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CA reveals decade of options miscues

Accounting challenged

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CA has admitted it held on to employees' shares for up to two years after awarding workers the options, helping the company boost its profitability for Wall Street.

The software giant has been forced to wipe $342m off its profits for the years 1996 to 2006 following a re-statement of earnings in the wake of an internal review. The $342m represented costs to CA that were hidden through the delayed options allocations.

CA made the admission as it filed delayed results for fiscal year 2006. The company reported $3.79bn in revenue for the year, $20m higher than expected.

The results had been pushed back as CA assessed the impact on current and past years' performance caused by the backdating of share options. CA's statement came as FBI and financial regulators comb through the books of nearly 100 public US companies, including many well-known Silicon Valley names, looking for evidence of backdated share options.

CA said its own review into share allocations had found a "number of cases" before 2001 where shares approved by the board of directors' compensation committee were not handed over to employees at the time of the award.

"The communication of these grants by management to individual employees was not made until some time after approval by the compensation committee, in some instances, up to two years later," CA said.

"In almost all cases, the exercise price set at the time of the committee's approval was lower than the market price of the company's common stock on the date the aware was formally communicated to employees," according to CA. The practice changed in 2001, and grants have been "communicated promptly after their approval" since fiscal year 2002.

CA has been trying to claw its way past an existing accounting scandal. A number of former executives have admitted to fraud in a scheme where CA used a "35-day month" to pad extra revenue onto quarters. The company changed its name from Computer Associates to CA in an effort to shift away from this past.

With just C and A left to play with, the company has limited rebranding options if it hopes to use a similar tactic to deal with the latest accounting incident. Here's hoping a cleaner decade won't make such a move necessary. ®

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