Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Salesforce Board Fought Off Activist Investors
Transcript
- Lucas: Luna, Salesforce's stock dropped 38 percent in 2022. Revenue growth was slowing, costs were ballooning, and the company was spending like crazy on acquisitions like Slack and Tableau. Then the activists showed up. Luna: Elliott Management and Starboard Value took stakes pretty quickly, right? What did the board actually do? Lucas: They didn't just fight — they listened. The board brought in three new directors, including Mason Morfit from ValueAct, who's known for pushing companies to focus on margins. They also launched a ten billion dollar share buyback and cut about ten percent of the workforce. Luna: That's a lot in a short time. How did the board decide which directors to add? Lucas: The nominating committee targeted people with deep experience in software profitability and capital allocation. They didn't just add activists; they added people like Sanford Robertson, a founder of a tech-focused investment bank, and Amy Weaver, who was already inside. The goal was credibility with the market. Luna: So the activists got board seats, but not full control. Lucas: Exactly. Elliott didn't get a board seat — they preferred to engage privately. But the board still shifted compensation metrics. For the first time, a big chunk of executive bonuses tied to return on invested capital, not just revenue growth. That changed behavior fast. Luna: Return on invested capital is a metric that measures how efficiently a company uses its capital to generate profits. For Salesforce, historically, it was pretty low because they kept buying companies. Lucas: Right. And once you tie bonuses to that, you stop overpaying for acquisitions. The board essentially said: 'No more big deals unless they earn their keep.' That forced management to focus on organic growth and margin expansion. Luna: But wasn't there tension with Marc Benioff, the founder ceo? He's famously ambitious. Lucas: There was definitely friction. The board had to push him to cut costs and slow down the acquisition spree. But Benioff ultimately bought in. He publicly admitted they'd grown 'fat and happy' during the pandemic. The board gave him cover to make tough decisions. Luna: So the stock rebounded. By mid-2023, it was up something like 60 percent from the low. Lucas: Yeah. The board's credibility went up too. They showed they could listen to activists without being hostile. And they preserved the core strategy — AI and data cloud — while trimming the fat. Luna: If these kinds of boardroom conversations have given you a sharper lens on how companies actually run, that's the whole point of this show. And honestly, a couple of dollars a month is what keeps it going — buy me a coffee dot com slash fexingo. Lucas: Yeah, that's genuinely what supports the research and production. If you've gotten something out of it, we appreciate that more than you know. Luna: Alright, let's go deeper on what the board did differently in terms of governance. Lucas: One big change: the board created a new operating committee that reviewed all large deals and expense increases above a threshold. That sounds bureaucratic, but it forced even Benioff to justify big spends. The committee included independent directors. Luna: So the board effectively moved from a 'trust the founder' model to a 'verify and challenge' model. That's a tough transition. Lucas: Very tough. But they did it without ousting Benioff. That's the delicate part — you need the founder's vision but also institutional discipline. The board added a lead independent director to facilitate that balance. Luna: Who got that role? Lucas: John Stumpf, the former Wells Fargo CEO. Controversial pick given Wells Fargo's scandals, but he had turnaround experience. He became the point person for activist engagement. The board also separated the chairman and CEO roles — Benioff kept CEO but Stumpf became independent chairman. Luna: That's a classic governance move. But does it actually matter? Lucas: Research suggests it does when you have an activist situation. The proxy advisory firms — ISS and Glass Lewis — look at board independence. By splitting the roles, Salesforce sent a signal that the board was serious about oversight. Luna: And the activists backed off. Elliott never went public with a proxy fight. Lucas: Right. The board preempted the fight by doing what activists wanted — cost cuts, buyback, board refresh — but on their own terms. That's the playbook now: don't wait for the proxy, anticipate it. Luna: Are there risks? Some people say the cost cuts went too deep, especially on R&D. Lucas: That's the tension. Salesforce cut about seven thousand people. Some product areas got hit hard. The board had to balance near-term margins with long-term innovation. They kept heavy spending on AI — they launched Einstein AI integrations — but trimmed sales and marketing. Luna: So the board made a bet: that Salesforce could grow with fewer people, relying more on AI tools for productivity. Lucas: Exactly. And so far, revenue growth hasn't collapsed. In the quarter ending April 2026, revenue was up about eight percent year-over-year, and margins hit twenty-five percent — a record. The board's bet is paying off. Luna: But the real test is: can they keep growing without new acquisitions? The organic growth engine needs to work. Lucas: That's the open question. The board has put a stake in the ground: no big M&A. They have to squeeze more from existing products and cross-selling. If that fails, activists might return. Luna: Interesting. So the boardroom battle is never really over — it's just deferred. Lucas: Right. And that's the lesson from Salesforce: a board can pacify activists for a few years, but it has to deliver sustained performance. Otherwise, the same investors circle back.