08 May Shareholders, Shmareholders
To be clear and to be fair, we want to state, up front, that we DO NOT believe that everyone involved in ESG and stakeholder capitalism is a grifter. Indeed, most are not. Most are well-meaning, decent people who believe that the financial system has the capacity to allow them “to do well by doing good.” We’ll even go so far as to say that the guy who popularized the normative version of stakeholder capitalism – R. Edward Freeman – had good intentions and earnestly sought to address real and serious problems in the American practice of capitalism.
All of that notwithstanding, ESG and stakeholder capitalism as they are understood and practiced today are grifts. Period. Those who have popularized the practices have harnessed the power of man’s inherent desire to do good and to believe in something bigger than himself to run a giant scam on the financial markets that has the potential to cripple Western capitalism or, at the very least, to make it less effective and less competitive. They have done great harm, all the while scolding those of us who resist their machinations for our selfishness and lack of public spiritedness.
Regular readers likely know that we consider Salesforce CEO Marc Benioff the poster child for the stakeholder capitalism grift. Benioff, of course, is the pretentious gasbag who declared that “At my company, Salesforce, 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,” even as he made his billions by awarding himself and then selling tens of thousands of shares of Salesforce EVERY DAY for at least seven years. Benioff is a hypocrite and a fraud. But more to the point, he is an exceptionally poor steward of shareholder funds. He has, over the years, given away hundreds of millions of dollars of shareholder wealth to his favored charitable causes, which, unsurprisingly, tend to lean hard to the political Left.
But that’s not even the worst of it, according to a new report:
Marc Benioff pulls out all the stops when it comes to buying gifts for some executives.
Insider revealed last week that the Salesforce CEO has generously given some watches costing five figures and cars costing well into six figures.
Company insiders say Salesforce extravagantly purchased an Aston Martin for its chief marketing officer, Sarah Franklin, as well as an electric BMW for the chairman of its advisory board, Alex Dayon.
The company also bought its cofounder, Parker Harris, a car worth $271,439 in 2017, regulatory filings show. Former co-CEO Keith Block was given a $211,703 automobile and $86,423 watch in 2019.
Salesforce’s culture of lavish spending goes as far back as 2015 at least when it paid $40,564 for a watch for Block, who was COO at the time. It was given to him “in recognition of his success leading the sales organization in the first quarter of fiscal year 2016,” the SEC filing said.
Benioff is known for handing out $10,000 Cartier watches at Salesforce executive meetings.
Not all employees are given opulent gifts or perks, however. The company cut annual bonuses by 30% last month despite reporting “record” adjusted operating margins of 22.5% in its most recent financial year.
In its most recent financial year to January 2023, Benioff was given a compensation package worth $30 million, an SEC filing showed. That was $1.4 million more than he received in the previous 12 months.
Benioff’s package was revealed in the same month that Salesforce cut about 10% of its workforce, or close to 8,000 employees, to focus on profitability.
There are, we think, a couple of important points worth noting here. First, a guy who gives an Aston Martin to his pal (USING SHAREHOLDER MONEY) while cutting the little people’s bonuses sounds to us like a TERRIBLE manager of his stakeholders. And we mean that in every sense of the stakeholder model, which is to say that on a practical level, it’s extremely poor management, while on a normative level, it’s grossly immoral. Benioff is not a stakeholder capitalist. He’s a crony capitalist.
Second, this is also terrible shareholder management. In The Dictatorship of Woke Capital, I quote Bloomberg’s Mark Levine, who wrote that the corporate embrace of stakeholder capitalism “should be seen less as the result of CEOs having ‘thought it over and decided that employees and the environment are getting a raw deal,’ and more as an overt declaration by corporate managers ‘that shareholders are annoying.’” In Benioff’s case, this distaste for the will of shareholders extends to include a disdain for the capital that the shareholders provide the corporation. He is not grateful. He is not careful. He is not a willing fiduciary.
Look again at the report cited above and specifically at these bits: “…the Salesforce CEO has generously given…Salesforce extravagantly purchased… The company also bought… Benioff is known for handing out $10,000 Cartier watches.” Benioff enjoys playing Santa Claus and has intentionally cultivated a reputation for generosity. It just so happens that he is generous with other people’s money. The guy is worth almost $8 billion, and yet, he’ll steal take from YOU to enhance his personal reputation. And when we say “you,” we mean “you.” If you own an S&P 500 ETF, for example, then Marc Benioff is using YOUR money to buy his pals extravagant gifts. And it’s unlikely you’ll ever get so much as a “thank you.”
Again, to be clear, we don’t mean to suggest that every CEO who embraces a stakeholder model or who gushes about ESG is as duplicitous and contemptible as Marc Benioff. Most aren’t. But that’s not the point. The point is that once you decide that shareholders are a pain in the backside, and once you decide that it is, therefore, OK to use shareholder funds to accomplish social goals, then it’s only a small jump to believing that it’s OK to use shareholder funds however you see fit, without regard for the effect on the company. Benioff, for example, knows that most shareholders will excuse his generosity with their money if he continues to goose the share price of the company higher through financialization (which is precisely what he is trying to do). And in this, he is NOT an outlier. He is, indeed, the quintessential stakeholder CEO, an example to his peers.
And that should make you a little nervous – as well as more than a little angry.
