DELL » Topics » Supporting Statement

This excerpt taken from the DELL DEF 14A filed Jun 1, 2009.

Supporting Statement

In our opinion, the power of stockholders to elect directors is the most important mechanism for ensuring that corporations are managed in stockholders’ interests. Some corporate law scholars posit that this power is supposed to act as a safety valve that justifies giving the board substantial discretion to manage the corporation’s business and affairs.

The safety valve is ineffective, however, unless there is a meaningful threat of director replacement. We do not believe such a threat currently exists at most U.S. public companies, including Dell. Harvard Law School professor Lucian Bebchuck has estimated that there were only about 80 contested elections at U.S. public companies from 1996 through 2002 that did not seek to change control of the corporation.

The unavailability of reimbursement for director election campaign expenses for so-called “short-slates” – slates of director candidates that would not comprise a majority of the board, if elected – contributes to the scarcity of such contests. (Because the board approves payment of such expenses, as a practical matter they are reimbursed only when a majority of directors have been elected in a contest.) The proposed bylaw would provide reimbursement for reasonable expenses incurred in successful short slate efforts – but not contests aimed at changing control by ousting a majority or more of the board – with success defined as the election of at least one member of the short slate.

The bylaw would also cap reimbursable expenses at the amount expended by the company on the contested election. We believe that the amount spent by a dissident stockholder or group will rarely exceed the amount spent by the company, but the cap ensures that the availability of reimbursement does not create an incentive for wasteful spending.

We urge stockholders to vote for this proposal.

 

 

This excerpt taken from the DELL DEF 14A filed Jun 2, 2008.
Supporting Statement
 
In our view, senior executive compensation at Dell has not always been structured in ways that best serve stockholders’ interests. For example, former CEO and President Kevin Rollins was paid more than $8.5 million in total compensation for 2007 while, in the same year, our company determined the need to restate financial statements relating to Fiscal 2003, 2004, 2005 and 2006.
 
We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide stockholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practice, in the United Kingdom, public companies allow stockholders to cast an advisory vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote is not binding, but gives stockholders a clear voice that could help shape senior executive compensation. A recent study of executive compensation in the U.K. before and after the adoption of the stockholder advisory vote found that CEO cash and total compensation became more sensitive to negative operating performance after the vote’s adoptions. (Sudhakar Balachandran et al., “Solving the Executive Compensation Problem through Shareholder Votes? Evidence from the U.K.” (Oct. 2007).)
 
Currently U.S. stock exchange listing standards require stockholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Stockholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages.


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Similarly, performance criteria submitted for stockholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.
 
Accordingly, we urge Dell’s board to allow stockholders to express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote could provide Dell with useful information about stockholders’ views on the company’s senior executive compensation, as reported each year, and would facilitate constructive dialogue between stockholders and the board.
 
Supporting Statement
 
The well respected Wharton economist Jeremy Siegel explained that paying dividends is the old-fashioned, time-tested way companies show investors their earnings are real and their bottom line is strong. Dividends provide certainty about the company’s financial wellbeing and they are also an attractive tool for investors looking to secure current income. More recently companies without a dividend history are generally received favorably when they declare new dividends. In addition, the percentage of large companies establishing dividends for the first time is significantly higher now that it has been in the past. The majority of Dell’s competitors all pay dividends. Dividends in mature companies that are no longer growing as rapidly as in the past have been a major component of growth in an investor’s return once the rapid appreciation phase is over. At one point in time, Dell was better served by the current policies of reinvestment in growth and returning capital to stockholders and managing dilution through stock repurchase programs. Now as a more mature value company with significant cash reserves the time is right to declare a quarterly dividend.
 
I urge your support for this issue.
 
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