Interview with CA CEO John Swainson

JOHN SWAINSON FACED one of the toughest challenges any first-time CEO ever does—parachuting into a company, in this case Computer Associates, where previous management had engaged in a $2 billion accounting fraud. Recruited from the ranks of IBM, Swainson now runs a company with annual sales of $3.75 billion. He recently sat down for an interview with Directorship.

Directorship: Wouldn't it be fair to say that the Computer Associates board had failed?

John Swainson: It's easy to understand why people would believe that's true. All of us, particularly outsiders, have a belief that boards should be omnipotent, that they should be able to see everything in an organization. In this case, the gist of the government's case against my predecessors is that they went to extraordinary lengths to prevent people from understanding what they were really doing. If someone does try very hard, they can make it extraordinarily difficult for a board to really know what's going on inside a corporation.

And it was the board who ultimately figured out what was going on inside. It probably took them longer than they would have liked, but they were dealing with extremely difficult circumstances, including the fact that management was essentially sandbagging them. I'm not at all negative about what our board did. In fact, they took extraordinary action when they discovered what was going on to save the company and get it headed in the right direction.

In 2004, the board essentially took over the operating of the company. One of the directors came became the interim CEO. The chairman of the board, who is still chairman, became a very active chairman. He was spending at least half his business time at the company. The board found the source of the problems and remedied them, including leading all the negotiations with the government regarding the deferred prosecution agreement. I'm very appreciative.

How have you altered the composition of the board to help you going forward?

Including myself and Laura Unger, who came on just before me, we've added five new directors in the past 18 months. They've brought with them a considerable amount of personal and professional expertise, which has been very helpful as we think about how to position CA.

Laura Unger has a Securities and Exchange Commission background?

Yes, she's a lawyer with SEC background.

Who else did you add?

We've added Ron Zambonini, the chairman of Cognos who has a long technology background; Bill McCracken, who had a long IBM background and is on the board of ICON office products; and Chris Lofgren, who is the CEO of Schneider National, who is a very good guy.

Lofgren would understand operations. Is that why you brought him in?

Lofgren is a technologist. When I first met him, he was the CIO of Schneider. He had been in the software industry and has a PhD in logistics. He had worked for Symantec for many years.  So he has a very strong operational and technology background, as does Bill McCracken, as does Ron Zambonini. What I've been trying to do is to create a balance on our board of people who know the business, know the software industry, and also people who have regulatory, financial and legal backgrounds to help us navigate our way through those waters. I think we've got now have a very nice balance. We have a couple of lawyers, we have a couple of people with pretty strong financial backgrounds and we have a very strong set of software industry backgrounds.

How do you go about changing your board if you're the CEO?

You do it very carefully. You do it very thoughtfully. The chairman, the chairman of the nominating committee and I thought about the fact that we wanted to have more operational executives on our board and we went through a process of looking for them. Some of them were people I knew. Some of them like Bill McCracken were recommended to us by others, including some of our investors. And some were in the pipeline already.