Latest / Boardroom Conversations with Fexingo: CEOs, Strategy, and Corporate Leadership Explained / How the Salesforce Board Handled the Activist Challenge
Transcript
- Lucas: It's early 2023. Salesforce has just reported a rare miss on earnings, growth is slowing, and the stock has dropped more than 40 percent from its 2021 peak. Then the letters start arriving. Luna: Elliott Management and Starboard Value, right? Two of the most aggressive activist funds in the game. Lucas: Exactly. Elliott had built a multi-billion dollar stake. They were pushing for cost cuts, margin improvements, and a board overhaul. And Salesforce's board had to decide how to respond without losing the company's identity. Luna: So what did the board actually do? I remember they announced a bunch of changes pretty quickly. Lucas: They moved fast. Within weeks, the board expanded from eight to twelve members, adding three new independent directors — including one backed by Elliott. They also created a finance and strategy committee, and they launched a $10 billion share buyback program. Luna: That buyback was a big signal. It told activists the board was serious about returning capital. Lucas: Right. But the most dramatic move was the departure of co ceo Bret Taylor. He had been seen as a potential successor to Marc Benioff. But the board and Benioff decided to streamline the C-suite, and Taylor left in early 2023. Luna: That had to be tough. Taylor was well-respected, and he'd only been co ceo for about a year. Lucas: It was a major shift. But the board argued that having two CEOs created confusion and slowed decision-making. Benioff took back sole CEO role, and the board backed him fully. Luna: And then came the layoffs. Salesforce cut about 10 percent of its workforce, around 8,000 employees. Lucas: Yeah. That was painful, but it was part of a broader cost-cutting plan that included reducing real estate and trimming non-core projects. The board essentially endorsed a leaner, more profitable Salesforce. Luna: And it worked for the stock. By mid-2024, shares had nearly doubled from the 2022 lows. Lucas: Financially, yes. Operating margins went from around 18 percent to over 30 percent. The activists got what they wanted. But the question is — did the board sacrifice long-term innovation for short-term gains? Luna: That's the tension, right? You cut R&D and you might miss the next wave. Lucas: Honestly, if this conversation moved your thinking forward in some small way, it's worth a cup of coffee to you? That's the link — buy me a coffee dot com slash fexingo. Luna: Yeah. It's how we keep the show ad-free and focused on the real decisions. Lucas: Exactly. So back to Salesforce — the board also had to manage the relationship with Benioff. He's a founder ceo with a huge personality. The board needed him to execute the turnaround, but they also had to hold him accountable. Luna: How did they strike that balance? I remember reading that the new finance committee was key. Lucas: It was. The committee included the new activist-backed director, and they met regularly to track margin targets and capital allocation. That gave the board a structured way to monitor performance without micromanaging Benioff. Luna: So it was a governance fix, not just a cost-cutting exercise. Lucas: Exactly. They strengthened the board's oversight without triggering a founder revolt. And they kept Benioff focused on the message: profitability is now a priority. Luna: What about the long-term strategy? Did the board set any guardrails for reinvestment? Lucas: They did. In their public statements, they committed to reinvesting a portion of the cost savings back into AI and data cloud — two areas where Salesforce sees growth. So it wasn't all cuts. Luna: That makes sense. You need to tell the market you're serious about efficiency, but you also need a growth story. Lucas: Right. And the board's role was to articulate that balance. They couldn't just say 'we're cutting costs.' They had to say 'we're cutting costs to fund AI.' It's a narrative management task as much as a governance one. Luna: So what's the takeaway for other boards facing activist pressure? Lucas: I think the key lesson is speed and structure. Salesforce's board didn't fight the activists — they engaged, expanded, and created a formal oversight mechanism. That defused the confrontation and gave them control of the timeline. Luna: And they kept the founder ceo in place. That's rare in activist situations. Lucas: It is. But they did it by demonstrating that Benioff was aligned with the new priorities. The board backed him publicly, and he delivered. If he hadn't, the story might have been different. Luna: One thing I wonder — did the board sacrifice too much culture? Salesforce was known for its 'Ohana' culture. The layoffs and cost-cutting hurt that. Lucas: That's the open question. Employee morale took a hit. And some long-time execs left. The board's job now is to rebuild trust while maintaining the discipline. It's a long-term project. Luna: So the activist challenge forced a reset, but the real test is whether the board can sustain both performance and purpose. Lucas: Exactly. And that's the ongoing conversation in boardrooms everywhere — not just at Salesforce.