Salesforce, Inc. (CRM) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for Salesforce.com, Inc. Our host for today's call is Marc Benioff, Chair and CEO. [Operator Instructions] I will now turn the call over to your host, Mr. Benioff. Please go ahead, sir.

Well, thank you so much, and hello, everyone. I'm Marc Benioff, the Chairman and CEO of Salesforce. And I hereby call this meeting to order. It is my pleasure on behalf of the Board and management of Salesforce to welcome you and express our appreciation for participating this year. We've adopted a virtual meeting format to provide a consistent experience regardless of location, reduce the environmental impact of our meeting and protect the health and safety of our attendees. I will act as Chair of this meeting. Amy Weaver, our President and Chief Legal Officer, will act as secretary. I'm pleased to introduce our directors joining us today: Craig Conway, Parker Harris, Alan Hassenfeld, Neelie Kroes, General Colin Powell, Sandy Robertson, John Roos, Robin Washington, Maynard Webb and Susan Wojcicki. Several members of the management are also present. Guy Wanger of Ernst & Young, our independent registered public accounting firm, is also on the line. Amy will now report on the existence of a quorum and cover the procedural and voting matters.

Thank you, Marc. At the outset, let me say that this meeting will be conducted in accordance with the agenda and rules of procedure which has been provided on the virtual meeting website. They outline how we will proceed. To conduct an orderly and productive meeting, we ask participants to abide by these rules. [Operator Instructions] Please note that we will first conduct the formal portion of this meeting. During this portion of the meeting, we'll present the proposals and can address any questions on them. After the formal portion of the meeting, we will keep the line open to address questions that relate to the company's business and are of general interest to stockholders. Now as to some important procedural matters. Our Notice of Meeting was mailed and our proxy materials and annual report were made available beginning on May 1, 2020, to stockholders of record as of the record date, April 16, 2020. Our inspector of elections, who is a representative of Broadridge, has confirmed that a majority of the company's issued and outstanding shares entitled to vote is present or represented by proxy at today's virtual meeting and that, therefore, a quorum is present, and the business of this meeting can be conducted. The polls were opened at the beginning of the meeting, and the polls will close on all matters immediately after the presentation and discussion of today's proposals. Most of you have already voted by proxy, and your shares will be voted accordingly. You do not need to vote again now unless you wish to change your vote. If you would like to vote now or revoke a prior vote, please follow the instructions on the meeting website before the polls close. We encourage you to vote as early as possible. The first item of business is the election of directors. 11 directors are to be elected at today's meeting. The votes cast for each nominee's election must exceed votes cast against in order for the nominee to be elected. As set forth in the proxy statement, the Board has nominated the following persons to be elected: Marc Benioff, Craig Conway, Parker Harris, Alan Hassenfeld, Neelie Kroes, General Colin Powell, Sandy Robertson, John Roos, Robin Washington, Maynard Webb and Susan Wojcicki. The Board recommends a vote in favor of each nominee. Approval of the remaining items of business requires the affirmative vote of a majority of the votes cast affirmatively or negatively on the matter. Please also note that under New York Stock Exchange rules, abstentions on either of the 2 equity plan proposals will be counted as votes cast against the proposal. I'll now introduce the second through fifth proposals. The Board recommends a vote for each of these proposals. Proposal 2 is the amendment and restatement of our 2013 equity incentive plan to increase the number of shares authorized for issuance by 31.5 million shares. Proposal 3 is the amendment and restatement of our 2004 employee stock purchase plan to increase the number of shares authorized for employee purchase by 10 million shares. Proposal 4, the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending January 31, 2021. Proposal 5 is an advisory vote to approve the compensation of the named executive officers for fiscal 2020. Proposal 6 was submitted by a stockholder and requests that the Board of Directors take steps to permit stockholders to act by written consent. Operator, please open the line to allow proposal 6 to be introduced.

Thank you. Thank you for keeping us all safe this year by holding a virtual meeting. I hope next year, Salesforce will conduct a hybrid meeting if the pandemic is in abatement. Proposal #6 on written consent is a basic good governance proposal coming from me, James McRitchie, of CorpGov.net, a longtime shareholder. Many Boards and investors assume a false equivalency between rights of written consent and special meetings. However, any shareholder, regardless of how many or few shares she owns, can seek to solicit written consent on a proposal. By contrast, calling a special meeting may require a 2-step process as shareholders who does not own the minimum number of shares required, that's $23 billion worth at Salesforce, must first obtain the support of other shareholders. Once that meeting is called, the shareholder must distribute proxies, asking shareholders to vote on the proposal to be presented at the special meeting. This 2-step process could take more time and expense than the 1-step process of soliciting written consent, especially at Salesforce, which allows only investors with 15% of outstanding shares to call a special meeting instead of 10% as allowed by many companies. And we all know, during this COVID-19 crisis, that emergency situations can arise, so written consent could be a real plus in some situation. Similar proposals won more than 50% of the vote recently at Stanley Black & Decker, Berry Global Group, Flowserve, JetBlue, United Rentals, Capital One, Cigna, Applied Materials and Nuance. Please vote in favor of proposal #6, written consent. Thank you very much.

Thank you, Mr. McRitchie. We appreciate your questions and your proposal. However, for the reasons set forth in our proxy statement, the Board recommends a vote against proposal #6. I'll now pause to see if there are any questions to be addressed regarding the ballot items. We will close the polls after addressing any appropriate questions about the ballot items. And remember, we'll hold a general Q&A session after the formal portion of this meeting. All right. Our proposals are as described in the proxy statement. I believe we have now covered all of the business properly brought before our stockholders today. So I now declare the polls for each matter of business to be closed. And I will now report on the voting results. Based on the preliminary voting results, the inspector of elections has confirmed that all 11 nominees have each been reelected as a director of the company. The inspector of elections has also confirmed that based on preliminary results, all other proposals have received sufficient votes in favor to pass, except for proposal 6, the stockholder proposal regarding written consent. The inspector of elections will provide a final voting report, which will be included in the minutes of the meeting, and the final voting results will be -- also be filed with the SEC.

Well, thank you so much, Amy. As there's no further business to come before this meeting, the meeting is hereby adjourned, and we will now open it up to general questions.

The first question…

Thanks, Marc. Okay. Sorry, Evan. As mentioned earlier, we'll now be happy to answer any stockholder questions that are of general interest to stockholders, and we will adhere to the rules of procedure provided on the virtual meeting website, where you can see and find direction for submitting questions. In the interest of covering as many questions as we can, we may summarize questions and cover similar questions at the same time. We will do our best to follow up after the meeting to answer questions we were unable to address during the meeting to the extent the question complies with the rules of procedure, and we also have contact information for that stockholder. Evan?

Your first question, why does Salesforce still need an incentive plan, an issuance of 31.5 million shares?

Great. Thank you for that question, especially as that was voted on at the meeting that just closed. We ask for an additional 31.5 million shares this year in our equity plan for employees. Stock-based compensation is a very critical part of how we recruit and we retain employees at Salesforce, as is the case for most technology companies. I would refer you back to our proxy statement, where we provide a detailed information about this plan and the many reasons for the share request. Thank you.

Your next question is from Justin Danhof of the National Center for Public Policy Research. For today's annual meeting, he filed a shareholder resolution with the goal of having Salesforce amend its equal employment opportunity, EEO, policy to protect employees from potential viewpoint discrimination. Rather than doing so, the company petitioned the SEC, arguing that it was within its ordinary business operations to discriminate against its employees based on their ideologic views. Given Silicon Valley's well-known liberal leading, combined with Salesforce CEO Marc Benioff's far-left public-facing statements and action taken on behalf of the company, we are concerned that conservatives may face a hostile work environment at the company. Furthermore, the company is ignoring the financial risks of viewpoint discrimination. Alphabet recently ended a year's long lawsuit for firing a conservative engineer. Given all this, will you commit today to amend Salesforce EEO policy to explicitly protect against discrimination based on viewpoint and ideology?

Great. Thanks, Mr. Danhof, for your question and your interest in the company. We have a long-standing belief that it is important to have diverse set of views and policies within our company, and our employees reflect that. It is very important to the company. It's important to our values, our values that has long stood by us at the company, and we continue to believe in those. As we pointed out in our proxy and through the proposal, we believe that the proposal that was presented was not appropriate for the proxy this year. Thank you very much.

Great. The next question, has the Board and upper management taken a pay cut for the good of the cause?

No, there's not been pay cuts. Thank you.

Next question, what has the firm done with respect to the ESG issues in the past year?

Well, we could go through and detail the ESG issues, but I'd refer you to Salesforce's stakeholder report, which you'll find either in my Twitter feed or available publicly on the Internet and on our website, if you just Google that or search that, it goes through in detail our ESG statistics and standings. It's the very best way, best document to give out that information. And if for some reason, you don't find what you're looking for, we'd love for you to contact Amy directly, and we'll get -- answer the specific question.

Your next question, what proportion of employees is expected to return to physical presence at the company's facilities long term even after COVID-19?

We don't know yet. This -- the pandemic continues to unfold, and there's too many variables to be able to answer that question accurately.

Thank you. The last question is, how many shareholders are in attendance? I will go ahead and answer that question. That is 60. At this point, there are no more questions.

Well, I'd just like to thank everyone for attending the meeting today. And Amy, thank you so much as well for being such a good partner during this discussion.

Great. Thank you, Marc, and that brings the meeting to the end for today. We want to thank you, to all of our stockholders, for your input, and thank you all for participating today.

This now concludes the meeting. Thank you for your attendance, and have a pleasant day.