Comverse's Burdick – chairman or CEO?

Burdick was named CEO in addition to his office as chairman after predecessor Andre Dahan stepped down last March. Comverse's less than satisfactory financial and business state of affairs led the company's board to the conclusion that Burdick, who already knows the ropes of the company's business, would be the right man to take the reins.

New corporate governance code

Burdick's appointment as CEO, in addition to his position as company chairman, posed several problems insofar as the agreement Comverse struck with its shareholders after the backdating scandal in 2006.

Concurrent with the Federal lawsuit against Comverse and its three former executives – chairman and CEO Kobi Alexander, CFO David Kreinberg and senior legal counsel William Sorin, the company's shareholders filed a class action suit against the company and its execs claiming heavy losses due to the options backdating.

Comverse agreed to pay investors $225 million, a large portion of which went to Israeli insurance company Menorah Mivtachim.

As part of the agreement, it was decided that Comverse would adopt a set of 14 rules, one of which stipulates that company directors are independent and that the CEO cannot act as chairman as well, as in the case of Kobi Alexander. Thus, Burdick's position as chairman of the board is in violation of the company's new code of governance.

At the time, Comverse believed that its liquidity problems and lack of growth engines would allow the company to sidestep its new corporate code.

In the end of 2010, the company launched a reorganization campaign, sending home hundreds of employees. The reorganization might yet take some time, but Comverse has already begun operating in a four-division format which includes billing (BSS), mobile internet, value-added services (VAS) and maintenance and management services divisions.

In addition to its downsizing, Comverse sold off part of its stake in subsidiary Verint, unloaded its subsidiary Ulticom and sold land it owned in central Israel.

Room for discretion

Last month, Comverse was relisted on NASDAQ's major exchange after being demoted to the Pink Sheets in February 2007, when the company stopped publishing its financial results after the backdating scandal.

Comverse ended the second quarter of 2011 with an 18% slide in profits to $182 million, as compared with the same quarter last year. Despite the loss, the company posted an operation profit of $9.6 million as compared with the same quarter last year in which it lost $13.2 million. The improvement is mostly attributed to the layoffs.

Comverse said in response, "The corporate governance code leaves the decision whether to allow the same person to serve both as CEO and chairman to the discretion of the directorate."

Burdick enjoyed a $230,000 salary and got a hefty option package worth $266,000 for his role as directorate in 2010. He also received restricted stock worth $47,000. If he navigates the company to achieve its objectives Burdick will also earn a target bonus of $700,000 for 2011.

The company's summon to shareholder reveals the compensation to company execs for 2010, a year in which Comverse was negotiating choppy financial waters, which was why it sent home employees and sold off holdings, as mentioned.

Despite heavy expenses bearing down of the company in 2010, its executive management nevertheless enjoyed a beefy salary. Former CEO Andre Dahan, who stepped down last March, earned $4.3 million in 2010 out of which $908,000 were his basic salary and $800,00 were a chalked up as a performance bonus.

Additionally, Dahan received $2.5 million in stock options and $20,000 towards his automobile expenses. For comparison's sake, Dahan's salary for 2009 cost Comverse $9.3 million and in 2008 - $6.5 million.

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