IBM board investigating sales reports that led to big paydays for execs

RESEARCH TRIANGLE PARK – The board of directors for IBM is investigating claims that the company’s sales numbers were manipulated so that that company executives could earn large financial bonuses, tech news site The Register reports.

The story cites details from an SEC filing that confirms the probe.

“A special committee of independent directors has been formed to investigate the issues raised in the letter,” IBM says in the filing.

According to reporting from Thomas Claburn of The Register, IBM received a demand letter from attorneys who were representing shareholders in March that alleged the company under both current CEO Arvind Krishna and former CEO Ginny Rometty “deceived shareholders by unlawfully manipulating mainframe revenues in a way that misled investors and inflated executive bonuses.”

The Register said it had been told that IBM’s board had chosen a law firm to investigate the claim.

IBM recently reported quarterly earnings. A recent SEC 10-Q filing from the company notes, on page 38, that the board of directors received a letter on March 25, 2022 “demanding that the company’s Board of Directors take action to assert the company’s rights.”

Ginni Rometty (IBM photo)

And a “putative securities law class action was commenced” against the company in the U.S. District Court for the Southern District of New York on April 5, 2022 that alleged the company misclassified “certain strategic imperatives revenues” with two current senior executives and two former senior executives named as defendants, according to the SEC filing.

The Register reported that those executives named as defendants in the lawsuit are Krishna, Rometty, former CEO Martin J. Schroeter, who is now the CEO of Kyndryl, which separated from IBM earlier this year, and current CFO James J. Kavanaugh.

A spokesperson for IBM did not immediately respond to a request for comment on this story.

IBM operates a large corporate campus in RTP, employes thousands of people across North Carolina, and owns Raleigh-based Red Hat.