Why is Salesforce increasing its equity incentive plan shares?

Salesforce is increasing the share reserve under its 2006 Inducement Equity Incentive Plan to allow for the continued granting of stock options and other equity awards. This is a common practice for technology companies to attract, retain, and incentivize key employees and executives, particularly in competitive talent markets.

What is 'majority voting' for directors and why is it significant?

Majority voting means that in an uncontested election, a director nominee must receive more votes cast in favor of their election than votes cast against it. This is significant because it shifts the standard from a plurality vote (where a director could be elected with fewer 'for' votes than 'against' votes if there were multiple candidates) to a more direct mandate from shareholders. It increases director accountability to the company's owners.

What happens if a director doesn't get enough votes under the new system?

If a director nominee fails to receive the required majority vote in an uncontested election, they are expected to tender their resignation. The Nominating and Corporate Governance Committee will then review this resignation and recommend to the Board whether to accept it or take other action. The Board will make the final decision, and the company will publicly disclose this decision and its reasoning within 90 days of the election results being certified.

Does this mean the company is having an election soon?

This filing indicates a change in the company's governance policy regarding director elections, not necessarily an imminent election. The new majority voting standard and resignation policy will apply to future director elections, particularly at annual shareholder meetings, unless specific circumstances trigger a contested election where plurality voting continues to apply.

CRM 8-K: Material Agreements & Corporate Changes

Summary

This 8-K filing by Salesforce.com, Inc. on January 14, 2011, reports on two significant corporate governance updates approved by the Board of Directors on January 10, 2011. Firstly, the company amended its 2006 Inducement Equity Incentive Plan to reserve an additional 300,000 shares of common stock for issuance, primarily for granting inducement stock options and awards. This action indicates a continued strategy to use equity as a tool for employee incentives and retention, particularly for key personnel, under the NYSE's employment inducement exemption. Secondly, and perhaps more crucially for governance-minded investors, Salesforce adopted Amended and Restated Bylaws to implement a majority voting standard for the election of directors in uncontested situations. This means directors will now be elected if they receive more votes for than against their election. The filing also details the process for handling a director's failure to achieve a majority vote, including the tender of resignation, review by the Nominating and Corporate Governance Committee, Board action, and public disclosure of the Board's decision and rationale within 90 days. This move aligns the company with best practices in corporate governance, enhancing shareholder rights and accountability.

Key Highlights

1Salesforce increased the share pool for its 2006 Inducement Equity Incentive Plan by 300,000 shares to continue granting equity awards.
2The company adopted Amended and Restated Bylaws to implement majority voting for director elections in uncontested situations.
3Under the new bylaws, directors need more 'for' votes than 'against' votes to be elected in uncontested director elections.
4A process is now in place for directors who fail to receive majority support, involving resignation tender, committee review, and Board decision.
5The Board's decision on a non-elected director's resignation will be publicly disclosed with rationale within 90 days.
6These governance changes aim to improve director accountability to shareholders.
7The equity plan amendment continues to utilize the NYSE's 'employment inducement exemption', allowing for equity grants without immediate stockholder approval.

Salesforce, Inc. 8-K Report, Material Agreement (Jan 14, 2011)

Summary

Key Highlights

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