Salesforce 2020

Salesforce 2020

Salesforce 2020 annual meeting is 6/11/2020 at 2PM Pacific virtually by entering the eligible shareholder’s 16-digit control number found on the proxy card. To enhance long-term value: Vote AGAINST Benioff, Conway, Hassenfeld, Kroes, Robertson, Roos, and Webb, Equity Incentive Plan, Auditor, Executive Pay. Vote FOR Employee Stock Purchase Plan and Written Consent. See list of all virtual-only meetings maintained by ISS. Vote online by 6/10.

Salesforce.com, inc. is an American cloud-based software company headquartered in San Francisco, California. It provides customer relationship management service and also sells a complementary suite of enterprise applications focused on customer service, marketing automation, analytics, and application development. Reading through almost 100 pages of the proxy takes too much time for most. Your vote could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 9 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 31% 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 2020: ISS Ratings

From the Yahoo Finance profile: Salesforce’s ISS Governance QualityScore was not available when I voted my shares. I know my previous proposals helpd them eliminate supermajority requirements and allow shareholders to call special meetings, so I assume their scores are moving in the right direction.

Salesforce 2020: Board Proposals

1. Salesforce 2020 DirectorsEgan-Jones

Egan-Jones Proxy Services recommends Against 1A) Marc Benioff, 1B) Craig Conway, 1D) Alan G. Hassenfeld, 1E) Neelie Kroes, 1G) Sanford Robertson, 1H) John V. Roos, and 1J) Maynard Webb. Benioff largely because CEO and Chair should be split – Conway, Hassenfeld, Robertson, and Webb have served for 10 years or more, so should no longer be considered independent nor should they serve on compensation, audit or nominating committees. Conway, Roos, Webb and Kroes serve on the Compensation Committee, so should be held responsible for approving compensation that needs improvement.

Vote: AGAINST Benioff, Conway, Hassenfeld, Kroes, Robertson, Roos, and Webb.

2. Equity Incentive Plan

Shareholders are being asked to approve an additional 31.5 million shares to employees, directors and consultants and employees and consultants of any parent, subsidiary, or affiliate.

Egan-Jones recommends Against: Taking into account the maximum amount of shareholder equity dilution this proposal could cause, as well as both the quantitative and qualitative measures, we believe that shareholders should not support the passage of this plan as proposed by the board of directors. We recommend the board seek to align CEO pay more closely with the performance of the company and work to reduce the cost of any similar plan that may be proposed in the future.

Vote: AGAINST

3. Employee Stock Purchase Plan

The shareholders are being asked to approve the amendment of the Employee Stock Purchase Plan (ESPP) to increase by ten million shares the number of shares reserved for issuance under the ESPP.

Egan-Jones recommends For:

An Employee Stock Purchase Plan or (ESPP) can be an important tool increasing ownership among company employees. In the US the tax advantages of a qualified plan are compelling… Egan-Jones supports the establishment of such qualified ESPPs unless there is a compelling example of prior abuse or significant reason to expect such abuse in the future. We find no evidence of prior or expected future abuse of this ESPP and note that it appears to meet the requirements of a qualified plan.

I would prefer the ESPP be administered by an employee committee elected by workers, rather than the Board. Such a plan would provide additional incentives to provide more channels of communication between the Board and employees. I am thinking of filing a proposal around this idea in the future.

Vote: FOR

4. Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Ernst & Young LLP has served more than seven years. No other issues appear significant.

Vote: AGAINST

5. Executive Compensation

mylogiq_logo

Salesforce 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair Marc Benioff at $26M. I’m using Yahoo! Finance to determine market cap ($156B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B.  is a large-cap company.

According to MyLogIQ , the median CEO compensation at large-cap corporations was $12.2M in 2019. Salesforce shares underperformed during the last one year time period but outperformed during the last 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 155:1.

Egan-Jones Proxy Services recommends AGAINST:

We believe that shareholders cannot support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are not effective or strongly aligned with the long-term interest of its shareholders.

Given the above median pay, mixed performance, E-J recommendation and my general concerns about inequality, I voted AGAINST.

Vote: AGAINST

Salesforce 2020 Shareholder Proposals

6. Written Consent

This good governance proposal comes from me (James McRitchie), so of course I voted FOR. Many boards and investors assume a false equivalency between rights of written consent and special meetings. However, any shareholder, regardless how many (or few) shares she owns, can seek to solicit written consents on a proposal.

By contrast, calling a special meeting may require a two-step process. A shareholder who does not own the minimum shares required must first obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies asking shareholders to vote on the proposal to be presented at the special meeting.

This two-step process can take more time and expense than the one-step process of soliciting written consents, especially at Salesforce, which allows only investors with 15% of outstanding shares to call a special meeting, instead of 10%, as allowed by many companies.

Proxy InsightLooking up on ProxyInsight, similar proposals won more than 50% of the vote recently at Stanley Black & Decker, Berry Global Group, Flowserve, JetBlue, United Rentals, Capital One, Cigna, Applied Materials and Nuance.

Egan-Jones recomments FOR.

Vote: FOR

Salesforce 2020 CorpGov Recommendations

Looking up a few funds announcing votes in advance, NYC Pensions voted For all items except Hassenfeld, Robertson, Washington, Webb, Auditor, and Pay. Trillium voted For all items except Hassenfeld, Powell, Robertson, Equity Incentive Plan and Pay. Calvert voted For all items except Equity Incentive Plan and Pay.

CorpGov Votes:

  1. Directors: AGAINST Benioff, Conway, Hassenfeld, Kroes, Robertson, Roos, and Webb.
  2. Equity Incentive Plan: AGAINST
  3. Employee Stock Purchase Plan: FOR
  4. Auditor: AGAINST
  5. Executive Pay: AGAINST
  6. Written Consent: FOR

Salesforce 2020: Mark Your Calendar

 Any stockholder proposal submitted for inclusion in the Company’s proxy statement for the 2021 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 December 30, 2020. 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 2020 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

Warnings

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,” chosen by aspiration. 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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