Siebel settles suit, adopts new governance rules

Siebel Systems Inc. said Tuesday it is adopting several new corporate governance initiatives in the wake of a just-settled lawsuit that charged the company’s board with excessively compensating Chairman and Chief Executive Officer (CEO) Tom Siebel through stock options grants.

The lawsuit, filed last year by the Teachers’ Retirement System of Louisiana, sought the recession of certain options, along with compensatory relief. Siebel, based in San Mateo, California, canceled 26 million of its CEO’s options in January, a move it said was unrelated to the shareholder suit. A judge ruled last month that the retirement system could proceed with its suit and seek punitive damages if it prevailed.

As part of its settlement agreement with the retirement system, announced Tuesday, Siebel will reimburse the organization for its legal fees, up to $900,000. The Teachers’ Retirement System of Louisiana is satisfied with the changes being made to Siebel’s board and governance provisions, the retirement fund’s General Counsel Tommy Reeves said in a prepared statement.

Those changes include the addition of a new board member, to be nominated at the company’s next annual stockholders’ meeting. Siebel will also expand the size of the board’s compensation committee and ensure that only outside directors serve on the committee. It will disclose annually the value of options granted to directors and the company’s five highest-paid employees, and will limit the compensation of its directors to a preset level disclosed in advance to shareholders.

Tom Siebel is currently drawing $1 in annual base salary from his company, as he struggles to reverse a trend of sharply declining income and revenue in the face of a difficult environment for enterprise software sales. His cancelled options, which represented all the shares he had been granted since October 1998, had a market value of $56.1 million at the time of their cancellation, according to a Siebel regulatory filing.