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Faking Stanford

Veritas Software CFO quits after officials catch him lying about an MBA. Also: Two big institutional investors target companies with excessive exec...
Lisa YoonOctober 3, 2002

Kenneth Lonchar didn’t learn Latin at Stanford University.

Nor, for that matter, did he learn anything else at the prestigious California school.

Veritas Software — whose name is Latin for “truth” — said Lonchar resigned as CFO and executive vice president after officials discovered he lied about getting an MBA from Stanford. The falsification was discovered by the Veritas board of directors, the board’s audit committee, and independent auditors.

“I regret this misstatement of my educational background,” Lonchar said. “Under the circumstances, I believe my resignation is in the best interests of both the company and myself.”

Veritas chairman Gary Bloom was quick to point out that, while unfortunate, the discovery of Lonchar’s misrepresentation has no bearing on the accuracy of the software manufacturer’s financial results or the quality of its financial controls.

Lonchar will be replaced on an acting basis by Veritas chief administrative officer Jay Jones. Jones was previously the company’s general counsel.

The company said its third-quarter results would match its previous estimates for revenue of between $350 million and $370 million and earnings, excluding a range of items, of 11 cents to 13 cents per share.

Veritas shares, which closed at $14.50 on Wednesday on Nasdaq, were down nearly 10 percent: In pre-market trading Thursday morning on the Instinet electronic trading network, the share price had hit $13.10. That’s the lowest the stock price has been since January 1999.

Pension Funds Crack down on executive pay

Two powerful pension funds are getting ready to target big companies for excessive executive pay in a move that could make the annual shareholder voting season the most confrontational on record, according to the Financial Times.

The newspaper reported in its Thursday edition that TIAA-Cref, the teachers’ retirement fund, is drawing up a list of the 50 companies with the cushiest executive-pay packages. Meanwhile, Calpers is planning a new campaign on pay. The move comes as a result of the outcry at the huge sums paid out by companies, some of which have collapsed.

TIAA-Cref will present boards with proposed pay schemes and, if these are rejected, it is going to file shareholder resolutions against the companies. It will also seek to clamp down on abuses of the executive pay system—including the practice of chief executives hedging any risk in their stock options, said the paper.

The pay proposals would involve three common themes for awards of stocks and stock options: they would have to be performance related, have extended holding periods, and contain an element of downside risk.

The campaign represents a significant hardening of the fund’s position in anticipation of the annual voting season. The wave of corporate scandals is likely to generate a highly charged atmosphere at the next round of shareholder meetings.

Calpers is also drawing up a list of companies it will press for changes. “There will be the usual suspects and topics and executive compensation and director independence will be part of those practices,” Calpers spokesman Brad Pacheco told the FT.