Dell investors question executive compensation

If Dell's stock has gone down, why does it look like the overall compensation of the company's executive team gone up this year?

That was the most contentious question raised at Dell's annual shareholder meeting, held Friday morning at the Austin Convention Center. An investor who didn't identify himself asked politely why, when gross margins, operating margins, earnings per share, and market share had declined in 2009, it looked as if executives were getting more in return.

"Shareholders who held stock for 12 months lost half their money," the man said from the Austin, Texas, audience. "Stock was down 50 percent, thousands of employees were laid off. Yet I see in most cases, executive compensation is up, in some cases significantly. I'm just trying to understand how something like that can be justified, given that shareholders and employees have suffered so much."

The director of Dell investor relations, Rob Williams, defended the company's performance and tried to put it in context, saying last year was a "shock to global economic markets, and spending for IT hardware declined at a pace that was unprecedented in this company's 25-year history."

Williams pointed out that no top executives, including Chairman and CEO Michael Dell, received pay increases. Dell also did not take a bonus the past two years or get any extra stock, he said. Other executives may have received bonuses "related to their hire" or received company shares as part of a previously arranged grant.

Another investor, Scott Adams of the American Federation of State County and Municipal Employees Pension Plan, rose to ask why Michael Dell's personal security costs the company $1.1 million. "We believe this is excessive," he said. "Only Larry Ellison at Oracle as higher security costs."

Williams said Michael Dell is a public figure and that the board is comfortable with the money it takes to protect him.

The meeting was otherwise fairly innocuous. A stockholder motion was passed that future votes need only a simple majority to pass. All 10 board members were reelected with at least 83 percent approval, according to Williams. And near the end, Dell and CFO Brian Gladden again spoke of the company's desire to make an acquisition that would help the company expand "into new areas," though they were not specific about what those areas would be. But it's clear an acquisition will happen soon.

"If you look at history of Dell, it's a 25-year-old company, and in the last two years we've done nine or 10 acquisitions," said Dell. "It's not been as important in our past as they will be in our future."

Dell will report its second-quarter earnings next month.

This post was updated at 9:28 a.m. PDT with Scott Adams' correct employer.