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

Welcome, and thank you for joining us on the final day of our virtual Milken Institute Global Conference. I'm Conrad Kiechel, the Executive Director of Events for the Institute, and I'm delighted to introduce this session, A Conversation between Marc Benioff and Hiromichi Mizuno. Marc Benioff is CEO and Co-Founder of Salesforce and one of the most thoughtful and visionary business leaders of the present day. Mizuno-san is the former Executive Management Director and CIO of the Government Pension Investment Fund of Japan, one of the world's largest. In this dialogue recorded just this week, these 2 friends exchange their insights on one of the most debated business and social issues of the day: What is the rightful role of the corporation and how could it most responsibly serve both shareholders and stakeholders. And now please enjoy the discussion.

Good morning, good afternoon or good evening, welcome to the Milken Global Conference. Today, I'm honored to have a fireside chat with Mr. Marc Benioff, CEO and Founder of Salesforce.com. I have had the pleasure to know him for a while and have been quite inspired by what he has done. So I'd like to invite Marc to join us today. So welcome, Marc.

Great to see you, Mizuno-san. Thank you for having me on your show.

Thank you. So we have 30 minutes to have a fireside chat. So I definitely would like to discuss with you on several of your favorite topics. And first of all, I just wanted to show the audience that this is the book you gave me, original American version of the Trailblazer, and this is the Japanese translation.

Japanese translation.

That's good. So you can tell that whatever the Japanese are making, we will make it more compact than American. But they can't be exactly at least as the original one.

I also have the Japanese flag behind me today for you, Mizuno-san.

That's beautiful. I'm living in a small Japanese-like apartment. So I just don't have anything to show you, unfortunately.

I also got my Japanese piggy bank, which I got from a Japan sale.

I believe we don't have that anymore these days. Everything's online, unfortunately. So let us start discussing the title of this book, Trailblazer. So when I first heard the Trailblazer from you, I immediately googled Trailblazer Salesforce.com. It led me to the website explaining the Trailblazer community. And when I first read it, just to be honest with you, I thought, this is another sophisticated way of like customer retention program, having like kind of like a native sales team inside of your customer. But when I finished reading the Trailblazer book, I just thought -- I just understood like this is much more than like a customer retention or a customer loyalty program. So I think for the people who haven't read this, can you just explain a little bit what do you mean by Trailblazer?

Look, a Trailblazer is an innovator, a creator, an entrepreneur, a visionary. Maybe the former manager of the GPIF fund in Japan is a Trailblazer. Somebody who has new ideas on how to create a new world with higher values to help us create and improve the world. That's a Trailblazer.

Well, that's great. And it sounds really exciting. And so I'm very excited that now I saw this book is piled up in a major Japanese bookstore so that the people will get inspired by your Trailblazer concept. And I hope to be called a Trailblazer myself because it sounds cool. So I just want to discuss with you several things today. Obviously, your favorite topic, the one is the stakeholder capitalism, and then we want to talk about the trust and value and et cetera. And I definitely want to discuss with you what the corporate executive do and how the investor should react to that. So let me start with the stakeholder capitalism. I grew up in a society, like trust means a lot. And even when I was trained as a young banker in City of London, I guess, 20 years ago, I was very impressed by the English banker who told me, my word is my bond. So it's not the contract basis. I mean, we will do the business on the basis of trust, and that's how I grew up. But over the last 10 years or so, maybe 20 years, we got more criticized by particularly American lawyers, we have to contract everything. And it just became more and more like a less trust-based, the business practice. But all of a sudden, you just raised it up. But what do you think about the, this like a trust versus like a contract-based or like a more like a rule-based business practice? How do you interpret interconnection of those?

Well, thank you for asking that question. I think that you're right. I think, look, at the beginning, everyone must ask himself, what is your highest value, what is the most important thing to you? For each of us, it's different. And we must also ask this for businesses, what is the most important thing to us, what is our highest value in our company? Look, it can be many different things. It could be success. It could be profitability. It could be growth. It could be quality. It could be market share. It could be employee happiness. There's many different types of values that guide a company. But at Salesforce, our highest value, the most important thing to us is trust. Nothing is more important than the trust we have with our employees, our customers, our partners, with our industry and certainly with our local communities, all of our stakeholders. This is #1 for us, trust. Nothing is more important than trust. And we organize and we operationalize the idea of trust. So if trust is our core value, if this is the most important thing to us, how will we get it? How do we achieve trust? What are the things that we can do to achieve trust? Of course, it's very important especially in regards to a large enterprise software company, our relationships with our customers, our relationships with all of our stakeholders. How do we get trust? How could we lose trust? You can lose trust in a moment. We all know that. So we want to have it. We don't want to lose it. How do we know that we have it? What are our metrics for having trust? Maybe it's security issues. Maybe it's making sure that we have the best security. It's transparency. Maybe it's being open and honest about how everything is happening in our organizations. But we can all do more things to have more trust and we can look at how are we losing trust so that we can figure out how we can amplify it. And we can also look at our metrics for trust. What are those things that we're doing to really know that we are trusted.

What was your customer or your employees or your peer, the CEOs' reaction when you brought up the concept of trust? Because to be very honest with you, I grew up in a society where trust means a lot. So for me, it's just kind of like, I take it for granted. Trust is really critical in any business we do. But why you, kind of like outstanding in the business community, you actually put the trust at the top of your corporate policy and everything you do. I mean you said operationalize trust. And what is the initial reaction from your team or like your peer CEOs or whoever you deal with when you just all of a sudden started talking about trust.

Well, I think the #1 thing is, we're an enterprise software company, of course, but we're also an enterprise cloud company. We're the largest enterprise cloud applications company in the world at Salesforce and our customers need to trust us to do business with us. We've been in business now for about 21 years. And we realize, if our customers don't trust us, they're not going to continue to invest with us, grow. And trust can also relate to the employees. Employees aren't going to stay with our company if they don't trust us. It also is even companies that we're going to acquire. We've been able to acquire many companies because they trust us, and they're going to trust that we're going to do the right thing when we acquire their company, take care of them. That we take our responsibility very seriously to them. So trust could be many things. It could also be to all of our stakeholders, even in our local community. We want to be highly trusted everywhere we do business. And when people think about us, we want them to say that they trust us. Now I realize that in the technology business, this certainly is at odds with what many people heard about technology companies, social media company. I think we all realize, Facebook is, in many ways, the new cigarettes. It's not trusted. It's addictive. It needs to be regulated. They're after our children. We don't trust them. We don't know what they're doing with our data. They change their story every day. So you realize in the technology industry, there can be many different forms of trust, different levels of commitment to trust. So we're very careful with how we use the word. We hold ourselves very highly, but we hold each and one of our employees responsible, that trust must be valued. And if we're not happy at that level, then we want to further invest or grow that trust that we're going to have.

That's particularly interesting that you are a leading tech company. And the tech business, people think it's less kind of like personal or less like the, less requires more like the emotional or like psychological or mental connection. Actually, I find it really refreshing that you do run the technology company. On the other side, you are talking more like a, kind of like a zen principle or like more like the old philosophical, the concept of like trust. But I totally agree with you, like the social network and all those like the software kind of things really requires trust because once they lose trust, it means nothing. Because that's basically just making money on the basis of people's trust on the system essentially. So if we lose that trust in social media, we just cannot use that.

Well, I think a good example is even the company you're on the Board of, Tesla. I have a new Tesla Model Y. And when I go down the highway, sometimes I turn on auto drive, which is the software in the car which is then it's driving itself down the highway. And I better trust the car. I better trust Tesla. I better trust the upgrade process. I better trust the update process. I better trust the security. And if there's problems, I want Tesla to be fully transparent with those problems, not try to hide them or obscure them. So I think as an auto company, and certainly and Mizuno-san, and with you on the Board of Tesla, I'm sure that you agree that trust must be one of the highest, if not the highest, value that Elon Musk and Tesla must operate. Because when the customer gets in the car and turns on auto drive, I better trust it or I'm not going to go down the freeway or I'm not even going to buy the car. And I think for Salesforce, we're very much the same thing, which is, we want to have that trust, not only with our products, which is very important, not just with all of our employees and customers, but even at a local community level. Like we're headquartered in San Francisco, California, we want to make sure that we're trusted by the local community to do the right thing for them or the -- we have 10,000 employees there. We want to make sure that they trust us. That's one of the reasons, by the way, we've invested so much in our local public schools. We've invested more than $120 million in our local San Francisco and Oakland public schools. It demonstrates back to the community that we're committed to them and in some ways, it's operationalizing trust.

That sounds great. Well, let me ask you about the sort of like sudden emergence of this concept of stakeholder capitalism. And I observed the emergence of this with great interest because I tried to deal with Japanese, the businesses, how to address the global investors' frustration about their lack of attention to shareholder value. And so interestingly, for the last 5 to 10 years in Japan, the biggest topic is how to make CEO focused on shareholder value creation. And on the other hand, where the Japanese business is trying to learn from the U.S., and the U.S., there's another movement, which is called the shareholder capitalism. And you are very active with the World Economic Forum, too. And Professor Schwab told me he came up with the idea of stakeholder capitalism inspired by his dialogue with Japanese business executive like 20 years ago. So it's very interesting, like going the other direction, we'd probably be able to find the ideal solution in the middle, like many cases of this kind of trend. But what do you think is sort of like a real force for this sudden emergence of like stakeholder capitalism these days, including Business Roundtable statement of corporate purpose.

Well, I think in Japan, it's very different. I think that business in Japan is an integrated and critical to society. So Japanese CEOs view them as a critical part of the ability to make society work in partnership with government, in partnership with schools, in partnership with all aspects of social service and that CEOs don't vault themself above community or above the rest of society. They view them as a peer and be part of working society. Now I don't understand Japanese society as well as you do, Mizuno-san. Of course, I'm not Japanese. I don't live there. I do have the flag, but that's all I have. So I would say, though, that Japanese business is quite different than American businessmen who sometimes see themselves as separate from society. They see themselves above society in many cases. So maybe you see that in the salaries. Maybe you see that in the way they're compensated. Maybe you see that in that where they don't give back to society or that they view themselves as fully disintermediated from society. Maybe European is not quite as much, but different CEOs and different societies view themselves different ways. I think in the case of Klaus Schwab and the World Economic Forum, when he came up with stakeholder theory, which was in 1972, the idea that business must manage not for just all shareholders but also for all stakeholders. What did that mean? Well, what it means is you have to define your stakeholders, your employees, your customers, your partners. In San Francisco, our homeless are a key stakeholder. As I mentioned, our public schools, but other key stakeholders, the planet, which I know you've written so extensively about Mizuno-san because Salesforce, for example, is a net zero company. Why is that? We have no net emissions. I hope every CEO and every investor who's watching this can also say that they're net zero. You can learn about our Salesforce stakeholder commitment, go to Salesforce.com/sustainability. It reviews our whole stakeholder report. You can look on my Twitter feed as well. I think that it's very important for CEOs to really define who are their stakeholders. Is it just your shareholders or do you have more stakeholders than just shareholders? And once you do that, then can you manage for all stakeholders? This is, I think, the question that really now defines, what does it mean to be a true modern CEO?

That's the discussion I had with all the major asset management companies and also the asset owners over the last 5 to 6 years. And I generally believe in the stakeholder, the multi-stakeholder model. But the the most common counterargument when I try to just push that agenda is, one is the Milton Friedman doctrine. He said like, there's only one social responsibility of the private business, which is to make a profit. And another thing, a lot of the professional asset manager uses the word, which I hate, fiduciary duty. And they actually define their job just to make money. And some of them might really struggle with that concept because that's told me to leave my core value behind when I walk into trading room. And I keep telling them, it's impossible. I just cannot become a machine when I walk into my office as a CIO. I always carry my core value and ethics and everything. And then the third argument is, some people appear on a panel early this year. And one of the lady or the female president of the the law school, I think it's Columbia or something. She argued it's even against the U.S. -- the commercial court for the other CEO, who might be an agent, to decide who their stakeholders. And all of those things really annoyed me like because I think it's just kind of like got in my way to push what I generally believe. But what is the idea or the reaction you get from those people? And how you deal with and react to those like skeptics who try to stick to what they learned at business school 30 years ago?

That is the question that is, Mizuno-san. Because I think that the Friedman argument is the business of business is business. And I don't know. That's a Japanese approach to business, for example, but I think he's mostly speaking about the American approach to business. Because, of course, the Japanese CEOs are vaulted up higher to take on more responsibility in society and that's really what we're saying at a time when the world needs business. That business is the greatest platform for change. I strongly believe that, Mizuno-san. You know that we're not going to heal the environment if business is not aligned. We're not going to heal our public schools if business is not aligned. We're not going to take care of our nonprofits and NGOs if business is not aligned. We're not going to improve society if business is not aligned because business is a critical part of society. So that's really where I think CEOs where we define the purpose of the corporation as the Business Roundtable has said, must be to manage for all the stakeholders. And of course, if we look at the Sustainable Development Goals of the United Nations, well, how will we reach those goals without business being a part of those things. One good example is, we're going to have more plastic in the ocean than fish by 2050. We all know that. Why is that? Well, we don't want it. Nobody wants a plastic ocean. But we know we're not going to solve that unless business gets involved because business is one of the creators of the plastic. So nobody wants a plastic ocean. Nobody wants more plastic in the ocean than fish by 2050. Business has to be part of the solution. So the ocean is a stakeholder that businesses have to be thinking about in key businesses that make a lot of plastic. And I'm not going to talk about their names because their CEOs will get very upset with me, but we all know who they are. They have to take this very seriously. And we realize that. We recognize that. That's just one example. It's a very specific example, but it's one example in regards to the environment. Of course, another example is carbon emissions. We know that emissions must be reduced. We know that we also need to sequester more carbon, which is why I've introduced the concept of 1 trillion trees or 1t.org, where planting 1 trillion trees on the planet will sequester gigatons of carbon. Because the planet is a key stakeholder and business needs a way to organize to help reduce emissions, globally reduce their emission and also sequestering existing carbon, both of these things are very important, restoring and maintaining our own world for us. These are critical things for our future, for our children, for our children's children. So when we think about business, they have to be a willing player, an actor in all of these things that we want for our world.

I totally agree that the business is the best platform because it's very difficult to scale up like a nonprofit organization type of the approach. But the business is kind of like allowing to be able to scale up these things and kind of leverage a lot of the different forces. So I totally agree with you. And I always feel it's refreshing to hear what you're saying because I kind of grew up in an industry where people get too technical, like you wouldn't believe it, but I got the question from the many asset management professionals saying, listen, why do you -- you can call it partly as a stakeholder because they are not the human or they are not the stakeholder. So I just need to come up with the idea of protecting us is basically saving the future generation, which is our future stakeholders. But some people got so technical. And coming back to the legal technicality, as I said, I have the question, C-corp structure is ideal, optimal for you to pursue what you're talking about. And I understand that even in the U.S. and the Delaware, there's another structure called a public benefit corporation. And you probably heard that our mutual friend, Emmanuel Faber at Danone, now pursue a totally unique corporate structure, the entreprise à mission, to serve the multi-stakeholders. I serve on their Mission Committee. But what do you think -- I understand the business is the best platform, but do you think the current corporate structure is most suitable for you to achieve what you're trying to achieve?

Well, I think I look at Salesforce, we've been able to give away more than $300 million in grants. We've done 5 million hours of volunteers and we run 50,000 nonprofits and NGOs on our service for free. We're a net zero company. We have no net new carbon emissions. Many organizations view us as the best place to work. That we've been rated very highly for our employees, for our customers. Oh, and we've also given a 5,000% return to our shareholders since we went public in 2004. So we've served all stakeholders, our employees, our customers, the environment, even our shareholders. So I think it's not as important what the structure is, but what is your intention. I don't know what the word is in Japanese, Mizuno-san. I think it's [Foreign Language]. What is my [Foreign Language]? What is my vision? What do I really want as a CEO? Do I want to only maximize shareholder profits or do I want to maximize all stakeholders? So I think it's very important. We need to have a beginner's mind here. We need to have, in Japanese, I believe, it's called Shoshin. How do we have a beginner's mind? How do we sit quietly and think about our business anew? So we can ask the question, what do I really want? What do I really want? If my business is really important and maybe trust is my highest value or customer success, innovation, equality, sustainability. Now what do I want for my business? What is my intention? What is my [Foreign Language]? And how do I achieve that? I think that we have to, as CEOs, develop this beginner's mind so that we can then say, yes, especially now during this pandemic. This is a great opportunity for us to think about everything new. Of course, we're all at home. We're all working at home. We're not back in our offices yet. We can really come up with what is our beginner's mind. How do we want to come back to work? What kind of companies will we create? How will we best serve society? What kind of leaders will we be? What do we expect of our employees when they come back? Whether from their travel and entertainment, all the way to how do they work in the office and which ones will work at home. So we are in a new world. We're in an all-new world. Look, we're never going back. We realize that. We're not going back. The past is over. We're in the present moment. And the present moment is global pandemic and now the future, the future is the new world that we're creating. So we need to be cautious and conscious. What is our future? Where do we want to go? How do we get there? We need to think about it. The past is not equal to the future. Present moment, our intention is creating the future.

Well, I think that one of the things I just wanted to discuss with you with the remaining time of the fireside chat is like Milken attracts a lot of like the people from, particularly my own industry, like a finance and the asset management. And there's always the argument like what you do is to by solving multi-stakeholder that will compromise the return to the shareholders, which I personally don't agree. And I heard that you're addressing that, you're saying like Salesforce also created a lot of value to the shareholders. But what is your reaction to that question? Like solving multi-stakeholder dilute the return to shareholders? And the second is, how the investor is supporting your endeavor because the -- I was very excited when Danone managed to get the 99% the shareholders support to amend their article of incorporation to solve the non-shareholder stakeholders. But what's your reaction to the argument and also how you're getting the support from investors?

Well, I think it's been 21 years of running Salesforce. And of course, when we started Salesforce, we had 3 goals. One, we wanted to create a new technology model. We call that today the cloud. We wanted a new business model for software. We call that subscription instead of a like traditional software license model. And three, we wanted a new what we called philanthropic model. We didn't know about the social enterprise model like you've just defined for then and we talked about this new philanthropic model, which was the idea that we were going to take 1% of our equity, 1% of our profit, 1% of all of our product and put it into a 501(c)(3) charity. That was the beginning of our social mission. Now here we are 21 years later, Salesforce has had a phenomenal impact not just to the industry that we're in, but to the world. And perhaps we can show through our own actions. And by the way, that's one of the reasons that I wrote the book, Trailblazer. I wrote this book, Trailblazer, because I realized that CEOs need lessons, and they need to know how to put stakeholder theory into action. And this is the most important thing today because, certainly, when I went to business school in Los Angeles at USC, very close to where the institutes are that is running the conference here. Well, I knew I needed to just do what I needed to be successful. But I didn't realize, no, there's a whole new world, it's called manage for all stakeholders. This is the most important thing.

You joined the Business Roundtable statement of the corporate purpose. And recently, I co-chaired the project called the Test of Corporate Purpose with the Oxford Saïd professor and the sustainability head of like Legal & General Asset Management. And we try to examine like, it's good to talk about those kind of things. Personally, we agree, but whether the corporate execs are really doing it. And we found some discrepancy. And I should acknowledge the methodology itself is not perfect. But I actually -- still, I'm very confident that we observed the discrepancy between some people like you who really is walking the talk and the other CEOs just join to look a lot better in a society, but they're not operationalizing in their own business. What do you think will divide those 2 groups, like who really does it and who actually basically, they talk, but they just don't do anything in their own organization?

Well, I think that, that's, of course, the constant question, which is, that there are CEOs who believe that their job is to improve the state of the world and there are CEOs who believe their only job is to make money. And I think that it's shifting. I think that as we move into this new world, that there's more CEOs who are committed to improving the state of the world. And look, there's always going to be a balance because business need to have profitability. But at the same time, business needs to take care of all stakeholders. And that's the true purpose of the corporation, to your point. And I think that this is a new idea in many ways. Klaus Schwab came up with it in 1972. But when I started my business in 1999, I had never heard of the World Economic Forum or even what Klaus Schwab had written. It wasn't until several years later. Now I feel very aligned with that theory and I felt good about that. So one thing that we've done is we've created pledge1percent.org. And that is to incorporate and encourage new companies to adopt these ideas. And over 5,000 companies have already said they're going to be 1-1-1 models like Salesforce was in 1999. Well, I can tell you in my industry, when we started, that was not the way it was. So when we look at all these great new companies that have gone public, like Twilio and Atlassian and Okta and so forth, they've done it with this 1-1-1 model. These are next-gen companies with next-gen values. So I really believe the future is coming fast and the next-generation leaders are appearing who are going to help us to create the future that we want.

Yes. I think what you have been doing is great, but I always face the question like whether or not kind of the activity will kind of translate into the financial return for the investors. And my argument is like, we have to agree. We are going to create the capital market which will price those activity into the stock price, rather than we are just trying to observe whether your actions will be translated into the stock price, rather the CEO and the investor have to agree those are the way to create the shareholders' value, but it doesn't seem to be widely spread. But these days, the asset manager, they all talk about the importance of sustainability or ESG, but they don't operationalize it. That we are facing the same situation, like the asset manager, the CEO, everybody talks about ESG, but they don't operationalize it. So if you ask the fund the manager how they use those information or like the 1-1-1 model, I mean, they probably said, we look at that, but they don't price it in. So I think we create the community of the shareholders as well as the CEO to believe in, those are the way to optimize the profit and value for the society. But to finish up the fireside chat, do you have anything for the -- particularly people listening from the financial industry to hear from you to wrap up this conversation?

Well, I think that you open the door, which is that if you're going to invest in companies, you should think about what are the companies that you're investing in. I think people who own funds today, more often than not, are looking at, are those portfolio managers also looking at those ESGs? I think we all see that. We all know that's coming. You can look at the World Economic Forum and the work on the IBC that the ESGs are being audited now by the 4 major accounting firms. And these large companies are all going to have to publish their ESGs. So what are their environmental policies? What is their position towards being net zero? What are their policies towards equality and gender equality? Do they pay men and women equally for equal work? How do they look at the world? How do they look at their employees? How do they look at the products that they're making? I think that the ESGs being published will be extremely important going forward, and it will help motivate even more companies to move from being shareholder companies to being stakeholder companies. Mizuno-san, I want to thank you so much for having me on today. [Foreign Language] You must be working very hard and you must be very tired. [Foreign Language] And I'll look forward to seeing you soon in Japan. [Foreign Language]

Thank you very much, Marc. And I'm looking forward to enjoying a sushi with you in Tokyo very soon.

I hope so too. Bye now.

Bye-bye.