Computer Associates 2006 Annual Report Download - page 99

with regard to the annual incentive bonus and the long-term incentives (described below), the Committee reserved
discretion to reduce or eliminate an executive’s bonus for any reason. In exercising this discretion, the Committee
expressly stated that it would consider and, in fact did consider, among other factors, each executive’s contribution
to the establishment and maintenance of high ethical and compliance standards throughout his or her organization
and, in general, throughout the Company. In this regard, the Committee also received a report of a designated
management committee, chaired by the Company’s Chief Compliance Officer.
Long-Term Incentives.
As discussed above, under the new LTIP program implemented in fiscal year 2006, each executive’s LTIP award is
comprised:
(i) 33% of stock options;
(ii) 33% of restricted stock (the number to be awarded is based on the achievement of one-year performance
targets); and
(iii) 34% of performance shares with a three-year performance cycle.
Stock Options. The stock option component of the Long-Term Incentive Award that is granted annually at the
beginning of each fiscal year generally vests in equal annual installments over a three-year period from the date of
grant. The stock options awarded in respect of the performance cycle beginning in fiscal year 2006 were granted in
May of 2005 and are reflected in the Stock Option Grant Table.
Restricted Stock. Under the new LTIP program, the award of restricted stock was dependent on the achievement
of specified performance targets set at the beginning of fiscal year 2006. The targets were based on (i) billings
growth and (ii) revenue growth, each responsible for determining one-half of the award. Payouts could range from
0% to 200% of the target, based on the degree to which the various performance measures were achieved. Targets
were established as a percentage of base salary at the beginning of the year and the closing share price on the day
before the new LTIP program and targets were approved by the Committee. Approximately one-third of the shares
to be awarded would vest immediately and the other two-thirds on the next two anniversaries of the date of grant.
The number of shares of stock awarded to our Named Executive Officers for fiscal year 2006 is reflected in two
columns of the Summary Compensation Table: the value of the one-third that is fully vested at grant is reflected in
the “Bonus” column and the other two-thirds are reflected in the “Restricted Stock” column. We note that, as
explained above under our discussion of Annual Incentives, for a number of our executive officers, this is the only
amount received as annual bonus. Although a target payout at 106% would have been consistent based on the pre-set
performance targets, upon the recommendation of the Chief Executive Officer and management, we set the actual
award payment at 75% of target. We took this action to more properly reflect the degree to which targets were
obtained by reason of organic growth as opposed to growth by acquisitions.
Performance Shares. The award of performance shares is described in the “Long-Term Incentive Plan — Awards
in Last Fiscal Year” table. The targets for this first three-year cycle are based on (i) average three-year adjusted net
income growth and (ii) average three-year return on invested capital, each responsible for determining one-half of
the payout under the award. There was no payout under this program as we are in just the first year of its three-year
cycle.
We have discretion to reduce the amount of any award if we determine that such action is appropriate.
Chief Executive Officer Compensation
John A. Swainson was named President and Chief Executive Officer-Elect on November 22, 2004 and he was
appointed Chief Executive Officer in February 2005. Mr. Swainson’s compensation for fiscal year 2006 was as
follows:
Base Salary: Mr. Swainson’s annual base salary was $1,000,000.
Annual Incentives and Certain Long-Term Incentives: Mr. Swainson received no cash bonus for fiscal year 2006.
The annual bonus of $337,565 reflected in the Summary Compensation Table was comprised solely of the award of
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