The Controversy Surrounding Salesforce’s Executive Compensation Plan

Salesforce investors recently made a bold statement by voting against the company’s compensation plan for its top executives. The resolution to approve the compensation received mixed reactions at the annual meeting, with 404.8 million votes against and 339.3 million in favor. Despite the board’s recommendation to vote in favor of the plan, two influential shareholder advisory firms, Glass Lewis and Institutional Shareholder Services, advised investors to reject it. This move was largely influenced by concerns over the equity awards granted to CEO Marc Benioff.

In the 2024 fiscal year, Marc Benioff received a total pay package of $39.6 million, an increase from $29.9 million in the previous year. While Benioff’s salary remained stagnant at $1.55 million, he received additional stock and option awards, as well as nonequity incentive plan compensation. The package also included security fees that were previously unaccounted for. Notably, in January, Benioff was granted a second long-term equity award valued at $20 million as a token of appreciation for the company’s outstanding performance in the fiscal year. Glass Lewis voiced its concerns over the “substantial discretionary equity grants” issued to Benioff, indicating a lack of convincing rationale behind them.

Glass Lewis highlighted that Benioff was already one of the largest stakeholders in Salesforce, holding a stake of over 2% valued at nearly $6 billion. The additional performance-based restricted stock units and stock options were deemed unnecessary as his interests were believed to be inherently aligned with those of other shareholders. The advisory firm criticized the lack of transparency and justification behind the equity grants, adding fuel to the fire of shareholders’ disapproval.

Despite the overwhelming dissent expressed by shareholders, it is important to note that the vote from the annual meeting is nonbinding. In response to the outcome, Salesforce’s board emphasized that they value the opinions of stockholders and will take into account the feedback while making future executive compensation decisions. The company chose not to provide further comments on the matter, leaving room for speculation on whether adjustments will be made in light of the shareholders’ concerns.

It is interesting to juxtapose the controversy surrounding executive compensation with Salesforce’s financial performance. The company witnessed a remarkable 67% increase in shares during the 2024 fiscal year, the most substantial growth since 2011. Net income surged to $4.1 billion from $208 million in the previous year, while revenue saw an 11% increase to $34.9 billion. Despite these impressive numbers, Salesforce faced backlash in January 2023 when it announced its decision to lay off 10% of its workforce, following pressure from activist investors to prioritize a better balance between profit and growth. Additionally, Salesforce disclosed its intention to initiate dividend payouts to shareholders, hinting at a shift in its corporate strategy.

The controversy surrounding Salesforce’s executive compensation plan underscores the growing scrutiny placed on companies’ remuneration practices. Shareholders’ dissent, backed by influential advisory firms, serves as a wake-up call for organizations to reassess their compensation structures and ensure alignment with shareholder interests. As Salesforce navigates through this challenging period, the spotlight remains on how the company will address the concerns raised and whether it will make significant changes to its executive pay policies.