Dell Admits Employee Misconduct, But Was CEO Involved?

Lora Bentley

The Sydney Morning Herald reports that Michael Dell is feeling the heat of the spotlight after his company announced it would restate financial results for a four-year period beginning in 2003. The announcement came at the completion of the company's internal investigation of accounting practices, which revealed that employees fudged the numbers on accruals and reserves or filed incomplete results -- all to meet quarterly earnings goals.


Though company stock soared when the investigation ended, some observers wonder whether Dell investors are taking a big risk with Michael Dell at the helm. Dell served as CEO during three of the four years at issue and was chairman of the board from 2002 into 2006. An analyst from Friedman, Billings, Ramsey & Co. told the SMH:

From an investor standpoint, the risk that Michael Dell is involved is arguably one of the most significant risks remaining in this.

Official word from the company is that Dell was not involved in the misconduct, the story says, but a spokesperson did point out that,"The company's leadership team takes responsibility overall." Securities and Exchange Commission and Department of Justice inquiries into the misconduct are reportedly ongoing.

Add Comment      Leave a comment on this blog post
Aug 21, 2007 2:51 AM vallabh vallabh  says:
The pressure that guidance numbers put on managements is too much and can be avoided. ISn't there talk that the authorities may scrap the requirement for quarterly guidances? However, the point of concern is that tighter compliance needs have only led to 'bigger and deeper' misconduct by businesses. More frightening, from the shareholder point of view, is that internal controls have failed to deliver. That would call for a close review of internal control requirements and putting more responsibility on them. Internal Control function also needs a high degree of independence, if they have to protect the interests of shareholders - which the statutory auditors have all but failed to do. Reply

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