Two labour unions have asked Dell shareholders to withhold their votes for Chairman and CEO Michael Dell to remain as a director on the company’s board following a US$100 million accounting practices settlement the company made with the U.S. Securities and Exchange Commission.
The AFL-CIO and American Federation of State, County, and Municipal Employees (AFSCME), in a letter to shareholders sent Tuesday, also suggest that Michael Dell’s executive compensation package was excessive during the past decade. Dell, who founded the company in 1984, received more than $450 million, including money through stock option sales, from his company from 2000 to 2009, while his company’s stock value dropped 66 per cent in the same time period, the labour unions said in the letter.
“Based on the allegations in the SEC’s complaint against our Company and Michael Dell, we believe that shareholders would be better served by the removal of Michael Dell as the Chairman of our Company’s Board of Directors,” the letter said. “By voting to ‘WITHHOLD’ from Michael Dell, you can encourage the Board of Directors to appoint a new Chairman.”
The letter asks shareholders to withhold their vote from Michael Dell during a shareholders meeting Aug. 12. Under Dell’s corporate governance rules, Michael Dell would be required to offer his resignation if he does not receive a majority vote, said Brandon Rees, deputy director of the AFL-CIO Office of Investment. The Dell board would then consider whether to accept the resignation.
The unions hold a significant amount of Dell stock, the letter said. The AFSCME Employees Pension Plan holds 48,483 shares and the AFL-CIO Reserve Fund holds 1,302 shares, Rees said. Union members also participate in pension plans that hold Dell stock, he added.
In announcing the SEC settlement, Dell’s board reaffirmed its “unanimous support” for Michael Dell’s leadership, said Jess Blackburn, a Dell spokesman.
The labour unions’ references to Dell’s compensation are “misleading,” Blackburn added. “In fact, he has not received a bonus from the company for four years and hasn’t been granted stock or stock options for six years,” he said. “His compensation total was primarily the result of expiring stock options from the 1990s that he exercised in 2000, 2001 and 2005.”
Dell reached a settlement with the SEC in July over the company’s accounting and financial reporting requirements. The settlement did not restrict Michael Dell’s role as an officer or director of the company, and the company did not admit wrongdoing in the settlement.
The SEC had alleged that the company did not properly disclose payments from Intel for the computer maker’s exclusive use of Intel CPUs. The Intel payments grow from 10 percent of Dell’s operating income in fiscal year 2003 to 76 per cent in the first quarter of fiscal year 2007, the SEC said in its complaint.
The SEC has also accused Dell of manipulating reserve accounts to cover shortfalls in operating results between 2002 and 2005.
