AFL-CIO, AFSCME Call for Removal of Dell Chairman

by James Parks, Aug 4, 2010

The AFL-CIO and AFSCME  are asking Dell Inc. shareholders to withhold their votes from Michael Dell, the company’s chairman and CEO, at the annual shareholder meeting Aug. 12. The AFL-CIO and AFSCME, which both own Dell shares, say the company would be better served by removing Michael Dell as chairman.

Last month, Dell postponed its annual meeting to give shareholders time to consider a proposed settlement of a complaint filed by the Securities and Exchange Commission (SEC). The SEC complaint alleged that payments from microprocessor manufacturer Intel were improperly disclosed to shareholders and that “cookie jar” reserve accounts had been manipulated. Under the proposed settlement, Dell Inc. agreed to pay a $100 million penalty and Michael Dell agreed to pay a $4 million penalty.

So-called cookie jar reserve accounts refer to an accounting practice in which a company uses generous reserves from good years against losses that might be incurred in bad years. The SEC prohibits cookie jar accounting by publicly traded companies because it misleads investors by understating earnings in good years and overstating in bad years.

 On July 22, Dell Inc. and Michael Dell agreed to settle the SEC’s complaint without admitting or denying the allegations.

 The letter also says:

 As reported by The Wall Street Journal, Michael Dell realized $453.8 million in total compensation including stock option exercises between 2000 and 2009; meanwhile shareholders lost 66 percent of the value of their stock. In our opinion, shareholders should withhold their vote from Michael Dell’s election as director of our company.

Dell Inc. shareholders also will vote on a proposal by the AFL-CIO Reserve Fund that urges an annual advisory vote on executive compensation. The AFSCME Employees Retirement Fund has filed a shareholder proposal to amend the company’s bylaws to provide for the reimbursement of proxy expenses.

 A copy of the AFL-CIO’s letter to Dell Inc. shareholders is available here.

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