Computer Associates Executives May Have to Repay Option Windfall

Three executives of Computer Associates could have to repay as much as $558 million from the exercise of stock options if a Delaware Chancery Court's ruling is upheld (Sanders v. Wang, Del. Ch. C.A. No. 16640, 11/9/99). Plaintiffs in the lawsuit contended Computer Associates' stock option plan did not provide for option awards to be adjusted when the company's stock was split. The compensation committee of the board, however, did make the adjustments, providing the executives millions more options than the maximum the plan allowed. While the plan was geared to executives, the lawsuit illustrates the importance of careful drafting in plan language.