Investors Seek 'Restatement' of Bonuses

Sanjay Kumar, Computer Associates' (CA Quote) recently deposed CEO, soon may be out of more than just his title. Irked shareholders are demanding that the executive repay the $3.2 million bonus he received in 2001.

Kumar and Computer Associates Founder Charles Wang -- who received $4.78 million in bonus pay in 2001 -- are the targets of what is becoming the latest corporate governance mantra: that executives repay bonus compensation for results that have been restated or are coming under close scrutiny.

"If you didn't earn it, if the financial results were [incorrect], as far as I'm concerned, you owe me money," said Duncan Stewart, a portfolio manager at Toronto-based Tera Capital. "Money received for profits that were not made should be paid back."

Forcing the boss to repay bonus cash for a performance that, in hindsight, never happened is a no-brainer for riled shareholders. But it is sending a chill through some of America's boardrooms. No one likes to give back money, and CEOs may decide to take the battle to court, a further expense to the company, especially if the CEO wins.

Corporate boards may not want to fight the CEO over past pay, even if it's for a bonus, but more firms are facing the issue. In recent weeks, three top executives at Nortel (NT Quote) were dismissed after the shake-up within the executive suite at Computer Associates that involved Kumar and Wang.

Nortel shareholders are already raising questions about whether the company's dismissed executives should have to repay their share of the $50 million worth of performance bonuses the company handed out last year. Nortel paid about $300 million in its "Return to Profitability" bonus program, The Wall Street Journal reported; recently dismissed CEO Frank Dunn received an estimated $5 million, although the company has yet to disclose actual figures.

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