Salesforce (NYSE:CRM) CEO and chairman Marc Benioff seems to be gaining more support and trust from investors after pressure from activist investors pushed the customer relationship management (CRM) platform to reduce costs and improve profits. An SEC filing on Monday revealed that a proposal suggesting that the board must be led by an independent chairman rather than a current or former CEO got about 23% votes at the annual meeting on June 8, down from less than 37% last year.
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Salesforce CEO Gains More Support
This reflects that investors are more comfortable than before with letting Benioff continue as the chairman of the board than they were before. CRM stock has rallied 61% year-to-date, reinforcing investor sentiment. The company recently reported market-beating fiscal-first quarter earnings. Also, it issued better-than-anticipated second-quarter guidance.
As per a Bloomberg report, advisory firm Institutional Shareholder Services Inc. recommended against the proposal, contending that the CRM board has recently made many “positive structural changes,” including reducing the complexity of its leadership structure. Interestingly, Institutional Shareholder Services backed a similar proposal last year, saying that it can be difficult to balance a board led by a founder and long-time CEO.
Meanwhile, advisory firm Glass Lewis supported the proposal to have an independent chair due to corporate governance concerns, as it believes that an independent chair removes the conflict of interest that inevitably comes into the picture when the CEO takes the role of the chairman as well.
Overall, shareholder sentiment toward CEO Benioff and the company has improved over the past year despite the impact of macro pressures on Salesforce. It is worth noting that in the first quarter, activist investor Elliott Investment Management retreated and said that it will no longer proceed with its director nominations, citing the company’s “New Day” multi-year profitable growth framework, solid FY23 results, and FY24 planned transformation initiatives.
Salesforce’s AI Offering
Separately, on Monday, Salesforce unveiled its AI Cloud service that comprises a suite of products, including the Einstein GPT Trust Layer, to address concerns about risks associated with adopting generative artificial intelligence (AI) by helping enterprises meet their data security and compliance demands.
Is CRM a Buy, Sell, or Hold?
On Monday, Bank of America analyst Bradley Sills reiterated a Buy rating on CRM stock with a price target of $250. Reacting to Salesforce’s new AI Cloud offering, Sills said that he is encouraged by the individual components of the product, like Marketing GPT and Commerce GPT, given the incremental value provided through AI-enabled automation.
Sills expects some components of the AI Cloud to generate incremental subscription revenue as early as Q4 FY24, with the general availability of some of these components anticipated in Q2 and Q3.
Wall Street’s Moderate Buy consensus rating on CRM is based on 14 Buys, nine Holds, and one Sell. The average price target of $230.24 implies nearly 8% upside.
