News analysis
Activist investors targeting Salesforce as company revamps its board
Activist investors targeting Salesforce isn’t surprising, but the company should tread carefully to avoid unnecessary board battles.
Salesforce has a global presence and is worth over $160 billion. It’s no surprise if significant stakeholders get vocal about how they want the company to function. It’s especially true now, as the company joins many other tech giants in announcing massive layoffs.
Activists see squandered potential and want a company to run correctly. The trouble is that there’s no consensus on what ‘correctly’ truly means. The company will have to strike a careful balance in the meantime.
What’s the latest?
Last Friday, Salesforce named three new board directors. They are:
- Arnold Donald, former President and CEO of British-American cruise operator Carnival Corporation & plc.
- Sachin Mehra, CFO of Mastercard.
- Mason Morfit, CEO/CIO of San Francisco-based ValueAct Capital, which has a portfolio just shy of $10 billion.
Announcing their appointment, all three focused their praise on Salesforce itself, calling it a standout company, a leader in its space, with a strong foundation and ability to innovate.
But while this is going on:
Activist investors targeting Salesforce want a rejig of priorities, and they’ve been growing in number these past few months.
Activist investors – if you need a reminder – are investors who want to change a company’s management structure. Usually, they own enough shares to have a chance of doing so.
You can read more about them here.
In this case, Salesforce is on several activist investors’ radars.
Who are these investors?
The main one is Elliott Management. You might be familiar with it already, as it has a decades-long history of activist investment – enough to strike fear into corporate leaders.
Elliott only finalised a “multi-billion dollar” stake in the company in the last fortnight, and it has gotten busy since.
It publicly said it looked forward to working with Salesforce to “realise the value befitting of a company of its stature.”
Behind the scenes, this translates to “Salesforce isn’t living up to its financial promise, big changes are needed, and we’re the ones to bring them about.”
The other activist investors joining that bandwagon are Starboard Value, Inclusive Capital, and Value Act.
Is Salesforce engaging with them?
Yes and no.
Faced with activist pressure, companies will often institute changes in their own way rather than engage directly with vocal, disruptive critics.
Yes, Salesforce has appointed three new directors, but this was planned for months and long before the recent flurry of activists arriving on the scene. It’s not likely to quell activist pressure, but it may go some way to calm it.
Should Salesforce listen to activists?
The company’s back is against the wall in some respects. It is one of many tech firms to have announced massive layoffs because it ‘over-hired’ during the pandemic. CEO Marc Benioff admitted this earlier this month and took responsibility.
While more honest than other firms, it will likely only spur on activists. So ultimately, ignoring them or acting as if they’re not there may just hinder progress.
Corporate leaders can make all the changes they like in situations like this, but if activists aren’t involved in discussions, it could spell trouble.