Go to [www.dell.com/leadership], and read the sections dedicated to Dell’s board of directors and corporate governance. Is there evidence of effective governance at Dell in regard to
- accurate financial reports and controls,
- a critical appraisal of strategic action plans,
- evaluation of the strategic leadership skills of the CEO, and
- executive compensation?
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Question asked by devi_ghimire
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After exploring through the Dell website and the details as listed in the Investors section has been taken into consideration to base this discussion post. Most of the key facts have been considered from their corporate governance principles. Whether or not Dell has effective governance with regard to each of the categories are considered as provided below:
Accurate Financial Reports and Controls
The management team at Dell pens the financial statements every quarter and also on an annual basis. These reports are then reviewed, understood and approved by the board before release. Further, there’s a separate team formed as part of the process called audit committee. The role of this committee is to assist the members of the board to fulfill their roles and responsibilities to oversee things with regard to the financial reports and other disclosers that are to be shared to the stakeholders (Dell Inc, 2018). It works as an internal control to ensure that the correct information is passed on. The committee also has additional roles like ensuring that the standards of accounts and reports are met, analyzing the risk that the company is exposed to, forecast the effect that the purposed or new addition might bring to the business and as such.
A Critical Appraisal of Strategic Action Plans
The management team and the board both are involved in the process of forming and implementing a strategic action plan. It first starts with the management team which is responsible to come up with a long-term strategic action plan along with annual operation plans. Those plans are then presented by the management team to the board which would review and suggest changes if needed (Dell Inc, 2018). Once all the suggestions are incorporated, the board approves the action plan. The management team now is responsible to implement and execute the approved plans. Once in action, if any changes are to be made, the management team makes a suggestion to the board which would either suggest an improvement or approves or reject the recommendation as per their understanding of the need. Once the recommended is accepted, the management team is tasked to incorporate the change in the system accordingly and execute it.
Evaluation of the Strategic Leadership Skills of the CEO
The company board serves as the judge when it comes to the overall plans, performance, and operation as a whole. The leadership development and compensation committee along with all of its other work is also responsible to have a succession plan in place for the company leadership along with evaluating the achievements of the CEO and passing it on to the board. The board than bases its decision on the report as presented by the committee. The evaluation of the CEO and other leaders are done on a yearly basis. If the performance of the CEO isn’t up to mark, the decision of termination is taken by the board. The decision to continue with the same CEO is in their control as well (Charan, 2016).
The leadership development and compensation committee plays a role in executive compensation as well. Their task with regard to this is to check the amount and type of compensation on behalf of the board that is to be paid to the executive staffs of the dell and all other staff as well (Dell Inc, 2018). They also come up with the bonuses and equity compensation that is to be paid out to the executives. They basically admin the company’s equity and benefit compensation.
Does Dell have effective governance?
Will all things considered and analyzing what Dell, as a company does in each of the four components, looked into, Dell indeed practices effective governance. The roles and responsibilities have been split across multiple smaller committee to recommend to the upper management for the decisions which help to streamline the process as well. All those processes and steps necessary are well defined as well to make things simpler. So, based on the findings for each of the criteria, there is ample evidence to suggest that Dell infact have effective governance.
Charan, R. (2016). The Secrets of Great CEO Selection. Retrieved from hbr.org/2016/12/the-secrets-of-gre...
Dell Inc. (2018). Retrieved from http://euro.dell.com/content/topics/global.aspx/about_dell/investors/corp_gov/corp_gov?c=eu&l=en
Dell Inc. (2018). Retrieved from http://euro.dell.com/content/topics/global.aspx/about_dell/company/leadership/email?c=eu&l=en&s=gen
Michael Dell founded Dell Computer Corporation, in 1984 while a student at the University of Texas at Austin. Operating from Michael Dell’s off-campus dormitory room. The startup aimed to sell IBM PC-compatible computers built from stock components. Michael Dell started trading the belief that by selling personal computer systems directly to customers, PC’s could better understand customers’ needs and provide the most effective computing solutions to meet those needs. Michael Dell dropped out of school in order to focus full-time on his fledgling business, after getting about $1,000 in expansion-capital from his family (Wikipedia., 2016). This firm has got more than 106,495 staffs and its net revenue was $54.9 billion in 2016. Dell offers products in desktop computers, business servers, network switches, storage area networks, high performance gaming systems, etc.
Accurate financial reports and controls:
Dell has started corporate governance policies and has adopted many policies on executive compensation and securities trading. The main strength of Dell is its Direct Sale Model (Achtmeyer., 2012). Now a days Dell become a popular brand and it has a strong Customer Relationship Management (CRM). This company is considered to be highly ethical.
A critical appraisal of strategic action plan:
Dell provides equal opportunity to all of its staffs. There is no racism or gender inequality in Dell. In dell, there have employees in different cats, gender, ethnic and geography. They believed that different diversify situation only creates the innovation. Innovation is essential for technology improvement. So they respect each other and they categorize their employees on the basis of performance rather than other things. All of Dell’s strategic action plans are made by management and then approved by board.
Evaluation of the strategic leadership skills of the CEO:
At the time of establishment time of dell, the market was totally dominated by IBM. But CEO of Dell, Michele Dell used low - cost direct marketing strategy to undersell better known computer being sold through high - overhead deals networks. As a result dell computers are top brand name and it is in top position (Dudovskiy, 2015). I think Michael Dell has great strategic leadership skills like seeing great opportunities to provide cheaper computing, learning quickly from mistakes, quickly changing with the environment, asks his staffs on decision making, etc (Murphy, 1990).
There is an executive committee which has the responsibility of approving all compensations of the board members. So that, the board member and the management are jointly responsible for managing and operating Dell’s business with the highest standards of responsibility, ethics and integrity.
The element that determines an organization’s success or failure is the strategy it follows. Dell’s business strategy is a successful cost leadership strategy. The company’s formula for success has been based upon its unique customization, delivery and cost proposition. Dell integrates its cost leadership skill with differentiated product features and related services to create value for its customers and achieve the benefits of an integrated cost leadership differentiation strategy.
Achtmeyer. (2012). Dell Computer Corporation, Center for Global Leadership. Retrieved from Tuck School of Business, mba.tuck.dartmouth.edu/pdf/2002-2-... .
Dudovskiy, J. (2015). Dell SWOT Analysis. Retrieved from Research Methodology: research-methodology.net/dell-swot... .
Murphy, M. C. (1990). CEO Incentives–It’s Not How Much You Pay, But How. Harvard Business Review, hbr: hbr.org/1990/05/ceo-incentives-its... .
Wikipedia. (2016). History of Dell. Retrieved from Wikipedia: en.wikipedia.org/wiki/History_of_Dell .
There are 11 members in Dell’s board of directors. Michael Dell the founder and CEO leads the team with his members all being experts and experienced in their allocated field of responsibility. Every member is given a specific task and governance to which they are fit for and either have given over a decade working in DELL or have proven their expertise in other organizations and shown similar traits after moving to Dell. For example Allison Dew responsible for the global marketing organization joined in 2008 and have contributed to data driven marketing, understanding customer perception and integrated planning. Previously she worked in the marketing leadership role in Microsoft. Jeff Clarke on the other hand is the Vice Chairman, Products and Operations and is responsible for Dell’s global supply chain. He joined Dell in 1987 as a quality engineer, has spent over 30 years in the company and knows intricate workings of the company. He used to work in Motorola prior to joining Dell. Let us see how effective governance is at Dell in regards to the following.
Accurate Financial Reports and controls
Generally speaking the CEO and CFO (Mr. Sweet in case of DELL) are the main responsible people for overseeing financial reports and controls. With them the other BOD members also have responsibility to ensure and oversee that the company is exercising sound financial practices (Gamble, Peteraf, & Thompson Jr, 2015).
Concerning the effective governance at Dell in regard to accurate financial reports and control it is seen that Dell has given the responsibility of corporate controller and chief account officer to Mr. Thomas W. Sweet a 16 year employee working in the same organization growing through the ranks and has been handling global accounting, tax, treasury and investor relations, as well as global financial services in the past years. (Round Rock, 2014)
Dell has two sub committees in regard to financial aspects of the company. One is the audit committee which helps in providing oversight to the BOD in relation to the financial statement and other disclosures to be done to the shareholders, internal control and audit process. The other committee is the Finance committee which oversees all areas concerned with corporate finance such as capital structure, banking, foreign exchange and share repurchase (Dell, 2018). "Anyone who has a concern about Dell’s conduct, accounting, financial reporting, internal controls or auditing matters, may communicate that concern directly to the independent directors (through the Presiding Director) or to the Audit Committee (through the committee chair) (Dell, 2018).”
Critical appraisal of strategic action plans
"Many boards have found that meeting agendas become consumed with compliance matters and little time is left to discuss matters of strategic importance. (Gamble, Peteraf, & Thompson Jr, 2015)” Therefore strategic plans are done outside the regular work of the organization as a refresher or retreat. The strategic plans are conducted every five years. Their strategic plan of converting the public company into private company was completed recently in which all the BOD members played their part to support with the transition.
Evaluation of the strategic leadership skills of the CEO
The board members are appraised annually and administered by the Governance and Nominating Committee and the CEO is appraised by the BOD members. This is mentioned in their corporate responsibility and also can be seen in their website. The strategic
The Leadership Development and Compensation Committee shall have the responsibility for recommending the compensation to the non-employee directors. This is done in careful study of the compensation structure of directors in other companies. It is also done to make it transparent and easy for the shareholders to understand and should also be competitive keeping in mind the long term goal of the organization. "On an annual basis, the Leadership Development and Compensation Committee shall review non-employee director compensation and benefits (including insurance and indemnity) with the full Board. (Dell, 2018)”
These show clear guidelines inside Dell company which support in effective governance.
Dell. (2018, September 14). Corporate Governance Principles . Retrieved from Dell, international site: http://euro.dell.com/content/topics/global.aspx/about_dell/investors/corp_gov/corp_gov?c=eu&l=en
Gamble, J. E., Peteraf, M. A., & Thompson Jr, A. A. (2015). Essentials of Strategic Management The quest for competitive management. NewYork: McGraw-Hill Education.
Round Rock. (2014, January 4). Dell Names Thomas W. Sweet Senior Vice President and Chief Financial Officer . Retrieved from Dell, Financial News: dell.com/learn/us/en/uscorp1/secur...
Sweet, T. (2018, September 14). Tom Sweet . Retrieved from Linkedin: linkedin.com/in/tom-sweet-1690929
Corporate governance is primarily related with the role of board of directors (BoD) in the process of formulating and executing corporate strategy (Gamble, Petaraf, & Thompson, 2015). The factors that affect the way a company is directed, administered or controlled like the processes, customs, policies, laws and administration constitute the corporate governance. The broad categories for analyzing the effectiveness corporate governance consists of auditing, board and management structure and process, corporate responsibility and information disclosure and ownership structure and exercise of control rights (Raut). As asked by the question, governance of Dell with regards to major obligations is discussed below:
Accurate Financial Reports and Controls
If we go through the website of Dell, we can see that the company publishes audited quarterly as well as annual financial reports after they are reviewed and approved by Board of Directors . The Audit Committee consisting of at least three members from BoD and others appointed by the Governance and Nominating Committee is responsible to look after the financial statements and reporting. It is the responsibility of the team to maintain integrity of the financial statements as well as financial information provided to stockholders and other parties to ensure communication of accurate information. For this, the committee is continuously involved in reviewing financial reporting policies and practices, effect of changes in auditing, accounting and reporting standards and financial risks and exposures along with the techniques to deal with them (Dell, n.d.). This serves as evidence of accurate financial reports and controls.
Critical Appraisal of Strategic Action Plans
There is the provision of finance committee consisting of minimum of two members from BoD and others appointed by Governance and Nominating Committee in Dell. The major responsibility of this committee is to review and approve the strategies, plans, policies and actions relating to corporate finance. The strategies related with capital structure, capital expenditure, corporate financing, cash management, banking activities, investments and foreign exchange are presented by management to the committee and if the committee approves it, they can be executed . The committee needs to report to BoD on regular basis that make the process more reliable (Dell, n.d.).
Evaluation of Leadership Skills of CEO
There is a leadership development and compensation management committee comprising of at least two members from BoD and others nominated by Governance and Nominating Committee in Dell. One of the responsibilities of this committee is evaluating and discussing the performance chairman, CEO along with other executive officers on the basis of current business environment and strategic objectives every year. The leadership ability of CEO is accessed based on the strategies, performance and effectiveness of the decision s/he makes for the company. it helps to ensure that the company has capable leadership to help it in heading towards the right direction. If the CEO performance of CEO is not as expected, The BoD can appoint another CEO with the help of succession planning and leadership development strategies (Dell, n.d.).
The leadership development and compensation committee discussed earlier is responsible to review and approve the amount and types of compensation of the executives. It acts as the administrator of company’s compensation plan and decides on the salary, benefits and equity compensation guidelines on behalf of BoD. The company policies ensure that the compensation paid to executive is transparent, fair, competitive and align with long-term interests of the corporation (Dell, n.d.).
Thus, the above discussions serve as evidence of effective governance in Dell.
Dell. (n.d.). Audit Committee . Retrieved from Corporate Governance Principles: http://euro.dell.com/content/topics/global.aspx/about_dell/investors/corp_gov/audit_comm?~ck=ln&c=eu&cs=uscorp1&l=en&lnki=0&s=gen
Dell. (n.d.). Finance Committee . Retrieved 2018, from Corporate Governace Principles: http://euro.dell.com/content/topics/global.aspx/about_dell/investors/corp_gov/fin_comm?~ck=ln&c=eu&cs=uscorp1&l=en&lnki=0&s=gen
Dell. (n.d.). Leadership Development and Compensation Committee . Retrieved 2018, from Corporate Governance Principles: http://euro.dell.com/content/topics/global.aspx/about_dell/investors/corp_gov/compen_comm?~ck=ln&c=eu&cs=uscorp1&l=en&lnki=0&s=gen
Gamble, J. E., Petaraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.
Raut, S. (n.d.). Corporate Governance - Concepts and Issues. Retrieved 2018, from iodonline.com/Articles/Corporate%2...