Salesforce 2018 Eliminate Supermajority Voting Requirements

Salesforce 2018 Needs Governance Tweaks

The Salesforce 2018 (CRM) annual meeting is June 12. CRM is on the right track. It needs a few good governance measures, including special meeting rights and an end to supermajority requirements. You can vote FOR both in the Salesforce 2018 proxy., inc. (CRM) develops enterprise cloud computing solutions with a focus on customer relationship management. Most shareholders do not vote because reading through 80+ pages of the proxy is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why.

If you have read these posts related to my portfolio for the last 22 years and trust my judgment, go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.

I voted with the Board’s recommendations 94% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

Salesforce 2018: ISS Rating

From the Yahoo Finance profile:, inc.’s ISS Governance QualityScore as of May 1, 2018 is 7. The pillar scores are Audit: 2; Board: 5; Shareholder Rights: 6; Compensation: 9.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to Compensation.

Salesforce 2018: Board Proposals

1. Salesforce 2018 Proxy Voting Guide: Directors

Egan-Jones Proxy Services recommends voting Against 1A) Marc Benioff (because combined CEO/Chair inherently conflicted), 1C) Craig Conway, 1D) Alan Hassenfeld, 1G) Sanford Robertson, and 1K) Maynard Webb (because have served more than 10 years, so independence questionable).

Since I voted against the say-on-pay, I also voted AGAINST all members of the compensation committee up for election:

2. Salesforce 2018: Special Meeting

Shareholders are asked to approve an amendment to the Certificate of Incorporation to allow one or more stockholders who own at least 15% of the Company’s common stock to call a special meeting. Egan-Jones opposes providing such a right to shareholders with less than 25% of shares. That does not make sense to me. Emergencies happen and getting 15% to agree to the need for a special meeting is a high bar. A majority of shares were voted last year in favor of my proposal to provide this right, so of course I voted For.

Vote FOR.

3. Salesforce 2018: Stock Plan

Egan-Jones advises, “taking into account the maximum amount of effective dilution this proposal could cause, as well as both the quantitative and qualitative measures outlined below, we believe that shareholders should support the passage of this plan as proposed by the board of directors. They recommend For.

Vote FOR.

4. Salesforce 2018: Ratify Auditors

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest. However, Egan-Jones notes the auditor has served for more than seven years, so believes independence is compromised. I also believe that the companies should consider the rotation of their audit firm to ensure auditor objectivity, professionalism and independence. I have not set a specific number of years. In this case I voted FOR.

5. Salesforce 2018: Executive Compensation

Salesforce’s Summary Compensation Table shows the highest paid named executive officer (NEO) was Chairman of the Board and CEO Marc Benioff at $13.2M in 2017. I’m using Yahoo! Finance to determine market cap ($100.7B) and I am roughly defining large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. Salesforce is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3M in 2014, so pay was over median.

Salesforce shares outperformed the S&P 500 over the most recent one, two, and five year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 30 to 1.

Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measures wealth creation in comparison to other widely held issuers. “Superior” is their rating given on compensation issues for Salesforce and they recommend For the say-on-pay item.Egan-Jones

Given CEO pay only slightly above median pay, growth of the company and low CEO to median employee pay ratio, I voted “FOR” the say-on-pay item. It was close. I could really go either way.

Vote FOR.

Salesforce 2018: Shareholder Proposals

6. Salesforce 2018: Supermajority Vote Requirement

This is my proposal (James McRitchie), so of course I voted For. It is simple good governance, requesting our board take each step necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws.

The Board of Salesforce argues the following items should require a 2/3 vote: (i) removal of any or all directors; (ii) adoption, amendment or repeal of the Company’s bylaws; and (iii) an amendment to certain provisions in the Company’s certificate of incorporation. I disagree and so do many companies. For example, only 16% of companies require a supermajority to remove directors.

The Council of Institutional Investors has the following policy:  “A majority vote of common shares outstanding should be sufficient to amend company bylaws or take other action that requires or receives a shareowner vote.”

Egan-Jones: “We believe that the advantages of eliminating supermajority provisions outweigh the benefits of maintaining it as a voting standard. We believe that a simple majority vote will strengthen the Company’s corporate governance practice. Contrary to supermajority voting, a simple majority standard will give the shareholders equal and fair representation in the Company by limiting the power of shareholders who own a large stake in the entity, therefore, paving way for a more meaningful voting outcome.”

Vote FOR.

7. Shareholder Proposal: Adopt Guidelines for Country Selection

This proposal comes from David Ridenour. “The proponent requests the Board of Directors review the Company’s guidelines for selecting countries/regions for its operations, and issue a report — at reasonable expense excluding any proprietary information — to shareholders by December 2018. The report should identify Salesforce’s criteria for investing in, operating in and withdrawing from high-risk regions.”

Egan-Jones agrees and recommends a vote For. “There is increasing recognition that company risks related to human rights violations, such as litigation, reputational damage, and production disruptions, can adversely affect shareholder value. To manage such risks effectively, companies must assess the risks posed by human rights practices in its operating regions.”

While very sympathetic to Ridenour’s motives, I oppose the proposal. I would hate to see companies not opening businesses in high-risk regions. Businesses can be a force for democracy and human rights in such regions. For more on my logic, read the speech I gave to a conference held by the Asian Development Bank in Shanghai, People’s Republic of China, on May 11 2002. I would be happy to help reframe the proposal.


Salesforce 2018 CorpGov RecommendationsProxy Insight

Proxy Democracy is still down. I am looking for contributions to bring it back to life. Proxy Democracy provided information on votes cast in advance of annual meetings by institutional investors at thousands of companies. If you think that is worthy of financial support, please contact me.

As I write this, Proxy Insight had not yet reported any votes. I expect them to do so by tomorrow. From other sources listed on my Shareholder Action Handbook page, I see Trillium voted For all items except #7, as did Teachers Retirement System of Texas and CPP Investment Board (Canada). I voted the same.

As I was writing this, Proxy Insight posted votes for Texas Teachers, which I reported above. Additionally, Calvert voted similarly but against the stock plan (item #3). CBIS voted like Calvert but also voted against the Auditor.

CorpGov Votes:

  1. Directors: FOR all.
  2. Special Meetings: FOR.
  3. Stock Plan: FOR.
  4. Auditor: FOR.
  5. Ratify Executive Pay: FOR.
  6. Eliminate Supermajority Requirements: FOR.
  7. Adopt Guidelines for Country Selection: AGAINST.

Salesforce 2018: Issues for Future Proposals

SharkRepellentLooking at for other provisions unfriendly to shareowners:

  • Classified board with staggered terms.
  • Plurality vote standard to elect directors with no resignation policy.
  • Directors may only be removed for cause and only by the vote of 66.67% of the shares entitled to vote.
  • No action can be taken without a meeting by written consent.
  • Shareholders cannot call special meetings.
  • Supermajority vote requirement (66.67%) to amend certain charter and certain bylaw provisions.

Salesforce 2018: Mark Your Calendar

Any stockholder proposal submitted for inclusion in the Company’s proxy statement for the 2019 Annual Meeting of Stockholders pursuant to Rule 14a-8 of the Exchange Act should be addressed to the Secretary of the Company at the address set forth above and must be received at our principal executive offices not later than January 1, 2019. In the event the date of the annual meeting is moved by more than 30 days from the one-year anniversary of the date of the 2018 Annual Meeting, then notice must be received within a reasonable time before the Company begins to make its proxy materials available. Upon such an occurrence, the Company will publicly announce the deadline for submitting a proposal by means of disclosure in a press release or in a document filed with the SEC., inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105, Attention: Corporate Secretary.


Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs. For more on the subject, see CEO Pay Machine Destroying America.


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