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Salesforce shakes up its board, a much-needed move amid executive, activist turmoil

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2 months ago

January 27, 2023

Salesforce (CRM) on Friday confirmed a shakeup to its board of directors, welcome news for a Club holding facing slowing growth, a leadership turnover, layoffs and intensifying pressure from activist investors. The enterprise software giant on Friday announced three new board members: former Carnival Cruise CEO Arnold Donald, Mastercard CFO Sachin Mehra and Mason Morfit, the chief executive of ValueAct Capital. Morfit has served on a number of corporate boards, including at Microsoft (MSFT), over his career at ValueAct, an activist-focused hedge fund. Their appointments are effective March 1. Additionally, Salesforce said two longtime board members, Sanford Robertson and Alan Hassenfeld, do not plan to stand for reelection. Salesforce’s announcement Friday confirms a Bloomberg News report Thursday , which said the moves were under consideration. Shares of Salesforce closed up more than 5.7% Thursday, at $165.09 apiece, with the stock gaining strength after the Bloomberg story hit the wires earlier in the afternoon. The news Thursday comes just days after Elliott Management’s multibillion-dollar stake in Salesforce became public . Elliott is a hedge fund known for its activism in the technology sector, having taken seats on the boards of Twitter and eBay (EBAY). And the firm is now planning to nominate candidates for Salesforce’s board, The Wall Street Journal reported Thursday . Elliott’s investment in Salesforce ratcheted up the activist presence in the company’s shareholder ranks. In October, Starboard Value disclosed a position in Salesforce, beginning a campaign to correct what it called the company’s “subpar mix of growth and profitability.” Inclusive Capital Partners founder Jeff Ubben also has also taken a stake in Salesforce and spoken with Salesforce CEO and Chairman Marc Benioff, CNBC reported Monday. Ubben founded ValueAct in 2000 but left in 2020 to launch Inclusive Capital. Salesforce shares have struggled over the past 14 months, as the Federal Reserve’s interest-rate hikes weakened investor appetite for growth-oriented technology stocks. Investors want the company to sharpen its focus on profitability, amid a weaker market for enterprise software sales. A recent string of high-profile executive departures, including co-CEO Bret Taylor , also has rattled investors. In early January, Salesforce outlined a cost-cutting plan that includes a 10% reduction in its workforce. Those layoffs, which were pushed by Starboard , come amid a wave of job cuts in the technology sector and are expected to lower expenses and boost profitability. Bottom line We’re encouraged by this news because Salesforce’s board could undoubtedly use a refresh, with multiple directors having served for 10 years or more, according to FactSet. In general, investors care about board composition because directors oversee management and can leverage their own expertise to ensure executives are steering the ship in the right direction. Salesforce’s entire board — currently at 13 members — comes up for reelection each year. The election takes place at the company’s annual shareholders meeting, which is usually held in early June. While we remain convinced that Salesforce’s cloud software is essential for businesses operating in the digital age, investors have new expectations for the company. They want higher operating margins to compensate for slowing revenue growth — a view we share. New board members, coupled with growing activist pressure, may be just the boost Salesforce needs and that the market wants to see. (Jim Cramer’s Charitable Trust is long CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Signage on a Saleforce office building in San Francisco, California, U.S., on Tuesday, Feb. 23, 2021.

David Paul Morris | Bloomberg | Getty Images

Source: CNBC

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