04 Jan An Inevitable “Slowdown”
We’ll apologize up front, but we’re going to start today with a long quote from The Dictatorship of Woke Capital (the paperback edition of which is pictured below and will be available in a few weeks). This is important stuff, we think, and not just because we don’t particularly care for the subject of this section of the book.
Anyway, here we go (again) with our thoughts on the execrable Marc Benioff (emphasis added):
Benioff is known to be a devotee of Klaus Schwab, the German engineer and economist who founded the World Economic Forum….
As a Schwab enthusiast, Benioff has made it his business to ensure that anyone who has anything to do with his company—all the stakeholders, you might say—contribute equally to his favored political and social causes. “At my company, Salesforce,” Benioff wrote, “we baked philanthropy into our business model from day one, leveraging one percent of our technology, people, and resources to help nonprofits around the world achieve their missions.” In practice, what this means is that Benioff has given away “more than $100 million in grants . . . more than 1.1 million [employee] volunteer hours and . . . products to more than 27,000 organizations.” Just to be clear, as of the moment this book is being written, Benioff is worth more than $7 billion, which means that $100 million would be about 1.4 percent of his personal wealth. But he’s had his “shareholders” give that money away instead. Just because he can.
Benioff also believes—as does Schwab—that the world needs a “new” form of capitalism. “Over the past 20 years, the company that I co-founded, Salesforce, has generated billions in profits and made me a very wealthy person,” Benioff wrote in the New York Times. “Yet, as a capitalist, I believe it’s time to say out loud what we all know to be true: Capitalism, as we know it, is dead.” He continues, noting that “capitalism as it has been practiced in recent decades—with its obsession on maximizing profits for shareholders—has also led to horrifying inequality,” and that “[w]hen government is unable or unwilling to act, business should not wait.”…
It’s hardly surprising that Benioff would want to change capitalism and to do it on the backs of his shareholders. That is, essentially, how he has done everything in his life since he launched Salesforce in 1999. The market commentator (and erstwhile political science professor) Ben Hunt has called Benioff “one of the modern-day robber barons,” noting that Benioff and those like him “built multi-billion dollar personal fortunes out of serial acquisitions of profitless software companies and constant stock sales. And by constant I mean constant. From 2004 through 2010, under a series of 10b5-1 plans filed with the SEC, Marc Benioff sold at least 10,000 shares of Salesforce.com stock. . . .Every. Single. Day.” Hunt has also noted that the “capitalism” that Benioff practices and refers to as “shareholder capitalism” more generally is a specific variety of shareholder capitalism, one that enriches insider shareholders at the expense of common shareholders. “No company has played the stock-based compensation game better than Benioff’s brainchild, Salesforce.com,” Hunt wrote, “to the benefit of not only Benioff, but everyone in management (particularly sales) at Salesforce. Here’s how it works. Since Salesforce became a public company, its revenues have grown at a wonderful clip. Its EBITDA (earnings before interest, taxes, depreciation and amortization) and net income available to common shareholders . . . not so much.”
Hunt continued:
“Since it became a public company in 2004, Salesforce.com has paid its employees $4.8 billion in stock-based compensation. That’s above and beyond actual cash compensation. For tax purposes, it’s actually expensed quite a bit more than that, namely $5.2 billion. The total amount of net income available for common shareholders? $360 million. On total revenue of $52 billion.
“Note that none of this includes the money that Benioff himself made in stock sales from 2004 through 2010. . . .”
Robber baron indeed.
Of course, we mention Benioff today not because of what he has done to shareholders, specifically, but because of the impact that his “new” capitalism and verbal obsession with “inequality” have done to his company and its principal “stakeholders,” i.e. its employees. The Wall Street Journal has the news this morning:
Salesforce Inc. CRM 3.42%increase; green up pointing triangle is laying off 10% of its workforce and reducing its office space in certain markets, extending a brutal period for tech job cuts into the new year.
Salesforce Co-Chief Executive Marc Benioff said that the cuts come as many of the company’s customers are taking a more cautious approach to spending, a trend that a growing number of software companies said they have been facing lately.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Mr. Benioff said in a letter to employees.
Mr. Benioff, who also serves as chairman of the company, said the business-software provider hired too many people as revenue surged earlier in the Covid-19 pandemic. “I take responsibility for that,” he said….
Salesforce had nearly 80,000 global employees as of Oct. 31….
Now, to be clear, only one of us majored in math in college, and he’s the one who doesn’t write any longer. Still, we think our back-of-the-envelope calculations here are right. Benioff’s current net worth is about $6 billion. If we took half of that – which seems fair, given that he “takes personal responsibility” for the company’s problem – he would never even notice it was gone, so it would be no sacrifice on his part. We could then give each of the 8000 employees being laid off a $375,000 severance check, which wouldn’t exactly make them “equal” to their former boss but would help them out quite a bit. And that’s what the “new” capitalism is all about, right? Helping your fellow man? That’s right, isn’t it, Marc?…
…Marc?
As we’ve noted before in these pages, we sympathize with R. Edward Freeman, the intellectual godfather of contemporary stakeholder capitalism. He recognized real problems with capitalism as it was being practiced and he made a good-faith effort to address some of those problems. His (biggest) mistake was not taking seriously enough the precedents set in previous attempts to right legitimate wrongs by overhauling the moral framework underpinning the system. Ancien France was corrupt and degenerate. The Industrial Revolution had an ugly and cruel underbelly. None of that, however, validated Robespierre or Stalin or Hitler, all of whom were the largely inevitable results of throwing the proverbial baby out with the bathwater, of the thoroughly unjustified and naïve expectation that the “new” man operating in the new moral environment would be any nobler than the old man in the old moral environment.
And while it may seem unfair to compare a guy who runs a management-wealth-creation operation that masquerades as a software business to Robespierre and Stalin, that’s his part in this analogy. Freeman expected the stakeholder reformers to be good and decent businessmen.
Instead, we got Marc Benioff.
