Dell (DELL): How I Voted – Proxy Score 71

Dell-symbol$DELL is one of the stocks in my portfolio. Their annual meeting is coming up on 10/17/2013. had collected the votes of three funds when I checked and voted on 10/9/2013.  I voted with management 71% of the time.  View Proxy Statement. I took a little less time in analyzing the proxy since the company is being sold to Michael Dell and the investment firm Silver Lake Partners for $24.9 billion and the votes will likely have little real impact, other than voicing opinions.

On the basis of public statements made by Icahn and SEC filings, it appears he no longer will attempt to nominate directors at the meeting and it is likely to be uneventful.  Nonetheless, I have a proposal on the proxy and you never know what might happen.

Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.
Dell’s Summary Compensation Table shows Michael S. Dell, CEO/Chair, was the highest paid named executive officer (NEO) at about $13.9M in 2013. I’m using Yahoo! Finance to determine market cap ($24B) and Wikipedia’s rule of thumb regarding classification. PG is a large-cap company. According to Equilar (page 6), the median CEO compensation at large-cap corporations was $9.7 million in 2012.

www3.gmiratingsDell’s pay was over that medium and I am generally voting against such pay packages in order to discourage continuous ratcheting up unless there are unusual circumstances. That sense was reinforced by an observation by GMIRatings that “CEO remuneration practices at Dell do not appear to be well aligned with sustainable shareholder interests.” For these reasons, I voted against the pay plan and against all members of the compensation committee, since they recommended the plan to the full board.  Compensation committee members included:

  • Shantanu Narayen, Chair
  • Gerals J. Kleisterlee

I am also concerned that GMI assigned a “D” rating to the Dell board. Additionally, I support CII’s policy:

Companies should establish and publish guidelines specifying on how many other boards their directors may serve. Absent unusual, specified circumstances, directors with full-time jobs should not serve on more than two other boards. Currently serving CEOs should not serve as a director of more than one other company, and then only if the CEO’s own company is in the top half of its peer group. No other director should serve on more than five for-profit company boards.

That would provide another reason for voting against Narayen, since he is a CEO and sits on three boards. Dell Inc.’s ISS Governance QuickScore as of Oct 1, 2013 is 5. The pillar scores are Audit: 1; Board: 7; Shareholder Rights: 2; Compensation: 8. Brought to you by Institutional Shareholder Services (ISS) Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures.

Of course, I voted in favor of my own proposal to provide shareowners the right to act by written consent, which is plainly good governance.

How I voted (CorpGov) below:

1.1Elect Director Donald J. CartyForForAgainstFor
1.2Elect Director Janet F. ClarkForForForFor
1.3Elect Director Laura ConigliaroForForForFor
1.4Elect Director Michael S. DellForAgainstForFor
1.5Elect Director Kenneth M. DubersteinForForForFor
1.6Elect Director Gerard J. KleisterleeAgainstForForFor
1.7Elect Director Klaus S. LuftForForForFor
1.8Elect Director Alex J. MandlForForForFor
1.9Elect Director Shantanu NarayenAgainstAgainstForFor
1.10Elect Director H. Ross Perot, Jr.ForForForFor
2Ratify AuditorsForForForAgainst
3Advisory Vote to Ratify NEO Pay PlanAgainstAgainstForFor
4Provide Right to Act by Written ConsentAgainstForForFor


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