Quarter of investors: Thumbs-down to Michael Dell

Most Dell investors still support CEO Michael Dell's re-election to the board, but a sizable 25 percent vote against him.

Lance Whitney
Lance Whitney Contributing Writer
Lance Whitney is a freelance technology writer and trainer and a former IT professional. He's written for Time, CNET, PCMag, and several other publications. He's the author of two tech books--one on Windows and another on LinkedIn.
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Investor frustration with Dell has now hit its founder and CEO.

Dell CEO Michael Dell
Dell CEO Michael Dell Dell

Twenty-five percent of Dell stockholders voted to withhold support for Michael Dell to serve on the board of directors at a Dell investor meeting on Thursday. The figure represented 377.8 million of 1.5 billion votes.

Though 75 percent approved retaining Dell as chairman, the "protest" vote was a clear signal sent by unhappy shareholders to the company, according to Patrick McGurn, special counsel for ISS, a proxy-advisory firm.

McGurn told The Wall Street Journal that any withhold vote over 20 percent is "something that boards take notice of and pay attention to."

For Michael Dell, who is clearly identified with the company as its founder, "it has to be a wake up call," added McGurn. Between 2005 and 2009, Dell never received more than 4 percent of votes withheld, according to ISS.

In response to the shareholder vote, Dell issued the following statement: "The Dell Board of Directors recently expressed its unanimous confidence in Michael Dell's leadership of the company. A majority of shareholders agreed and last week reelected Mr. Dell to the board."

But the lagging support from some investors comes amid a variety of problems and challenges for the PC maker. Though the past few quarters have seen a rebound in earnings and sales, Dell was hit hard by the economic downturn and is still struggling to bounce back.

Beyond its financial performance, the company has been mired in regulatory and accounting scandals. It recently paid $100 million to settle a complaint from the Securities and Exchange Commission that it had received payments from Intel to snub processors from rival Advanced Micro Devices. Separately, Michael Dell also agreed to pay a $4 million civil penalty.

Referencing the SEC payment, two large labor unions--the American Federation of State, Country and Municipal Employees and the American Federation of Labor and Congress of Industrial Organizations--had both urged investors to vote against Michael Dell in a letter sent August 3.

The company has also been involved in a lawsuit with Advanced Internet Technologies in which it is accused of withholding documents and communications related to a problem of defective capacitors on PC motherboards several years ago. Dell has denied charges that it knew about the faulty components but told its service staffers to deny the defect in their dealings with customers.

Once the world's biggest PC vendor, Dell is now in third place behind Hewlett-Packard and Acer. The company has been trying to expand its market through a series of acquisitions, buying Perot Systems last year for $3.9 billion and just agreeing to scoop up storage vendor 3Par for $1.15 billion.

Updated 8/19 at 3:15 a.m. PDT with response from Dell.