Michael Dell facing shareholder revolt

A quarter of Dell shareholders witheld their support for Michael Dell continuing as chief executive

A quarter of Dell shareholders appear to be disillusioned with chief executive and founder Michael Dell, according to the latest vote to elect the firm's board of directors.

Shareholders controlling 378 million of the company's 1.5 billion shares withheld their vote when asked to endorse Michael Dell's continued presence on the board, according to a US Security and Exchange Commission filing.

A letter (PDF) from the American Federation of State, County and Municipal Employees urged disgruntled shareholders to show their displeasure with Michael Dell's performance as chief executive.

"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 stated.

The letter also quoted the Institutional Shareholders Service, which noted that "[Michael] Dell should be held accountable for the lack of oversight of the company's accounting practices and for his role in disclosure violations".

Nathaniel Martinez, a research director at analyst firm IDC, suggested that the shareholder revolt is probably due to Dell's recent SEC settlement, and the fact that the firm is reported to have knowingly shipped faulty parts.

"Michael Dell has been driving a significant transformation of the business with aggressive acquisitions especially over the past 18 months," he said.

"It is likely that he will continue as chief executive, as it was still only 25 per cent of the shareholders who withheld their votes."

Dell reached a settlement with the SEC earlier this month after an investigation into misleading accounting practices.

The company was accused of taking undisclosed payments from Intel as part of an exclusivity deal which Dell reportedly used to pad out its accounts.

Dell agreed to pay a $100m (£65m) penalty, and Michael Dell agreed to handover $4m (£2.6m) personally as part of the settlement.

Michael Dell founded Dell in 1984 and the firm became the number one computer manufacturer using its innovative build to order strategy.

Dell stepped down as chief executive in 2004, but remained on the board and returned to the position in 2007 at the board's request. He remains the largest shareholder with an 11.7 per cent stake.

Dell responded by telling us that "the Dell Board of Directors recently expressed its unanimous confidence in Michael Dell's leadership".

"The majority of shareholders agreed and re-elected him to the board," the firm added.