CEO on the Spot

Sanjay Kumar was on his best behavior. Through winter and spring of 2002, as corporate scandals erupted across America, the CEO of Computer Associates International Inc. (CA ) appeared determined to cast the embattled software powerhouse as a model of corporate virtue. It was no easy sell. After a decade of white-hot growth, CA had become legendary for its convoluted accounting, outsize executive handouts, and a take-no-prisoners approach to customers. Still, the 40-year-old Kumar toiled to turn over a new leaf. He coddled customers and worked to clear up accounting questions. He overhauled the board of directors, long considered a rubber stamp, even bringing aboard a former chief accountant of the Securities & Exchange Commission. Was this a new, spic-and-span CA for the post-Enron age?

Not quite yet. On July 24, Kumar stupefied investors and corporate-governance experts alike. After a week of negotiations that ended after midnight, he dished out $10 million to end a proxy challenge from Texas entrepreneur Sam Wyly. It seemed the bad old CA had reared its ugly head. "Technically, it's not greenmail, but they paid somebody to go away," says Ted White, director of corporate governance for the California Public Employees' Retirement System. CA justifies the deal as a legitimate means to end a management distraction--which drained precious time for Kumar's turnaround effort. But the company can't wash off the odor of scandal. These days, it's operating under the noxious cloud created by Enron, WorldCom, and Adelphia.