Tackling a very big turnaround: as part of the new executive team at Computer Associates, Robert Davis was intrigued by the challenge and the leadership group he was joining. But the CFO has a lot on his plate--not the least of which involves complying with a deferred prosecution agreement meant to ensure CA's survival.

• Author: Marshall, Jeffrey
• Position: Interview

Two years ago, venerable computer software firm Computer Associates Inc. (CA) was in dire straits. Founder Charles Wang had stepped down as CEO, but his hand-picked successor, Sanjay Kumar, had been implicated in a massive accounting fraud and was forced to resign, as was CFO Ira Zar, who later pled guilty to securities fraud. New leadership was brought in from outside to right the Islandia, N.Y., computer giant, but cleaning up the accounting issues and reviving the finance team looked like a tall order. In fact, earnings from both 2000 and 2001 have been restated.

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Interim finance leadership from now-Chief Operating Officer Jeff Clarke, former CFO of Compaq Computer Corp. (later bought by Hewlett-Packard Co.), had started the ball rolling. Now, the task has fallen to Robert W. Davis, executive vice president and CFO. Recruited from Dell Inc., where he was chief accounting officer, just over a year ago, the 6-foot-7 Davis has a lengthy list of responsibilities and challenges.

Besides the task of upgrading and reinvigorating the financial controls, the affable Davis has been busy meeting the mandates of the deferred prosecution agreement (DPA) that CA--as the firm now prefers to call itself--entered into just over a year ago. The 18-month pact, due to expire at the end of September, was meant to allow CA time to implement the controls that regulators deemed sufficient to put its house in order; if not, it would face potentially crippling prosecution under charges of fraud and obstruction of justice.

Davis, 47, is a former accountant with PricewaterhouseCoopers and finance executive with MCI and Dell; he has been an FEI member since 2002 and serves on FEI's Committee on Corporate Reporting (CCR). He spoke to Editor-in-Chief Jeffrey Marshall about what has been happening at CA under his watch and the implications of the DPA. Excerpts from the interview follow.

Q When first contacted by a recruiter about coming to CA, what went through your mind?

1. I knew there were some issues, but frankly, I wanted to catch up with Jeff Clarke. He could have gone to a number of different places after he left HP, and his comment was that when you look at CA, there are just enormous opportunities here. We all know the difficulties the company had back in the early part of this decade, yet it continued to generate well over $1 billion worth of cash flow from operations each year.

   One of the other things I learned as I interviewed and dug into the company was that we are about 21 quarters now into an extremely conservative accounting policy, a ratable accounting model. So, while there were some issues back in late 90s and maybe even the beginning of this decade, the accounting for the last five-plus years has been rock-solid and very conservative. And, in interviewing with [CEO] John Swainson, he was able to paint a vision of how he expected to see this company grow in a consolidating industry that was very exciting.

   When I was with Price Waterhouse in the national office back in the early 1990s, CA was one of the fastest-growing, most admired companies. So this is a company that, except for a few executives losing their moral compass, or whatever term you want...