San Diego Union Tribune

June 9, 2007

Auditor issue stirs 1st SAIC stockholders' meeting

By Paul M. Krawzak
COPLEY NEWS SERVICE

 WASHINGTON – During its first stockholders' meeting as a publicly traded company, SAIC yesterday shortened its board members' terms to one year and defended its rehiring of an independent auditor.

The San Diego-based defense contractor, also known as Science Applications International Corp., re-elected three board members, including CEO Ken Dahlberg, who doubles as chairman of the board and is now the only employee of the company who sits on the board.

The company also added retired Air Force Gen. John P. Jumper to the board to replace J.P. Walkush, an executive vice president at the company.

About 80 shareholders showed up for the meeting, which proceeded smoothly without any objection until Ralph Siver, a shareholder and former employee, stood up.

Siver questioned the reappointment of Deloitte & Touche LLP to perform the yearly audit.

Noting the accounting firm has served as SAIC's independent auditor for several years, Siver said not changing auditors could lead to “too close of contact” between the auditor and company, compromising the integrity of the audit.

“The value of our holdings in the company are most sensitive to our reputation,” Siver said.

Wolfgang Demisch, a board member who serves on the board's audit committee, responded that the practice of changing the Deloitte managing partner in charge of the audit every five years prevents undue familiarity from developing between employees and auditor.

Demisch said he was reluctant to change auditors frequently because SAIC is “not a simple company.”

“It is complex, it is difficult, it is lots and lots of judgment,” he said.

After the meeting, Dahlberg said he was pleased the proposal to shorten board members' terms received the necessary two-thirds vote to pass.

“It's just good governance that we have all directors stand for annual elections,” he said.

Dahlberg also defended the transition away from past boards that had heavy representation from company executives.

“More independent directors with a variety of skill mix and experiences helps me, helps the company better develop a strategy for long-term success,” he said.

Dahlberg said the consolidation of several classes of employee-owned preferred stock into a single series would not have any impact on the owners. The stock was separated into four series, each with a different date when it could be sold, to promote orderly trading when the company went public last year, according to SAIC financial statements.

Under that plan, all of the stock would have been able to be sold as of Oct. 8. That will not change under the consolidation.

SAIC's stock closed at $18.04 per share, up 7 cents.