By Ariel Solomon
- Salesforce’s activist investors may take issue with the perceived prioritization of celebrities will.i.am and Matthew McConaughey over shareholders
- will.i.am received $117M in Salesforce funding for his consumer tech business and is now a common presence at executive meetings
When people imagine the scene of a high-level corporate meeting, they typically visualize a room filled with C-suite executives and board members. In the case of Salesforce (CRM -4.07%) their executive meetings also include a few choice celebrities, like Matthew McConaughey and will.i.am. This has spurred the battle for control of the company’s $150 million empire between its activist investors, ambassadors and investees at the table.
Activist investors, or individuals and institutions, who buy up large stakes in companies in order to influence how they are managed, might have a problem with this method and what it might represent.
Why This Matters: As investors, each shareholder rightfully feels like a part-owner of the company. However, activist investors typically buy up large stakes in companies in order to influence how they are managed. As the size of that share increases, many investors have an expectation that so too should the impact of their voices. This is why in the case of Salesforce, activist investors like Elliot Management, Starboard Capital, and Jeff Uben want their voices to be heard such that the company puts more focus into driving increased profit and share prices, rather than catering to its roster of celebrity partnerships.
In 2017, will.i.am received an $117 million investment from Salesforce for his consumer tech business and frequently attends the company’s executive meetings. Similarly Matthew McConaughy, a brand partner for Salesforce, was recently spotted at meetings, drawing ire from activist investors.
This can raise concern for a number of reasons as it may signal a lack of focus from leadership, but more importantly a level of disregard for the activist investors who want their concerns to be heard and addressed. As for Salesforce, the falling stock and shifting leadership, in spite of a 14% increase in revenues, is the hot topic. Salesforce´s operating cash flow decreased by 23% year over year, down to $313 million for the quarter, per its most recent financial results.
Situational Awareness: It can actually be a solid strategy to lean into the probing from activist investors. They often raise thoughtful questions regarding strategy and performance, and their support, given the size of their equity stake, may be critical. Activist investors are increasingly raising ESG concerns beyond questions about profit; so finding a way to engage constructively with them can mitigate risks and keep companies on a path to success.
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