Proposal 7 – Stockholder Proposal Requesting, on an Advisory Basis, Action to Allow Stockholders to Request Special Meetings of Stockholders
The Company has been advised that James McRitchie and Myra K. Young, 9295 Yorkship Court, Elk Grove, CA, 95758, beneficial owners of 35 shares of the Company’s common stock, intend to submit the proposal set forth below at the Annual Meeting:
RESOLVED: The shareholders of Salesforce.com Inc. (‘CRM’ or ‘Company’) hereby request that the Board of Directors take the steps necessary to amend our bylaws and each appropriate governing document to give holders in the aggregate of 15% of our outstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting.
Supporting Statement by Stockholder Proponent
Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting is a way to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. This is important because there could be 15-months between annual meetings.
A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value. Our Company offers no right of shareholders to act by written consent or to call a special meeting.
Currently, more than 60% of the companies in the S&P 500 have adopted company bylaws, articles of incorporation, or charter provisions to allow shareholders to call a special meeting.
This proposal topic won more than 87% support at Illinois Tool Works in 2015. It may be possible to adopt this proposal by simply incorporating something similar to the following text into our governing documents:
Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or President or Secretary upon the order in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% of the entire capital stock of the Corporation issued and outstanding and entitled to vote.
We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning 15% of our outstanding common sock [sic] to call a special meeting.
Please vote for: Special Shareowner Meetings—Proposal 7
The Company’s Statement of Opposition
The Board of Directors recommends a vote AGAINST Proposal 7 for the following reasons:
We have a history of regularly reviewing and pro-actively embracing appropriate corporate governance practices, reinforcing our Board’s accountability to stockholders, as well as pursuing productive engagement with our stockholders. As a result, we understand that the ability to call special stockholder meetings between annual meetings is a topic of interest to some stockholders and a topic about which stockholder perspectives vary. We intend to gather additional views from stockholders as we study the topic further. However, we are concerned that this proposal, which advocates a relatively low ownership threshold for triggering the ability to call special meetings, could result in misuse by enabling a small group of stockholders to pursue narrow special interests that may not be in the best interests of all stockholders. For that reason, and other reasons outlined below, we recommend a vote against this proposal.
In evaluating this stockholder proposal, our Board considered the relatively low ownership threshold proposed and the context of the Company’s ownership base. In particular, given existing concentration in ownership of the Company’s stock, a low number of stockholders could satisfy the proposed threshold and use the right to advocate special interest agendas.
The Board also considered:
- the significant costs and resources required to convene a special meeting,
- the potential for a special meeting to divert Board and executive management attention away from managing the business on behalf of all stockholders,
- the strong governance practices we already have in place,
- the fact that our Bylaws already provide stockholders a mechanism for bringing business before the Company’s annual stockholder meeting each year, and
- the opportunities stockholders have to engage in regular, substantive dialogue with the Company to communicate their views and offer feedback.
The Board believes it is important to strike an appropriate balance between providing stockholders meaningful rights and protecting against misuse of those rights. We recognize that the Board is accountable to our stockholders, and we believe our governance practices demonstrate and promote our accountability and advance the creation of stockholder value over the long term. We have also consistently provided stockholders with opportunities to deliver direct feedback through an extensive stockholder engagement program, covering more than 50% of shares outstanding in calendar year 2016. This program is in addition to other substantive stockholder rights and strong corporate governance practices, which include:
- Annual election of directors
- Majority voting for directors
- Proxy access right
- Ongoing Board refreshment, including the addition of six new directors since June 2013
- A predominantly independent Board, with over 80% of our directors qualifying as independent
- Lead Independent Director with robust role
- Rigorous director selection and evaluation process
- Limit on outside directorships
- Fully independent committees
- Comprehensive risk oversight by full Board and committees
- Stock ownership policy for directors and executive officers
- Holding advisory stockholder votes on executive compensation annually
Our Board regularly reviews developments in corporate governance and thoughtfully evaluates which practices would serve the best interests of the Company and its stockholders. Our active stockholder engagement process informs the Board’s actions. Accordingly, while we do not support this proposal and recommend voting against it, we intend to seek stockholder input regarding this topic to obtain more perspective than a binary “For” or “Against” vote can provide.
In summary, in light of the Company’s existing corporate governance practices and its commitment to engage with stockholders on this topic, and in consideration of the potential for misuse that could arise under the particular terms for special meetings that this proposal advocates, the Board recommends that stockholders vote AGAINST Proposal 7.
Vote Required and Board of Directors’ Recommendation
For the foregoing reasons, the Board believes that this proposal is not in the best interests of the Company or our stockholders, and recommends that you vote AGAINST Proposal 7.
Approval of this proposal requires the affirmative vote of a majority of the votes cast.
The Board of Directors Recommends a Vote AGAINST Proposal 7.