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On Oct. 11, a saleswoman at Computer Associates International Inc. began her day at the company’s Islandia, N.Y., headquarters. At about 9:30 a.m., her manager walked to her desk and said: “I’d like you to come with me to my manager’s office.” The dread was immediate. For a week rumors had been flying that the company was going to fire 25 percent of its 18,000-member workforce. The saleswoman (who requested anonymity) feared the worst. Being let go by CA — the third-largest independent software maker in the world and the dominant player in mainframe software utilities — used to mean getting fired, not laid off. The difference is significant. Fired employees get no severance and no medical coverage. In some suits filed against CA, ex-employees claim also to have been deprived of commissions and expenses due to them. Axed CA employees were typically escorted out of the building. As the saleswoman headed to the manager’s office, she recalls, “I was literally prepared to sue.” A number of ex-CA employees also had suits alleging that the company disguised earlier layoffs as performance-based firings, to avoid paying severance. Management surprised the saleswoman. She did lose her job that day. But it was nothing like she’d expected. The manager handed her a letter stating that she was being let go for business reasons, not because of her performance. And, says the saleswoman, he was gentle and empathetic. The sympathy was backed up with cash: paychecks through the end of October, then two weeks of severance for every year she had worked. Health benefits would continue for six months. At the end of the session, the saleswoman was asked whether she would prefer to empty her desk immediately or return to do it later. She recalls thinking: “Wow, I can’t believe I’m getting asked this question.” Although the saleswoman decided to pack right away, she says: “My manager didn’t stand over me; that was nice. And as we were leaving, he let me stop to shake a few hands.” The saleswoman was one of 900 employees — 5 percent of the workforce — laid off at CA during the second week of October. That number isn’t large when compared with national figures. In September alone U.S. employers announced almost a quarter-million layoffs, according to Challenger, Gray & Christmas Inc., an outplacement firm that tracks layoffs. But, at CA, the losses had been mounting. According to company annual reports, total staff on April 1, 2000, was 21,000. Nineteen months later, the total was 17,000. And throughout this time CA was dogged by accusations that it was mishandling terminations — charges that were getting aired both in the courtroom and the media. Now, though, it appears that CA is trying to mend its ways. October marked the first time in its 25-year history that CA publicly announced layoffs, rather than quietly firing employees. “We had been criticized in the past for the way these kinds of issues had been dealt with,” acknowledges CA’s general counsel, Steven Woghin. “We wanted to take into account some of the criticism — some of which we thought was fair and some of which we thought was unjust.” Putting that goodwill into action was an arduous process. For the two weeks before the layoffs, Woghin and Joel Katz, the in-house lawyer who handles employment issues, worked late into the night and through the weekends, amending the company’s severance plan and briefing human resources executives and managers in offices nationwide. Says Woghin: “We spent an awful lot of time trying to put ourselves in the shoes of the person who is going to be on the other side of the desk, to understand their reactions.” The cost of this kinder, gentler approach? A $20 million charge on its fourth-quarter balance sheet. (CA’s revenues in fiscal year 2001 were $4.2 billion, with a net loss of $591 million.) But the perception that CA executives handled terminations badly in the past also has cost the company. The company says it has 18 active federal employment cases — plus an undetermined number in state court. Plaintiffs’ claims run the gamut, including that firings were illegally based on age, race, and sex discrimination. Says Edward Boyle of New York’s Wilson, Elser, Moskowitz, Edelman & Dicker (who has a suit pending against CA): “There are a number of people out there who are extremely disgruntled.” And one look at the many vitriolic postings on electronic bulletin boards, such as yahoo.com and vault.com, confirms this view. The worst fallout from CA’s troubled labor relations may be Texas billionaire Sam Wyly’s proxy fight. In March 2000 Wyly sold his company, Sterling Software, Inc., to CA for $4.2 billion. But, says Wyly, after former employees complained about the way CA fired them, he began to think the company was poorly managed. Wyly ultimately put broader allegations of mismanagement into his highly publicized proxy resolution against the company. His proposal for restructuring the board was soundly defeated at CA’s annual meeting in August. But, according to CA estimates, that victory cost between $10 million and $11 million in advertising, legal fees and other expenses. Sometimes the cost of an unhappy relationship with employees isn’t so obvious. Marc Miller left his job as a CA sales executive in June. He decided to go, he says, after a young colleague was abruptly fired in January. “It was brutal,” says Miller, adding: “Everybody in that place feared for their jobs constantly.” Miller’s young, former colleague was one of 314 employees fired by CA in January. All but 80 of them were fired for what were described as “performance-related reasons.” Many complained to the press, or hired lawyers, claiming that they were fired to cover fourth-quarter losses — and that, to avoid paying severance, the company invented performance pretexts. Woghin won’t discuss specific cases, including that of Mary Welch, a former CA sales representative whose story hit the national media in March. Welch’s Jan. 3 annual performance review said that she “exceeds expectations,” and put her in the top 5 percent of her department. That’s why, Welch says, she was shocked to be fired just 13 days later and stunned to be told that the termination was because of poor performance. Furor over the January firings prompted an internal review by a committee of company lawyers, human resources executives and new outside counsel. GC Woghin says that he brought in Covington & Burling as “fresh eyes” to review CA’s labor disputes. The result? Woghin says that the company offered severance to another 30 to 40 former employees from the January batch, including Welch. But lawsuits and public criticism alone didn’t prompt the company’s generosity with severance, says Woghin. “We really worked hard to look at present circumstances, at what it’s going to be like in today’s marketplace … . You can’t ignore the consequences to these people.” He contends that the company’s culture always has been fundamentally generous. CA is known for its free breakfasts, excellent child care centers and inclusion in Working Mothermagazine’s annual “100 Best Companies for Working Mothers” list. Says Woghin: “We still tend to view ourselves as a smaller company than we are.” CA’s staff has grown rapidly — tripling in size since 1994 — largely because it has gobbled so many competitors. After the acquisitions, there were often firings at the target companies. Some of those let go filed suit claiming CA had reneged on obligations assumed when it had bought their companies. In 1995 the company bought Legent Corporation and fired 1,000 employees in five weeks. In 1999 CA bought PLATINUM technology inc., and fired 50 percent to 60 percent of its 4,300 employees. After acquisitions and restructurings, CA tries to determine as quickly as possible which employees to keep, Woghin explains. “If we do not have a position for them, we let them know on day one. There’s not going to be a second shoe that drops,” he says. “People appreciate that.” But employees also appear to appreciate CA’s new approach. The laid-off saleswoman actually thanked her manager for the way he’d terminated. “I’m very happy not to sic my lawyer on them,” she says. And happier employees means better customer relations — which is a big part of CA’s new business model. “The company isn’t known for its customer-friendly behavior,” says Merrill Lynch & Co. Inc. analyst Peter Goldmacher. “And they’re trying desperately to change that.”
Computer Associates International Inc. Headquarters: Islandia, N.Y. FY2001 Revenue: $4.2 billion FY2002 Revenue (first half): $1.48 billion Chairman: Charles Wang President, CEO and Director: Sanjay Kumar Senior VP and GC: Steven Woghin Employees: 17,000 (as of Oct. 11) Law Department: 30 attorneys Outside Employment Counsel: Seyfarth Shaw; Covington & Burling

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