Elliott Prepares to Nominate Slate of Directors at Salesforce

Activist investor has made a multibillion-dollar investment in Salesforce

Activists are swarming around Salesforce, which has been through a turbulent stretch. Photo: Alexander Cohn/The Wall Street Journal

By guest author Lauren Thomas from the Wall Street Journal

Updated Jan. 26, 2023

Activist investor Elliott Management Corp. is preparing to nominate a slate of directors at Salesforce Inc., CRM 0.14%increase; green up pointing triangle

according to people familiar with the matter, in a sign that a battle may be looming for board seats at the business-software maker.

Elliott is having conversations with numerous technology executives as well as those with other industry backgrounds, the people said.

The Wall Street Journal first reported on Sunday that Elliott has made a multibillion-dollar investment in Salesforce. At the time, Jesse Cohn, managing partner at Elliott, said he looked forward to “working constructively” with a company he said he had been following for nearly two decades.

The window for nominations ahead of Salesforce’s annual shareholder meeting opens on Feb. 12 and closes March 14, according to proxy materials.

Elliott has been in talks with Salesforce, the people added, and it’s possible the two sides could reach an agreement that heads off a full-blown proxy fight.

The news of Elliott’s plan follows a report from Bloomberg that Salesforce is considering director candidates of its own.

Should there be a proxy fight, it would represent another major battle on the horizon. Activist investor Nelson Peltz is mounting a proxy fight for a seat on Walt Disney Co.’s board.

Salesforce has been going through a turbulent stretch. Earlier this month, the company said it was laying off 10% of its workforce and reducing its office space in certain markets, as customers take a more cautious approach to spending. Co-CEO Marc Benioff, who also serves as chairman, has said Salesforce hired too many people as revenue surged earlier in the Covid-19 pandemic, echoing other tech executives.

There has been upheaval, meanwhile, in Salesforce’s top ranks. Co-CEO Bret Taylor is expected to vacate his position on Jan. 31, ending the company’s second experiment in recent years with dual leadership. Stewart Butterfield, the chief executive and co-founder of Slack Technologies, the workplace-messaging app Salesforce acquired during the pandemic, announced his departure last month.

Salesforce’s stock, a stellar performer for years, was down by about half from a late-2021 high before rallying this week on the activist news. It now has a market capitalization of roughly USD 165 billion.

The decline in the shares has helped draw a swarm of activists to the company.

In October, Starboard Value LP revealed it had taken a stake in Salesforce, arguing that the company’s mix of growth and profitability is far below that of its peers.

Jeff Ubben‘s Inclusive Capital also owns over 1.5 million shares in Salesforce, a stake worth about USD 250 million, according to a person familiar with the matter.

Mr. Ubben’s former firm, ValueAct Capital Partners LP, also has a stake in the company, according to people familiar with the matter.

Any election of directors at Salesforce would be taking place under the recently implemented so-called universal proxy rules, meaning investors will now be able to pick and choose who they want to see on a board, rather than voting entirely with either the company or the activist’s slate.

Advisers to companies say the likelihood of at least gaining one board seat will increase significantly, especially for smaller players. That’s especially true given that they will no longer incur the substantial expense—sometimes running into six figures or more—of printing and mailing proxy cards to shareholders.

The change could also make board battles more personal, given that investors will now be asked to make calls on individual candidates as opposed to entire slates.

Elliott is known for taking on tech companies and others and forcing changes that include sales and executive shake-ups. Its targets have included PayPal Holdings Inc., AT&T Inc., Dell Technologies Inc. and Twitter Inc.

Elliott has been in situations before where it has engaged with a company that ended up appointing its own directors, but where the activist still ultimately got board seats.

Elliott took a significant stake in Public Storage in 2020 and nominated six directors after the company had just named new board members of its own. Public Storage, a self-storage giant, ended up reaching an agreement with the activist hedge fund to add two board members.

Appeared in the January 27, 2023, print edition as ‘Elliott Readies Salesforce Board Fight’.