The company began the year with a ton of turmoil
This year did not start off great for Salesforce, with an unusual level of turbulence and uncertainty surrounding the company. But as the year comes to a close, Salesforce finds itself in surprisingly good shape financially: Its stock is up over 96% year-to-date. Earlier this year, such an outcome would have seemed impossible to imagine.
The bad news started rolling in even before the new year began, when co-CEO Bret Taylor, who many speculated was being groomed to be heir apparent to Marc Benioff, quite suddenly announced he was leaving the company at the end of November. A week later, Slack CEO and co-founder Stewart Butterfield announced he, too, was stepping down. Losing two key executives in less than a week would be a huge hit to any company, but it would be just the start of an onslaught of bad news for the CRM giant.
As the year began, we learned that activist investors were, well, quite active inside 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 on how to “fix” a company, and this would be no different.
First, we learned that Salesforce was bringing in three new board members, which felt like a way to appease the activists — especially because one of them was Mason Morfit, CEO and chief investment officer of ValueAct, one of those very same activists.
Activists typically pressure the company to cut costs, and in corporate terms, that usually means cutting staff. Sure enough, Salesforce soon announced that it was cutting 10% of its workforce, or 7,000 people, on January 4, 2023. The excuse was that it had overhired during the pandemic and this was a correction, but it could also have been throwing the activists a cost-cutting bone.
Either way, reports suggested the company didn’t handle the layoffs well, engineers were being pressured, and Benioff began preaching about going back to the office after embracing work from home, and what Salesforce called the “Digital HQ,” during the pandemic. The company’s reputation as a progressive, employee-friendly organization took a big hit.