Do Dell Directors Want Responsibility for Investor Decisions?
As reported last week, Dell’s legal officer has continued to argue
that the company is not obligated to respond to stockholder
information demands because investors should rely upon the company’s
board to disclose what is relevant to investor decisions.
I have therefore offered to withdraw the demand for records if the
company’s directors are actually willing to accept the fiduciary duty
suggested by this legal theory.
The text of my letter is copied
Conventionally, directors have been relied upon to assure compliance
with reporting requirements and fair disclosure of material
information, and it is assumed that nobody questions the practical
wisdom of that well established duty. What Dell now argues is that the
board should also be relied upon to determine what every investor
needs to know, and that investors should therefore give up their right
to ask questions and get answers.
It is unlikely that this suggested shift in responsibilities would be
welcomed by most corporate directors or by most investors, especially
considering the impracticality of a board’s determining the different
objectives of each company stockholder.
Forum participants with a wide range of perspectives have told me that
a company’s board “can’t be expected to read my mind;” that no
corporate director wants to be burdened with trying to do so; and that
beyond this “implicit limitation of a board’s ability to know” the
interests of each investor, our marketplace depends on the “investor
right to seek clarification, and to verify what is reported.”
The first test of this new theory is with Dell’s board. Its members
must now make a simple choice: either accept responsibility for
investor decisions or respect investor rights to make their own
GL – April 3, 2013
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022
[letterhead of The Shareholder Forum]
April 2, 2013
By email and postal service
Mr. Michael S. Dell
Chairman, Board of Directors
Mr. Alex J. Mandl
Presiding Director and Chairman of the Special Committee, Board of
One Dell Way
Round Rock, Texas 78682
Dear Messrs. Dell and Mandl:
Dell’s Vice President – Corporate,
Securities & Finance Counsel, Janet B. Wright, has argued in
that the company is not obligated to respond to information
demands I have been authorized to make on behalf of a stockholder.
Although most of Ms. Wright’s points can be easily resolved by
lawyers, her substantive argument presents a question that can be
answered only by Dell’s board of directors.
According to Dell’s legal theory, the company is not obligated to
respond to the demand for information because a stockholder should
rely upon Dell’s board to determine what information is needed for
that stockholder’s consideration of the board’s proposed
transaction. This view would necessarily make the board
responsible for determining the particular investor objectives of
each and every company stockholder, and of each stockholder’s
associated decision-making criteria and information requirements.
That is a very significant expansion of board responsibility
beyond the conventional limits of determining the interests of the
corporation. I must therefore ask whether the members of Dell’s
board will in fact accept this new fiduciary duty.
If you inform me that Dell’s directors are assuming the fiduciary
duty to determine each stockholder’s interest, I will respect
their responsibility and withdraw my demand for records.
Otherwise, I will welcome discussions of confidentiality
provisions and procedural arrangements that will allow a Dell
stockholder to get answers to its own questions and assume
independent responsibility for its own interest.
cc: Ms. Janet B. Wright