Tuesday, 15 May 2012

CSC announces Paul Saleh’s as CFO and files details of his compensation package

CSC has appointed Paul Saleh as Chief Financial Officer (CFO), effective May 23, 2012 taking over from Michael Mancuso who will retire.

He was previously CFO of Gannett, a newspaper group, having earlier worked for Sprint Nextel, Walt Disney and Honeywell.  His employment agreement was filed with the SEC on 14 May 2012. Here are some key elements of his compensation package:

·         His base salary is US$750,000 pa, to be reviewed annually.

·         His on-target annual bonus is 100% of his base salary ($750,000).

·         Grant of an “Annual equity” share award with a value of US$2.8million per year for 3 years.   

·         Grant of  an Inducement share award (a “Golden Hello”)  of 35,000 shares vesting in May 2015.  At a current price of $26.50 per share the value of the shares covered by this agreement would be about US$925,000.   

·         An unspecified number of Career Shares vesting in May 2017.

·         Various provisions regarding termination of employment, change of control of CSC , confidentiality agreements, etc.

Further details of this SEC filing can be found on: http://biz.yahoo.com/e/120514/csc8-k.html

CSC’s announcement of  Paul Saleh’s joining them can be found on:  http://finance.yahoo.com/news/csc-names-paul-saleh-vice-130000591.html

CSC CEO Mike Lawrie describes Saleh as  “exactly what we had in mind when we set out to find a new CFO”.  We shall find out over time what this means. 

We had similar praise in the announcement of Mike Mancuso joining CSC in 2008 and look at the legacy he has left; significant accounting irregularities, an Audit Committee investigation, the need to restate prior periods’ financial statements, inability to certify to the SEC that the financial statements could be relied upon for a period of time, multiple profit warnings, significant and unexpected write-offs, major shortcomings in project control, shareholder class-action lawsuits, an SEC investigation and massive operating losses.

It seems as if what Mancuso brought to CSC was too much “Laphen compatibility” and a complete absence of self-doubt.  His departure is at least two years overdue and a change of approach is needed.

Paul Saleh is an unknown quantity, and it is not clear how relevant his previous industry experience is to a struggling IT Services company.  It looks like CSC placed finance function skills above IT industry knowledge in the requirements for the job. This makes sense given the doubts about CSC’s finance function’s fitness for purpose today.  

Even if Paul Saleh is not the superman CSC’s announcement suggests, he must surely be an improvement on Mancuso.  We hope that Saleh will challenge Mike Lawrie  if and when it is needed.  CSC has suffered for too long from an all-powerful CEO who tolerated no disagreement, and whom nobody seemed to dare question.

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