Salesforce faced backlash from its investors as they voted against the company’s compensation plan for top executives. The resolution to approve the compensation received a significant number of votes against it, highlighting concerns raised by shareholder advisory groups regarding equity awards granted to CEO Marc Benioff. Despite the board’s encouragement for shareholders to vote in favor of the resolution, two prominent shareholder advisory firms, Glass Lewis and Institutional Shareholder Services, recommended against it.
For the 2024 fiscal year, CEO Marc Benioff received a total pay of $39.6 million, up from $29.9 million in the previous year. While Benioff’s salary remained unchanged at $1.55 million, he received additional stock and option awards, as well as nonequity incentive plan compensation. The resolution also included security fees that were previously not invoiced to the company. Moreover, in January, the board’s compensation committee granted Benioff a second long-term equity award worth $20 million, citing the company’s successful transformation actions and strong financial performance.
Glass Lewis expressed its reservations about the discretionary equity grants given to Benioff in January, emphasizing a lack of a fully convincing rationale behind the grants. The advisory firm highlighted that Benioff was already one of the largest shareholders of Salesforce, holding a stake of over 2% valued at close to $6 billion. Glass Lewis deemed the additional performance-based restricted stock units and stock options as unwarranted, stating that Benioff’s interests were already aligned with those of shareholders.
Nonbinding Vote and Future Considerations
The vote on the compensation plan at the annual meeting was nonbinding. In response to the investor disapproval, Salesforce’s board acknowledged the feedback and expressed the intention to consider the outcome of the vote when making future executive compensation decisions. While the company refrained from commenting on the situation, it emphasized the value placed on the opinions of its stockholders.
Despite the controversy surrounding executive compensation, Salesforce’s financial performance in the 2024 fiscal year was notable. The company’s shares rose by 67%, marking the strongest performance since 2011. Additionally, net income surged to $4.1 billion from $208 million a year earlier, while revenue increased by 11% to $34.9 billion from $31.4 billion. However, in January 2023, Salesforce announced layoffs affecting 10% of its employees in response to demands from activist investors seeking a better balance between profit and growth. Subsequently, in February, the company announced its decision to start paying dividends to shareholders. Despite the positive financial indicators, Salesforce shares experienced a 2.6% decline year to date.
The controversy surrounding Salesforce’s executive compensation plan underscores the significance of transparency and alignment with shareholder interests in corporate governance. The board’s response to investor feedback and the future actions taken by the company will be crucial in maintaining stakeholders’ trust and confidence in Salesforce’s leadership and decision-making processes.
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