In disclosing that it's
the subject of government inquiries , Computer Associates ( CA) isn't the only party in a sticky situation. Think for a moment of New York Stock Exchange chief Richard Grasso. Grasso has sat on the board of NYSE-listed Computer Associates since the mid-1990s. Many outside observers believe his directorship there presents a profound conflict of interest, but the Exchange maintains that it isn't a problem. The bickering about the Exchange allowing officials to serve on NYSE-listed company boards has until now been a side issue, but with allegations of impropriety swirling around Computer Associates, the tempest threatens to break out of the teapot. With legislators and shareholder advocates closely questioning the role of the Enron board in the demise of the energy trader, and Computer Associates' accounting and disclosure practices coming under intense scrutiny, the question of board independence has never loomed larger on Wall Street. "If they can't figure this one out at the Stock Exchange as being an utterly poor governance conflict and utterly obvious conflict of interest, I don't know what is," says Patrick McGurn, director of corporate programs for Institutional Shareholder Services. According to Computer Associates' last proxy statement, outside directors were to accrue $45,000 in Computer Associates stock as annual compensation on Aug. 28, 2001. Payment is deferred until retirement from the board, the proxy says. The NYSE says it has provisions that bar Exchange officials from taking part in decisions related to companies whose boards they serve on. "The appropriate controls are in place," says an Exchange spokesman. "End of story."