The US courts have approved CSC paying just over US$ 97 million to settle the Class Action lawsuit brought by the Ontario Teachers’ Pension Fund and others. The lawsuit alleged that CSC and its CEO of that time, Michael W Laphen, willfully and fraudulently misled shareholders about the real state of the failed NHS project in the UK. The judge agreed with this.
The UK daily “The Guardian” recently reported on the background to the case and the settlement, per the below link:http://www.theguardian.com/society/2013/sep/18/csc-courts-sign-off-payment-shareholders
Let’s look at how the various key figures and groups involved in this episode have fared:
The class action plaintiffs agreed to the settlement, so presumably must feel they got reasonable compensation for the prejudice they suffered.
Former CEO Michael W Laphen has since left the company, helped along by a payoff in excess of US$ 20 million. Additionally CSC is paying him a monthly pension of US$ 81,000 for life. (That makes his pension each year worth $972,000 or $29,160,000 if he takes it for 30 years) Thus Laphen will have collected from CSC $50million dollars after the leaving the company. We are not aware of Laphen having to make any contribution towards the settlement amount. He can stay out on the golf course for the rest of his life and not have to worry about calls from his bank manager.
Guy Hains, the then President CSC Europe, was the senior executive with personal accountability for the NHS project. He left CSC almost 12 months ago. We do not have all the details of his severance package. CSC disclosed that his remuneration for FY2012 was in excess of US$ 2 million. Add to that his remuneration during his tenure as President Europe, and we doubt that he is suffering any kind of financial hardship.
The CSC non-executive directors were supposed to look after the interests of the shareholders, specifically by providing adequate oversight over the senior executives. We look at the amount ofsettlement of the Class Action lawsuit and ask ourselves how the non-executives could have allowed this mess to occur if they were exercising adequate oversight. This seems particularly pertinent in the light of reports alleging difficulties appearing in reputable media sources as far back as 2006.
Two or three of these non-executive directors have since reached mandatory retirement age and have stepped down. The others have been rewarded with a 50% increase in their retainer remuneration. We are not sure what they have done to deserve this.
So the key players in CSC who played a role in the events leading up the lawsuit do not seem to have suffered too much financial damage from the NHS fiasco and lawsuit, while employees who did their bidding are losing out.
So who has suffered?
Firstly, the UK taxpayers have seen literally billions of dollars (or more accurately, pounds sterling) of their money wasted.
We suppose that many of the CSC employees who worked on the NHS project from 2003 onwards (many of whom worked 60 and 70 hour weeks without overtime payments to make this mess work) have now lost their jobs as the company has re-structured and downsized. We wonder how many of these people were amongst the employees who unsuccessfully tried and tried to get CSC senior management to listen to their concerns about the real state of the project.
CSC employees who had never been involved with NHS in any way have also become victims of its failure, being made redundant as a result of the massive financial damage the NHS project did to the company.
And finally, there are the normal CSC shareholders. They saw the value of their investments crash as the company’s NHS propaganda unraveled and CSC’s financial condition with it.
It seems that the CSC top management responsible for the NHS fiasco, and the non-executive directors who were supposed to provide oversight to prevent such disasters, have not sufferedmuch financial damage at all. The losses are borne by the employees and “shareholders on the street” who naively entrusted their investments and careers to the CSC senior executives and Board of Directors.