This year's proposal argues that all directors who served on the board prior to 2002 should be removed. According to the proponent, failing to make a full break with the past will continue to delay the company's financial recovery. The proponent points to reports in The New York Times as early as April 2001 that raised questions about Computer Associates' accounting practices, yet the board did not launch its own independent investigation until 2003. The Islandia, New York-based software maker agreed in 2004 to pay $225 million in restitution and make governance changes. And earlier this week, former CEO Sanjay Kumar pleaded guilty to securities fraud charges.

The LongView proposal is not the typical "vote-no" campaign that is often waged by activist investors, because it would appear as a separate ballot item apart from the director elections. Nevertheless, the underlying message is the same--someone on the board needs to be held accountable for the company's past accounting problems.

On April 21, the company petitioned the Securities and Exchange Commission for permission to omit the proposal. In a letter to the agency's Division of Corporation Finance, CA argued that the resolution relates to the election of directors and thus may be excluded under SEC Rule 14a-8(i)(8). The company cited a number of rulings where the SEC had permitted companies to exclude similar proposals.

The LongView fund asserts that shareholders have the right under Delaware law to remove directors at any time regardless of how much time is left on their terms or whether they intend to stand for re-election. As Cornish Hitchcock, an attorney representing LongView on this proposal, notes: "If state law gives shareholders this right, then why not utilize it? The fact pattern at CA is certainly compelling."

The SEC's rules governing shareholder proposals are not the typical means used by frustrated investors to remove directors. Shareholders should watch closely to see how the SEC evaluates the company's exclusion request. If the commission's staff deems that the resolution does not overlap with the company's election process and the proposal appears on the ballot, shareholders can expect to see similar resolutions in the future.

While Hitchcock acknowledges that the SEC has allowed the omission of similar proposals, he notes that the proponents in those cases did not raise the state law issues or make the arguments LongView will offer. "The beauty of the provision is that the SEC doesn't have to adopt any rules or issue any guidance. All it has to do is just stand back and let shareholders exercise their rights under state law," he says.