No matter how you look at it, Salesforce CEO Marc Benioff, has had a successful career. He helped build Salesforce from the ground up, starting in a San Francisco apartment in 1999 and eventually building his Salesforce Tower, the tallest building in the city. He took the idea of running software in the cloud and grew it into a de-facto method for delivering software at a time when most companies offered software in a box or on-premises seat with his license. rice field.
There is no denying that he helped transform the way software is bought and sold. However, he is now under strict surveillance. Instead of one, he has two activist investors recently occupying big positions at Salesforce. That means his decisions can be challenged on everything from acquisitions to how budgets are allocated.
For starters, Starboard Value announced in October that it would acquire a sizeable (but private) stake in Salesforce. And just this week, Elliott Management announced it would take the multi-billion dollar position of CRM leader.
Both companies usually have strong opinions about what they think the company needs to fix. In this case, they may want Salesforce to be more profitable and less costly. This could include cutting executive compensation, cutting overhead costs, laying off additional employees, and selling underperforming parts of the organization. Activist investors will likely also seek board seats.
Salesforce has already begun layoffs, announcing earlier this month it would lay off 10% of its workforce. We plan to reduce overall operating costs and increase efficiency while also reducing real estate costs, which may not be enough in the eyes of new investors.
Looking at what Salesforce has done over the past five years, there is certainly room for criticism in terms of the large sums spent on acquisitions and the successful integration and allocation of acquired assets. Elliott and Starboard may have been watching from afar, waiting for the company to weaken and question some of these decisions.
With Salesforce’s stock dropping 29% last year and growth slowing, perhaps these companies saw the moment and acted. What does this mean for Salesforce and Benioff going forward? Let’s find out more.
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When activist investors call, they typically make a list of desired changes and ask for board seats to ensure those changes are implemented.
But this doesn’t necessarily have to take on an immediate hostile tone. A CEO who has been through the activist battle told me his first goal was to find common ground with the activists rather than take a militant stance.
“It’s not exactly about defense. That’s what the industry calls it, but more than that, it’s about understanding what shareholders want and why they want them. And , are they right, and are they aligning the timeframe they want a particular set with perhaps the vision the company has for the long term?” to speak candidly to TechCrunch about the background. said the official, who requested anonymity.
It’s a very political exercise and Benioff will have to read what other big investors are doing and see how all of this fits together. The really important thing is that you need to get very close to the top 20, 30, 50 shareholders and understand what they think best,” said the CEO.
All this information will be incorporated into Benioff’s strategy. If many shareholders agree with the activist, they should be more committed to the activist agenda, but if the activist’s perspective differs from that of other shareholders, there is room to disagree.
“So it’s a very interesting kind of dance, and it’s actually kind of like shareholder democracy to some extent,” the executive said.
That said, Salesforce will likely have to make some concessions.
