournment
thereof. On June 20, 1997, the Company had outstanding
363,519,747 shares of Common Stock.
Votes cast at the meeting will be tabulated by persons appointed as
inspectors of election for the meeting. The inspectors of election will
treat shares of Common Stock represented by a properly signed and
returned proxy as present at the meeting for purposes of determining a
quorum, without regard to whether the proxy is marked as casting a vote
or abstaining. Likewise, the inspectors of election will treat shares of
Common Stock represented by broker non-votes as present for purposes
of determining a quorum.
The nominees for election to the Board of Directors receiving the
greatest number of affirmative votes cast by holders of Common Stock, up
to the number of directors to be elected, will be elected as directors.
Accordingly, abstentions or broker non-votes as to the election of
directors will have no effect on the election of directors.
2
The affirmative vote of the holders of a majority of the shares of
Common Stock represented at the meeting in person or by proxy and
entitled to vote thereat will be required to ratify the selection of the
independent auditors. In determining whether such proposal has received
the requisite number of affirmative votes, abstentions and broker non-
votes will have the same effect as votes against the proposal.
Annual Report
The Annual Report of the Company for the fiscal year ended March 31,
1997 is being mailed with this Proxy Statement.
Stockholders are referred to that report for financial and other
information about the activities of the Company. The Annual Report is
not incorporated by reference into this Proxy Statement and is not
deemed to be a part of it.
STOCK OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the
beneficial ownership of the Company's Common Stock as of June 20, 1997
by the persons known to the Company to own, or deemed to own,
beneficially 5% or more of the Company's Common Stock:
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class(rounded)
- ------------------------------------ ------------------ --------------
Walter Haefner/ 84,375,000(1) 23.2%
Careal Holding AG
Utoquai 49
8022 Zurich, Switzerland
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(1) According to a Schedule 13D as amended, filed by Walter Haefner and
Careal Holding AG, Mr. Haefner has the sole voting and dispositive power
with respect to 84,375,000 shares of the Company's Common Stock held of
record by Careal Holding AG.
BOARD AND MANAGEMENT OWNERSHIP
The following table sets forth certain information as to the
beneficial ownership of the Company's Common Stock as of June 20, 1997
for (i) each director, including Charles B. Wang, the Chairman and Chief
Executive Officer, Sanjay Kumar, President and Chief Operating Officer,
and Russell M. Artzt, Executive Vice President-Research and Development,
(ii) the two most highly compensated executive officers other than
Messrs. Wang, Kumar, and Artzt, and (iii) all directors, and executive
officers as a group (11 persons). Information with respect to beneficial
ownership is based upon information furnished to the Company by each
security holder.
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned (1)(2) of Class
- ------------------------------ ------------------------- --------
Directors:
Russell M. Artzt 1,137,870(4) .3%
Willem F.P. de Vogel 29,368 *
Irving Goldstein 28,250 *
Richard A. Grasso 23,500 *
Shirley Strum Kenny 6,200 *
Sanjay Kumar 986,691(4) .3%
Charles B. Wang 18,707,248(3)(4) 5.1%
3
BOARD AND MANAGEMENT OWNERSHIP (continued)
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned (1)(2) of Class
- ------------------------------ ------------------------- --------
Non-Directors:
Charles P. McWade 64,998 *
Peter Schwartz 872,290 .2%
All Directors and Executive
Officers as a Group
(11 persons) 21,924,192 6.0%
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* Represents less than .1% of the outstanding Common Stock.
(1) Includes shares that may be acquired within 60 days after June 20,
1997 through the exercise of stock options as follows: Mr. Artzt,
926,735; Mr. Kumar, 787,500; Mr. McWade, 51,709; Mr. Schwartz, 857,716;
Mr. Wang, 5,226,224; Mr. de Vogel, 18,000; Mr. Goldstein, 18,000;
Mr. Grasso, 13,500; and all directors and executive officers as a group,
8,836,198.
(2) Includes shares credited to the executives' accounts in the
Company's tax-qualified profit-sharing plan as follows: Mr. Artzt,
12,775; Mr. Kumar, 21,402; Mr. McWade, 937; Mr. Schwartz, 1,898;
Mr. Wang, 695; and all executive officers as a group, 53,878.
(3) Includes 81,554 shares owned directly and as trustee for a minor by
Mr. Wang's spouse, an employee of the Company; 895,514 shares subject to
employee stock options held by Mr. Wang's spouse, which are exercisable
within 60 days after June 20, 1997; and 494 shares credited to the
account of Mr. Wang's spouse in the Company's tax-qualified profit-
sharing plan. Mr. Wang disclaims beneficial ownership of such shares.
(4) Does not reflect the Initial Grant or Additional Grants of shares to
Mr. Artzt, Mr. Kumar, and Mr. Wang under the 1995 Key Employee Stock
Ownership Plan since they are subject to substantial risk of forfeiture.
ITEM 1 - ELECTION OF DIRECTORS
Nominees
It is proposed that the seven persons named below will be elected at
the meeting. Unless otherwise specified it is the intention of the
persons named in the accompanying form of Proxy to vote all shares of
Common Stock represented by such proxy for the election of Russell M.
Artzt, Willem F.P. de Vogel, Irving Goldstein, Richard A. Grasso,
Shirley Strum Kenny, Sanjay Kumar, and Charles B. Wang to serve as
directors until the next Annual Meeting of Stockholders and until their
successors shall have been duly elected and qualified. Each of the
nominees now serves as a director of the Company. At the time of the
annual meeting, if any of the nominees named below is not available to
serve as director (an event which the Board of Directors does not now
anticipate), the proxies will be voted for the election as directors of
such other person or persons, if any, as the Board of Directors may
designate.
Set forth below are the names and ages of the nominees, the principal
occupation of each, the year in which first elected a director of the
Company, the business experience of each for at least the past five
years and certain other information concerning each of the nominees.
4
Director
Age Since
---- --------
Russell M. Artzt (1) 50 1980
Executive Vice President-Research and
Development since April 1987 and the
Senior Development Officer of the
Company since 1976.
Willem F.P. de Vogel (2) (3) 46 1991
President of Three Cities Research,
Inc., a private investment management
firm in New York City, since 1981.
From August 1981 to August 1990,
Mr. de Vogel served as a director of the
Company. He is also a director of MLX Corp.
4
Director
Age Since
---- --------
Irving Goldstein (2) (3) 59 1990
Director General and Chief Executive
Officer of INTELSAT, an international
satellite telecommunications company,
since February 1992. He was Chairman
and Chief Executive Officer of COMSAT
(formerly known as Communications
Satellite Corporation) from October 1985
to February 1992 and President from May
1983 to October 1985, and was a director
of that company from May 1983 to February 1992.
Richard A. Grasso (3) (4) 50 1994
Chairman and Chief Executive Officer of
the New York Stock Exchange since June
1995. He was Executive Vice Chairman of
the New York Stock Exchange from January
1991 to May 1995 and President and Chief
Operating Officer from June 1988 to May
1995. He has been with the Exchange since 1968.
Shirley Strum Kenny (2) (4) 62 1994
President of the State University of New
York at Stony Brook since September 1994.
She was President of Queens College of The
City University of New York from 1989 to
August 1994. She is also a director of Toys
'R' Us, Inc.
Sanjay Kumar (1) 35 1994
President and Chief Operating Officer since
January 1994. He was Executive Vice President-
Operations from January 1993 to December 1993
, Senior Vice President-Planning from April
1989 to December 1992, Vice President-Planning
from November 1988 to March 1989. He joined
the Company with the acquisition of UCCEL in
August 1987.
Charles B. Wang (1) (4) 52 1976
Chief Executive Officer of the Company since
1976 and Chairman of the Board since April 1980.
He is also a director of Symbol Technologies, Inc.
- ---------------------------------
(1) Member Executive Committee.
(2) Member Audit Committee.
(3) Member Stock Option and Compensation Committee.
(4) Member Nominating Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
NOMINEES LISTED ABOVE.
Meetings of the Board of Directors and Committees
During the Company's fiscal year ended March 31, 1997, the Board of
Directors of the Company held eight meetings. In addition to these
meetings, the Board of Directors acted by unanimous written consent on
two occasions. Each Director attended more than seventy-five percent of
the Board meetings and meetings of the Board committees on which he or
she served. The Company has standing Executive, Audit, Stock Option and
Compensation, and Nominating Committees.
5
The Executive Committee consists of Russell Artzt, Sanjay Kumar, and
Charles B. Wang. During fiscal year 1997 the Executive Committee did not
meet, but acted by unanimous written consent on three occasions.
The Stock Option and Compensation Committee of the Board (the
Compensation Committee) consists of three non-employee directors,
Willem F.P. de Vogel, Irving Goldstein, and Richard A. Grasso. During
fiscal year 1997 the Compensation Committee met once and acted by
unanimous written consent on one occasion. The Compensation Committee
also has the power to prescribe, amend, and rescind rules relating to
the Company's 1994 Annual Incentive Compensation Plan, 1995 Key Employee
Stock Ownership Plan, 1991 Stock Incentive Plan, 1981 Incentive Stock
Option Plan, 1987 Non-Statutory Stock Option Plan, and 1993 Stock Option
Plan for Non-Employee Directors (the plans), to grant options and
other awards under the Plans and to interpret the Plans. The other
duties of the Compensation Committee are described below under "Stock
Option and Compensation Committee Report on Executive Compensation."
The Audit Committee of the Board consisted of three non-employee
directors, Willem F.P. de Vogel, Irving Goldstein, and Shirley Strum
Kenny. The committee has the responsibility of recommending the firm to
be chosen as independent auditors, overseeing and reviewing audit
results, and monitoring the effectiveness of internal audit functions.
The Audit Committee met two times during fiscal year 1997. The Audit
Committee has recommended the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending March 31, 1998.
The Nominating Committee of the Board was established in May 1996 and
consists of three directors, Richard A. Grasso, Shirley Strum Kenny, and
Charles B. Wang. The committee has responsibility for suggesting
nominees to the Board for election as directors.
Director's Compensation
Under the 1996 Deferred Stock Plan for Non-Employee Directors,
directors receive their entire annual retainer in Common Stock, receipt
of which is deferred until retirement from the Board, death or
disability. At its annual meeting on August 14, 1996, the Board of
Directors established its annual Director Fees for the succeeding twelve
months at $45,000. These Director Fees will be credited to each
director's Deferred Stock Compensation Account based on the Fair Market
Value of the Company's stock on August 12, 1997. Directors who are also
employees of the company receive no Board or Committee fees.
Under the Company's 1993 Stock Option Plan for Non-Employee Directors
(the 1993 Plan), non-employee directors are automatically awarded
options to acquire up to 4,500 shares of the Company's Common Stock per
year depending on the Company's attainment of specific return on equity
objectives. Pursuant to the 1993 Plan, the exercise price of such
options is equal to the Fair Market Value of the shares covered by such
options on the date of grant. On August 15, 1996, each non-employee
director, except Ms. Kenny, was granted 4,500 shares of Common Stock at
$56.75 per share. On the advice of the New York State Commission on
Ethical Practices, Ms. Kenny has declined to accept any options under
this Plan.
Report of Compensation Committee
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, that might affect
future filings, including this Proxy Statement, the report of the Stock
Option and Compensation Committee of the Company's Board of Directors
set forth below and the Stock Performance Graph set forth on page 8 in
accordance with Securities Exchange Commission requirements, shall not
be incorporated by reference into any such filings.
STOCK OPTION AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
General
Decisions as to certain compensation of the Company's executive
officers are made by the Compensation Committee of the Company's Board
of Directors, none of the members of which are employees of the
6
Company. At the Company's fiscal year end, the members of the
Compensation Committee were Willem F.P. de Vogel, Irving Goldstein, and
Richard A. Grasso.
Compensation Policies
The Compensation Committee's executive compensation policies are
designed to attract and retain executives capable of leading the Company
in a rapidly evolving computer software marketplace and to motivate such
executives to maximize profitability and stockholder value. The
Compensation Committee has designed the Company's Comprehensive
Executive Compensation Plan with four components to achieve this
objective-base salary; annual incentives; long-term equity
participation; and benefits. The majority of each executive's total
compensation is dependent on the attainment of predefined performance
objectives which are consistent with the maximization of stockholder
value. The philosophy and operation of each component is discussed
herein.
Base Salary. Base salaries for its executive officers are designed to
attract and retain superior, high performing individuals. As such, the
Company believes its base salaries for executive positions are, and
should be, equal to or greater than those of comparable companies.
Annual Incentives. The executive officers earn a significant portion
of their total compensation based on achievement of predetermined
individual and Company performance targets. The Company's 1994 Annual
Incentive Compensation Plan, which is administered by the Compensation
Committee, establishes a specific percentage of net income after taxes
that is in excess of a threshold based on the Company's target return on
average stockholders' equity. Different percentages of any such excess
are determined for each executive officer at the commencement of each
fiscal year. The Compensation Committee may, at its discretion, decrease
(but never increase) the calculated annual incentive compensation
payable to an executive, and/or direct that a portion of this incentive
be payable in Company's Common Stock, subject to certain holding
restrictions.
Long-term Equity Participation. The Compensation Committee believes
strongly that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
stockholders' interests in the enhancement of stockholders' return. To
this end, the Compensation Committee grants to key executives stock
options which vest (i.e., become exercisable) over a five-year period
following the date of grant as follows: 10% on the first anniversary;
15% on the second anniversary; 20% on the third anniversary; 25% on the
fourth anniversary; and 30% on the fifth anniversary. Options granted at
the current market price to executives under the Company's 1991 Stock
Incentive Plan have a term of ten years from the date of grant, and
subject to the above vesting restrictions, may be exercised at any time
during such term. The Compensation Committee has authorized the grant to
certain key employees of shares of Common Stock under the 1995 Key
Employee Stock Ownership Plan. These grants are non-transferrable after
vesting, subject to substantial risk of forfeiture if certain
performance objectives are not attained, and further subject to
significant limitations on transfer for seven years after vesting.
Benefits. The benefits available to executive officers are the same as
those afforded to all full-time employees. In general, they are the
standard protection against financial catastrophe that can result from
personal or family illness, disability, or death. Executive officers are
also eligible to participate in the voluntary personal contribution, as
well as the Company matching and discretionary, provisions of the
Computer Associates Savings Harvest Plan (the Cash Plan), to the
extent permitted under the CASH Plan, the applicable Employment
Retirement Income Security Act of 1974 regulations, as amended (ERISA)
and the Code. The Company's medical, dental and disability plans as well
as the CASH Plan provide all employees with the protection and peace of
mind necessary to devote their full attention to achievement of the
Company's objectives.
Chief Executive Officer Compensation
The Compensation Committee determined the components of Mr. Wang's
fiscal year 1997 compensation as follows:
Base Salary. Mr. Wang's base salary of $1,000,000 was not increased
from that of the two previous fiscal years.
Annual Incentives. The Company's fiscal year 1997 performance produced
a return on average stockholders' equity, excluding a write-off of
7
purchased research and development associated with the acquisition
of Cheyenne Software, Inc., in excess of the predetermined threshold.
Pursuant to the 1994 Annual Incentive Compensation Plan for fiscal year
1997, Mr. Wang's award was calculated at a predetermined percentage of
the Company's net income for the fiscal year less a cost of equity. The
cost of equity was computed based on a five point quarterly average of
the Company's reported stockholder's equity. Mr. Wang's total
performance-based at risk compensation calculated under the 1994 Annual
Incentive Compensation Plan was approximately $14,300,000. This amount
was reduced by the Compensation Committee to $12,000,000. In addition,
approximately 58% of this amount or $7 million, as reduced, was granted
in unregistered Company Common Stock which is therefore restricted from
transfer for one year from the date of award.
Long-term Equity Participation. On January 11, 1996, 540,000 shares
previously awarded to Mr. Wang under the 1995 Key Employee Stock
Ownership Plan, which was approved by the stockholders in August 1995,
were vested and no longer subject to forfeiture, but remain contingent
on his employment by the Company until March 31, 2000. Additional grants
of the remaining 5,400,000 shares available under the 1995 Plan have
been made based upon the achievement of certain target stock prices.
These additional grants and the unvested portion of the initial grant
are non-transferable and subject to substantial risk of forfeiture
through March 31, 2000 if certain stock performance objectives are not
attained. If the Company stock price objectives are attained in the
fiscal year ended March 31, 2000, or in some instance sooner, these
shares are further subject to significant limitations on transfer for
seven years after vesting. Mr. Wang has agreed to restrict the transfer
of 5,400,000 shares of Common Stock which he currently owns. Such
restrictions will lapse concomitantly with those of shares granted under
the 1995 Key Employee Stock Ownership Plan. All share amounts referred
to above reflect the three-for-two stock split effective June 21, 1996.
Benefits. Mr. Wang received matching and discretionary contributions
to the Company's benefit plans of $24,400 in fiscal year 1997. He was
also provided benefits under the Company's medical, dental, and
disability plans consistent with those provided to other full-time
employees.
Other Executive Officers
The compensation plans of most of the Company's other executive
officers, including the four persons listed in the Summary Compensation
Table on page 9, provide for a base salary, annual incentive cash
compensation based on either individual fixed percentages of the
Company's aggregate net income above a predetermined return on average
stockholders' equity for the fiscal year or an absolute level of Company
revenue/net margin achievement, long-term equity grants under the
Company's 1991 Stock Incentive Plan and access to the Company's standard
employee benefit plans. For fiscal 1997, the Compensation Committee
allocated an aggregate of approximately 1% of the Company's net income,
excluding the $598 million pre-tax, non-cash charge associated with the
November 1996 acquisition of Cheyenne Software, Inc., to the four
executive officers, other than the Chief Executive Officer. Except for
Mr. McWade, approximately sixty percent of this amount was awarded in
the form of Company Common Stock which is restricted from transfer for
one year from date of award. The Compensation Committee has authorized
the grant to two of the executive officers of certain shares of Common
Stock under the 1995 Key Employee Stock Ownership Plan. These shares are
non-transferrable and subject to substantial risk of forfeiture, if
certain performance objectives are not attained, and further subject to
significant limitations on transfer for seven years after vesting.
In addition, approximately forty percent of the Company's
approximately 9,850 employees, including the Chief Executive Officer and
the four executive officers referred to in the table on page 10 and
three non-employee directors, were granted options to purchase an
aggregate of 6,278,166 (reflects the three-for-two stock split effective
June 19, 1996) shares of the Company's Common Stock. This total
represents approximately 1.7% of the Company's total shares outstanding
at March 31, 1997. The Compensation Committee believes that a
significant vested interest demonstrated by their ownership of stock and
stock options is a strong incentive to align the interests of all
directors, employees, and particularly the executive officers, with the
interests of the stockholders.
SUBMITTED BY THE STOCK OPTION AND COMPENSATION
COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Willem F.P. de Vogel
Irving Goldstein
Richard A. Grasso
8
Common Share Price Performance Graph
The following graph compares cumulative total return of the Company's
Common Stock (using the closing price on the NYSE at March 31, 1997 of
$38.875) with the Standard and Poor's Computer Software and Services
Index* and the Standard and Poor's 500 Index during the fiscal years
1993 through 1997** assuming the investment of $100 on April 1, 1992 and
the reinvestment of dividends.
TOTAL RETURN DATA
3/31/92 3/31/93 3/31/94 3/31/95 3/31/96 3/31/97
------- ------- ------- ------- ------- -------
Computer Associates
International, Inc. 100 155 201 389 706 576
S&P Computer Software
and Services Index 100 132 148 200 283 397
S&P 500 Index 100 115 117 135 179 214
- ------------------------------
Source: Standard and Poor's Compustat Custom Business Unit
* The Standard and Poor's Computer Software and Services Index is
composed of the following companies:
Autodesk, Inc. Novell, Inc.
Computer Associates International, Inc. Oracle Systems Corporation
Computer Sciences Corporation Parametric Technology Corporation
Microsoft Corporation Unisys Corporation
** The Company's fiscal years ended March 31 of each year.
9
COMPENSATION AND OTHER INFORMATION CONCERNING
EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation for
the Chief Executive Officer and each of the four next most highly
compensated executive officers of the Company for each of the fiscal
years ended March 31, 1997, 1996, and 1995, respectively.
SUMMARY COMPENSATION TABLE
Long Term
Compensation Awards
Name and Fiscal Annual Compensation Restricted Stock Option All Other
Principal Position Year Salary Incentive(1) Awards($)(1)(4) Awards(#)(2) Compensation(3)
- ------------------ ------ ------ ------------- --------------- ------------ ---------------
Charles B. Wang 1997 $1,000,000 $5,000,000 $7,000,000 $36,400
Chairman of the Board 1996 $1,000,000 $5,000,000 $5,000,000 847,125 $38,376
and Chief Executive 1995 $1,000,000 $4,585,000 $3,056,625 794,812 $38,425
Officer
Sanjay Kumar 1997 $ 900,000 $3,250,000 $5,850,000 $36,400
President and Chief 1996 $ 650,000 $3,250,000 $3,250,000 678,375 $38,376
Operating Officer 1995 $ 650,000 $2,667,000 $1,777,747 569,812 $38,425
Russell M. Artzt 1997 $ 750,000 $ 975,000 $1,425,000 $36,400
Executive Vice 1996 $ 550,000 $ 975,000 $ 975,000 453,375 $37,923
President-Research 1995 $ 550,000 $ 954,000 $ 635,787 412,312 $38,425
and Development
Peter Schwartz 1997 $ 600,000 $ 525,000 $ 675,000 264,405 $36,400
Senior Vice 1996 $ 450,000 $ 525,000 $ 525,000 363,375 $38,376
President-Finance and 1995 $ 450,000 $ 488,000 $ 325,197 288,562 $38,425
Chief Financial Officer
Charles P. McWade 1997 $ 175,000 $ 315,000 76,905 $30,410
Senior Vice 1996 $ 175,000 $ 265,000 59,625 $31,915
President-Finance 1995 $ 175,000 $ 210,000 37,575 $32,125
- --------------------------
(1) Incentive compensation and restricted stock awards shown for Messrs.
Wang, Kumar, Artzt, and Schwartz for fiscal years 1995, 1996, and 1997
were made under the 1994 Annual Incentive Compensation Plan.
(2) Option awards reflect the three-for-two stock splits effective
August 21, 1995, and June 19, 1996. All options granted to such
executive officers of the Company vest over a five year period following
the date of grant, 10% on the first anniversary; 15% on the second
anniversary; 20% on the third anniversary; 25% on the fourth
anniversary; and 30% on the fifth anniversary.
(3) Consists of Company contributions to the Company's benefit plans and
a non-reimbursed travel allowance for each executive officer of $12,000
for each fiscal year.
(4) Does not reflect the vesting on January 11, 1996 of 20% of the
Initial Grant under the 1995 Key Employee Stock Ownership Plan (the
"1995 Plan") which was previously described in the 1995 Proxy and
approved by the stockholders at the 1995 Annual Meeting (Mr. Wang -
540,000 shares, Mr. Kumar - 270,000 shares, Mr. Artzt - 90,000 shares).
These shares are subject to risk of forfeiture if the employee
terminates his employment with the Company prior to March 31, 2000 for
any reason other than death or disability. Sale or transfer of these
shares is restricted for seven years thereafter under the terms of the
1995 Plan.
10
The following tables summarize option grants and exercises during the
fiscal year ended March 31, 1997 to or by the executive officers named
in the Summary Compensation Table on page 9, and the value of the
options held by such person on March 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Granted Percent of Exercise Expiration Potential Appreciation
Name Options(1) Total Grants(4) Price Date 5%(2) 10%(3)
- --------- ---------- --------------- -------- ---------- --------- ----------
C.B. Wang
S. Kumar
R.M. Artzt
P. Schwartz 264,405 4.2% $52.417 May 15, 2006 $8,713,032 $22,078,796
C.P. McWade 76,905 1.2% $52.417 May 15, 2006 $2,534,278 $ 6,421,582
- ----------------
(1) Share amounts and exercise prices reflect the three-for-two stock
split effective June 19, 1996.
(2) Realizable net value if Company stock were to increase in value five
percent (5%) per year for the ten year term of the options.
(3) Realizable net value if Company stock were to increase in value ten
percent (10%) per year for the ten year term of the options.
(4) Based on a total of 6,278,166 options granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Net Value of Unexercised
Unexercised Options In-The-Money Options
Shares Acquired/ Value at March 31, 1997(1) at March 31, 1997(4)
Name Exercised(1) Realized(2) Exercisable(3) Unexercisable Exercisable(3) Unexercisable
- --------- ---------------- ----------- ------------ ------------- ------------ -------------
C.B. Wang 89,617 $ 4,577,368 4,561,721 1,942,128 $147,642,510 $39,659,540
S. Kumar 15,876 $ 690,398 360,000 1,396,166 $ 9,210,443 $27,202,750
R.M. Artzt 817,169 980,253 $ 24,808,690 $19,425,049
P. Schwartz 21,150 $ 1,204,662 622,078 974,978 $ 19,008,879 $13,475,446
C.P. McWade 47,738 $ 2,272,735 197,449 $ 2,420,427
- -----------------
(1) Share amounts reflect the three-for-two stock split effective June
19, 1996.
(2) Market value of shares purchased at exercise date less aggregate
option exercise price.
(3) All option grants vest over a five year period: 10% on the first
anniversary; 15% on the second anniversary; 20% on
the third anniversary; 25% on the fourth anniversary; and 30% on the
fifth anniversary.
(4) Pro forma net valuation based on the March 31, 1997 closing price of
$38.875, less fair market price at the grant date.
11
Employee's Profit Sharing Plans
The Company maintains a profit sharing plan, the CASH Plan, for the
benefit of employees of the Company. The CASH Plan is intended to be a
qualified plan under Section 401(a) of the Code, and certain
contributions made thereunder qualify for tax deferral under Section
401(k) of the Code. The CASH Plan is funded through the Company's and
participating employees' contributions and generally provides that
employees may contribute, through payroll deductions, a percentage of
their regular salary. The Company makes matching and discretionary
contributions for eligible participants in the CASH Plan who have one
year of service, including the Company's executive officers (Employer
Contributions). Participants in the CASH Plan receive a 50% match of
their contributions, up to a maximum of 5% of annual compensation
(subject to certain Code limitations), and a portion of the Company's
discretionary contribution for each year generally in proportion to
their annual compensation as allowed by the Code. The Company's
contributions under the CASH Plan vest in incremental amounts over a
period of seven years from date of hire, and are 100% vested after seven
years. The CASH Plan is administered by a committee of officers of the
Company appointed by the Board of Directors. All employees are eligible
to participate in the CASH Plan in the month following hire.
Effective April 1, 1994, the Company established an unfunded
Restoration Plan primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees, within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. This Restoration Plan is solely for the purpose of
benefiting participants in the CASH Plan who are precluded from
receiving a full allocation of Employer Contributions under the CASH
Plan because of the limitation on the compensation taken into account
under such CASH Plan imposed by Section 401(a)(17) of the Code as
amended by the Omnibus Budget Reconciliation Act of 1993.
The Company also established effective January 1, 1993, an unfunded
Excess Benefit Plan as said term is defined in Sections 3(36) and
4(b)(5) of ERISA, solely for the purpose of benefiting participants in
the CASH Plan who are unable to receive a full allocation of Employer
Contributions under the CASH Plan limitations imposed by Section 415 of
the Code.
During the 1997 fiscal year, the Company contributed $24,400 for the
accounts of each of Messrs. Wang, Kumar, Artzt, and Schwartz, $18,410
for the account of Mr. McWade and $21,755,000 for all participating
employees under the CASH, the Excess Benefit and the Restoration Plans.
Such contributions are included in the amount of other cash compensation
set forth opposite the five executive officers' names on the Summary
Compensation Table on page 9.
Stock Option Plans
During fiscal year 1997, the Company maintained the 1981 Incentive
Stock Option Plan (the 1981 Plan) which provides for the issuance to
certain selected employees of incentive stock options to purchase up to
a maximum of 18,000,000 shares of Common Stock. Incentive stock options
are stock options which are intended to satisfy the criteria established
in Section 422 of the Code and are subject to different tax treatment
than non-statutory stock options. Under the 1981 Plan, stock options may
be granted for terms of up to ten years. The 1981 Plan terminated in
accordance with its terms, on October 23, 1991, which was the tenth
anniversary of the date on which it was first adopted. No additional
options may be granted under the 1981 Plan.
The Company also maintains the 1987 Non-Statutory Stock Option Plan
(the 1987 Plan) pursuant to which non-statutory options to purchase up
to 11,250,000 shares of Common Stock may be granted to selected officers
and key employees of the Company. Pursuant to the 1987 Plan, the option
price of stock options granted thereunder may not be less than the
market price of the shares of Common Stock on the date of grant. The
option period may not exceed twelve years.
The Company's 1991 Stock Incentive Plan (the 1991 Plan) provides
that up to an aggregate of 45,000,000 shares of the Company's Common
Stock may be granted to employees (including officers of the Company)
pursuant to stock options or stock appreciation rights (SARs). The
options may be either options intended to qualify as incentive stock
options, as that term is defined in the Code, or non-statutory options.
The Compensation Committee has the power to determine whether such
options are intended to qualify as an incentive stock option under the
Code.
The 1993 Stock Option Plan for Non-Employee Directors (the 1993
Plan) provides for non-statutory options to purchase up to 225,000
shares of Common Stock to be available for grant to each member of the
Board of Directors who is not otherwise an employee of the Company.
12
The 1981 Plan, the 1987 Plan, the 1991 Plan, and the 1993 Plan are
administered by the Compensation Committee of the Board of Directors,
which determines the individuals to whom options and SARs are granted,
the date or dates of grant, and the number of shares covered by the
options and SARs granted. The per share exercise price of options and
SARs granted may not be less than 100% of the Fair Market Value of a
share of the Company's Common Stock on the date of grant. Shares of
Common Stock acquired may be treasury shares, including shares purchased
in the open market, newly issued shares or a combination thereof. Fair
Market Value, as of any date, means the closing sales price of a share
of Common Stock on such date as reflected in the consolidated trading of
New York Stock Exchange issues (as long as the Company's Common Stock is
listed on the New York Stock Exchange). All share amounts referred to
above reflect the three-for-two stock split effective June 19, 1996.
1995 Key Employee Stock Ownership Plan
Under the 1995 Key Employee Stock Ownership Plan (1995 Plan), a
total of 13,500,000 restricted shares are available for grant to Messrs.
Artzt, Kumar, and Wang. An initial grant of 4,500,000 restricted shares
was made to these executives at the inception of the 1995 Plan. In
January 1996, based on the achievement of a target price for the
Company's common stock, 900,000 shares of the initial grant vested,
subject to continued employment of the executives through March 31,
2000. These vested shares are also subject to significant limitations on
transfer during the seven years following vesting. Additional grants of
the remaining 9,000,000 shares available under the 1995 Plan have been
made based upon the achievement of certain target stock prices. These
additional grants and the unvested portion of the initial grant are
subject to risk of forfeiture through March 31, 2000, and further
subject to significant limitations on transfer during the seven years
following vesting.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 (the Exchange
Act), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the
Company's equity securities, to file with the Securities and Exchange
Commission (SEC) and the New York Stock Exchange (the NYSE) initial
reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company (Section 16(a) Forms).
Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of such copies of Section 16(a) forms
received by it, or written representations from certain reporting
persons, during the fiscal year ended March 31, 1997, the Company
believes that each of its officers, directors and greater than ten
percent beneficial stockholders complied with all applicable filing
requirements, except that two transactions reportable by Mr. Goldstein
on separate Form 4's were reported by him on his Form 5 instead.
Certain Transactions
Mr. Anthony W. Wang, a former President and Chief Operating Officer of
the Company, and a brother of Charles B. Wang, Chairman and Chief
Executive Officer, had an agreement to remain with the Company in a non-
executive capacity until March 31, 1997. During this term, Mr. Wang
assisted the Company in the prosecution and defense of certain
litigation and performed such other advisory and consulting duties as
were reasonably requested from time to time by the Company's Chief
Executive Officer. For these services and in consideration of a five-
year non-competition covenant, the Company paid Mr. Wang $500,000 per
year. Under his agreement Mr. Wang was not entitled to receive
additional stock option grants, but stock options granted to Mr. Wang
during his tenure as an officer of the Company continued to vest and
were exercisable up until March 31, 1997.
During the fiscal year ended March 31, 1997, the Company retained the
law firm of Wang & Wang, in which Charles B. Wang's brother, Mr. Francis
S. L. Wang, is a member, to perform legal services for the Company. Wang
& Wang, who represented the Company in connection with a number of
matters involving protection of intellectual property rights, employment
issues, and litigation, received approximately $575,000 in fees and
disbursements during the fiscal year.
13
ITEM 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
A representative of Ernst & Young LLP will be present at the meeting
and will be available to respond to appropriate questions from
stockholders.
Although the By-laws of the Company do not require the submission of
the selection of independent auditors to the stockholders for approval,
the Board of Directors considers it desirable that its appointment of
independent auditors be ratified by the stockholders. Ernst & Young LLP
(and its predecessor firm Ernst & Whinney) has been the independent
auditor for the Company since 1980 and has been appointed to serve in
that capacity for the 1998 fiscal year. The Board of Directors will ask
the stockholders to ratify the appointment of this firm as independent
auditors for the Company at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS
The Company's By-laws require advance notice for any stockholder
nomination or proposal at an annual or special meeting of stockholders.
In general, all nominations or proposals must be delivered to the
Secretary of the Company at the Company's world headquarters. The
submission deadline for stockholder proposals for consideration for
inclusion in proxy materials for the 1998 Annual Meeting is March 6,
1998.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at
the meeting. However, if any other business properly comes before the
meeting, it is the intention of the persons named in the enclosed proxy
to vote the shares represented thereby on such matters in accordance
with their best judgment.
The prompt return of your proxy will be appreciated. Therefore,
whether or not you expect to attend the meeting, please sign and date
your proxy and return it in the enclosed postpaid envelope.
By Order of the Board of Directors
/s/ Michael A. McElroy
----------------------
Michael A. McElroy
Secretary
Dated: July 7, 1997
Islandia, New York
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT
WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING. SUCH
REQUESTS SHOULD BE ADDRESSED TO: COMPUTER ASSOCIATES INTERNATIONAL,
INC., ATTN.: MR. MICHAEL A. McELROY, SECRETARY, ONE COMPUTER ASSOCIATES
PLAZA, ISLANDIA, NEW YORK 11788-7000.
