The company started the year with a lot of turmoil
I did this year It’s not been a great start for Salesforce, with an unusual level of turmoil and uncertainty surrounding the company. But as the year comes to a close, Salesforce finds itself in a surprisingly good financial position: its stock is up more than 96% year to date. Earlier this year, such an outcome would have been impossible to imagine.
The bad news started coming even before the new year, when co-CEO Brett Taylor, who many expected would be groomed as Marc Benioff’s heir apparent, suddenly announced that he would be leaving the company at the end of November. A week later, Stuart Butterfield, CEO and co-founder of Slack, announced that he would also step down. Losing two key executives in less than a week would be a major blow to any company, but it would be just the beginning of an onslaught of bad news for the CRM giant.
At the beginning of the year, we learned that activist investors were very active within the company. This included Elliott Management, Starboard Value, ValueAct Capital, Inclusive Capital, and Third Point. When activists show up, they usually have a strong opinion about how to “fix” the company, and this will be no different.
First, we learned that Salesforce was appointing three new board members, which seemed like a way to appease activists — especially since one of them was ValueAct CEO and chief investment officer Mason Morfitt, one of those same activists.
Activists usually pressure a company to cut costs, and from a corporate perspective, this usually means cutting headcount. Sure, Salesforce soon announced that it would cut 10% of its workforce, or 7,000 people, on January 4, 2023. The excuse was that it had overstaffed during the pandemic and this was a correction, but it could also have eliminated the problem. Activists bone to cut costs.
In both cases, reports indicated that the company was not handling the layoffs well, engineers were under pressure, and Benioff began preaching about returning to the office after accepting work from home, and what Salesforce called “Digital headquarters“, during the pandemic. The company has gained a reputation as a progressive, employee-friendly organization powerful hit.