CA, Inc. Exec’s Agreement Worth the Wait…

May 7, 2010

Yesterday’s announcement that Arthur Weinbach had been named as the non-executive chairman of the Board of CA, Inc. (CA) was reported widely, but there was more in the filing that caught our attention.

CA, Inc., which calls itself —the world’s leading independent IT management software company, filed an 8-K to disclose that CEO William —Bill McCracken, an industry veteran who spent more than three decades at IBM and previously served as a director at IKON Office Solutions, now has an employment agreement.

Of course, McCracken is no newcomer to CA, Inc. He became a board member in 2005 and was named non-executive chairman in 2007. Last September, after former CEO John Swainson retired, McCracken stepped in as the executive chairman. Then, on January 28, 2010, he assumed the post of CEO. When that appointment was announced, no financial terms about his employment were disclosed.

Now, more than three months after McCracken’s appointment as CEO, the terms are known. The Employment Agreement runs for a two-year term, but it also has an automatic renewal clause so that the relationship continues unless one party gives the other 90 days— notice that the agreement won—t be extended.

One odd section of the agreement refers to now-past time periods in the future tense. Since the agreement itself is dated May 6, 2010, we assume this just reflects a long negotiation over the agreement. Section 3 states: —Prior to March 15, 2010, your only Salary shall be paid to you pursuant to your existing pay arrangements as Interim Executive Chairman of the Company. Following March 15, 2010, the amount of your Salary will be $1,000,000.

McCracken also gets a sign-on bonus of $1.3 million and protection in case his relationship with the company terminates. He’s also eligible for a two-part bonus: 1) He—ll get a prorated amount of a targeted annual cash bonus of $1.25 million from the time he started through March 31, 2010; and 2) beginning with the company’s 2011 fiscal year, the target level for his bonus increases to “at least” 150% of his Salary, or $1.5 million.

And then there’s the section on Long-Term Incentive Awards:

—Beginning with the Company’s 2011 fiscal year, you will be eligible to receive long-term incentive awards (Long-Term Incentive Awards) as determined by the Company in accordance with the Company’s Long-Term Incentive Plan (and any successor plan). The target award level under the Company’s Long-Term Incentive Plan for (i) the Company’s 2011 fiscal year will be $5,000,000, and (ii) for the Company’s 2012 fiscal year, and each year thereafter during your employment, will be no less than $5,000,000.

The announcement about McCracken’s deal comes just a month after the company cut 1,000 jobs, or more than 7.5 percent of its workforce. This article said at the time: —— Chief Executive Bill McCracken said Tuesday in a memo to employees that the company needs to do more and needs to be —leaner, more focused, more competitive and more effective— in its execution.

Although CA, Inc. is paying McCracken several million dollars to lead the company, the board seems confident that it chose the right person for the job. At the end of January, when McCracken was named CEO, Gary Fernandes, the lead independent director and head of the search committee, said: ——it became evident to us that Bill McCracken has the knowledge, industry expertise, and experience to take CA to the next level. The Board unanimously decided that Bill was the best choice to sustain the Company’s momentum and lead it going forward.

They—ve invested a lot of money in that decision, so let’s hope they’re right.

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