The members of the Board of Directors at Gateway are elected by shareholders to advise and oversee management who account for the day-to-day operations and management of Gateway (http://www. gateway. com/about/corp_responsibility /guidelines/shtml).

The Gateway board members also have specific duties which include: the selection, compensation, and annual evaluation of the performance of the CEO and executive management, and oversight of the their succession plans, review of Gateway’s financial performance on a regular basis, review of the processes in place to ensure the integrity of Gateway’s financial and accounting systems, and the review and approval of Gateway’s long-term strategy. The current Gateway board is composed of six directors. Five of these are independent directors, and the sixth is Gateway’s CEO, Wayne Inouye. This makes about 83% of the board external.However, looking at other firms within the industry Dell has ten directors (8 independent and 2 not), Hewlett-Packard has nine (8 independent and 1 not), and IBM thirteen (12 independent and 1 not). This shows that though Gateway’s external director composition is about average in the industry, it has far less directors than other firms on average within the industry. The directors at Gateway are required to have significant experience in commercial, industrial, technology, educational, government, charitable, not-for-profit and/or other relevant sectors, in order for them to successfully oversee management at Gateway.Directors are also required to have demonstrated integrity and honesty, reflect diversity, and express commitment to dedicate time and resources to the Board.

The Board of Directors at Gateway varies greatly and has assorted backgrounds. Of the six directors, four of them are CEOs or have been a CEO of a company. Of the other directors, one is a partner in a law firm and the other is a partner in an accounting firm (http://www. gateway. com/about/investors /board. shtml). Being that the majority of the directors are CEOs or have been a CEO, it can be concluded that they have the four functional areas of management covered.;not really.

Since management is the problem in the firm, looking close at the skills was a challenge of the project. Looking at other firms within the industry, it can be seen that Dell, HP, and IBM all have a board made up of people with the same type of skills and experience as Gateway. Many directors on the boards for all these companies are CEOs of other organizations and have diverse backgrounds. At Gateway it is believed that the directors should hold a meaningful equity ownership position in Gateway.The directors are encouraged to acquire stock within three years of first becoming a Director, and to hold Gateway common stock equal to the lesser of $25,000 or 10,000 shares (Gateway Governance Guidelines) However, Ted Waitt, Chairmen of the Board, owns more than this amount because of his position as former CEO of the company. Together the board owns about 30% of their common stock.

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The majority of this number is coming from Ted Wait who owns 28. 8% (Gateway’s 2004 Proxy Statement). Dell’s board in comparison owns only 10. 7% of their common stock. (SEC Filing Form 10-Q FY05-Q2).In accordance with Agency Theory, excluding Ted Waitt, the directors on the board do not own a significant portion of stock and they are more likely to not act in the best interest of other shareholders but for Gateway itself.

Ted Waitt, though he owns a significantly large amount of the company, because he started the business it is more likely that he will not act in the best interest of the shareholders but for the company. However, he could be more risk-averse than other board members. agree The Board of Directors at Gateway has a high involvement in the operation of Gateway.The board is required to meet at least six times per year in regularly scheduled meeting. Quarterly, the board meets in regularly scheduled meetings without the participation of management or other employee directors. There are currently three board committees at Gateway: Audit, Compensation, and Corporate Governance ; Nominating Committee.

Three members serve on the audit and compensation committee, while none serve on the corporate governance ; nominating committee, and all of the members of these committees are independent from the company.During the last fiscal year, 2003 the audit committee met 15 times and the compensation committee met 6 times. Other companies, such as Dell, seem to also have a high involvement between their board and operations within the company. Dell has the same committees that Gateway does, plus an additional one (a Finance committee), in which at least three members are on each committee.

The audit, compensation, and finance committee meets at least 4 times a year. While the corporate governance meets at least 2 times per year, and as a whole board the directors meet at least 4 times per year (http://www1.us. dell. com/content/topics/global.

aspx/corp/governance).Again, all of the members of these committees are independent from the company. The Gateway Board of Directors composition is different from other firms within the industry in that it has quite a few less directors. However, the structure when it comes to experience and knowledge is quite similar to that of other firms within the industry. Nevertheless, Gateway’s board has not managed to do a successful duty at overseeing management who account for the day-to-day operations and management of Gateway.

Gateway’s Board of Directors has not so far created a management team that has successfully accomplished the goals that was put ahead of them. This is probably due to a lack of more directors to help oversee management. Top Management In March of 2004, Wayne Inouye became president and Chief Executive Officer of Gateway after the acquisition of eMachines by Gateway. Inouye replaced Ted Waitt, who was the founder of Gateway, and remains on as chairman of the Board of Directors.Inouye, 52, has numerous decades of senior management experience at outstanding retail companies. Before coming to Gateway, he became the CEO of eMachines in 2001. He is credited for turning eMachines into one of the fastest-growing and efficient PC companies in the United States (http://www.

gateway. com/about/news_info/executive_bios. shtml). Before becoming CEO at eMachines Inouye was the senior vice president of computer merchandising for Best Buy since 1995, and before that he was the vice president of merchandising for The Good Guys! for nine years.Inouye has a great deal of experience dealing with customers and finding out what they want due to his past retailing experience.

He is also familiar with heading a company that is failing and pulling it up to become successful, which he did with eMachines and hopes to do with Gateway (Gateway website). Therefore, Inouye should be sufficiently able to handle the current and future challenges associated with heading Gateway. Dell just recently turned its CEO position from founder Michael Dell to Kevin Rollins in July 2004, who was Dell’s former COO. However, we will concentrate on Michael Dell.

Looking at Michael Dell, age 39, there are not many similarities between him and Inouye in past experience, besides the fact that they both dropped out of college, Michael from the University of Texas and Inouye from University of California at Berkeley. Michael has no other previous history working for another company. He founded Dell in 1984 and made it one of the biggest computer companies in the world.

However, both men are similar in their goal to provide customers with the products and features they want out of a PC at reasonable prices, and to make their companies a success (Dell website).Gateway’s stated vision is to improve the quality of life through technology. Inouye is following in line with this vision. In an interview Inouye was asked “What is your vision for Gateway? ” he responded, “I would like Gateway to be recognized as a global brand and certainly as a provider of very high-quality, affordable products. The near term is centered around PC products-desktops, notebooks, servers and, in the intermediate term, convergence products” (Spooner).

Dell is similar in that he also makes decisions that are in line with Dell’s vision, which is to be the most successful computer company in the world at delivering the best customer experience in the market they serve. Michael Dell is quoted as stating that he started Dell with an unprecedented idea…. “to build relationships directly with customers. ” Now Dell is a lead provider of computer products and services to customers around the world (http://www1. us.

dell. com/content/topics/global. aspx/corp/biographies). Inouye and Dell’s decision-making style is quite different. Inouye has a top-down decision-making style.Inouye has took control of making decisions for Gateway and has brought a lot of his eMachines tactics with him such as, making cuts on excess costs, refocusing the company’s business on meeting customer wants, and allowing research and development to be left to their key component suppliers (Spooner). Michael Dell does not run Dell the same way, because global regions divide Dell and each region has a president and CEO who makes the decisions for their area.

However, they all try to fall in line with Michael Dell’s main decisions to focus on cutting costs and focusing on fulfilling consumer expectations.Looking at both Inouye’s and Dell’s ownership of their companies, it’s seen that Inouye owns . 02 %, totaling 968,339 shares of Gateway’s common stock, while Michael Dell owns 9. 9%, or 245,338,088 shares of Dell’s common stock (Yahoo! Finance).

While Inouye’s ownership is at a low level, Michael’s is fairly high. However, both men will most likely take measures to ensure the maximization of shareholder wealth and make sure their strategies are in line with the companies and shareholders best interest.