DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant   x                             Filed by a Party other than the Registrant   ¨

Check the appropriate box:

 

¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to §240.14a-12

salesforce.com, inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.
¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)

Title of each class of securities to which the transaction applies:

 

     

(2)

Aggregate number of securities to which the transaction applies:

 

     

(3)

Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

(4)

Proposed maximum aggregate value of the transaction:

 

     

(5)

Total fee paid:

 

     

¨ Fee paid previously with preliminary materials.
¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)

Amount Previously Paid:

 

     

(2)

Form, Schedule or Registration Statement No.:

 

     

(3)

Filing Party:

 

     

(4)

Date Filed:

 

     

 

 

 


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LOGO

 

 

Notice of the 2015 Annual Meeting and

2015 Proxy Statement

Thursday, June 4, 2015 at 2:00 p.m. local time

50 Fremont Street, San Francisco, California 94105

 


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LOGO

salesforce.com, inc.

The Landmark @ One Market

Suite 300

San Francisco, California 94105

 

LOGO

April 22, 2015

Dear Fellow Stockholders:

You are cordially invited to attend the 2015 Annual Meeting of Stockholders of salesforce.com, inc. on Thursday, June 4, 2015 at 2:00 p.m. local time at 50 Fremont Street, San Francisco, California 94105.

At this year’s meeting, we will vote on the election of all of our directors, amendments to our 2013 Equity Incentive Plan and our 2004 Employee Stock Purchase Plan to increase the number of shares authorized for grant thereunder, and the ratification of the selection of Ernst & Young LLP as Salesforce’s independent registered public accounting firm. We will also conduct a non-binding advisory vote to approve the compensation of Salesforce’s named executive officers and transact such other business as may properly come before the meeting. In addition, stockholders will have an opportunity to ask questions.

U.S. Securities and Exchange Commission rules allow companies to furnish proxy materials to their stockholders over the Internet. This expedites stockholders’ receipt of proxy materials, lowers the annual meeting costs and conserves natural resources. Thus, we are mailing stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of the Proxy Statement and our 2015 Annual Report. The Notice of Internet Availability of Proxy Materials contains instructions on how to access our proxy materials online, vote and obtain a paper copy of our proxy materials.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote over the Internet, by telephone or by mailing a completed proxy card (if you request printed copies of the proxy materials to be mailed to you). Your vote by proxy will ensure your representation at the Annual Meeting of Stockholders regardless of whether or not you attend in person. Details regarding admission to the meeting and the business to be conducted are described in the accompanying Notice of Annual Meeting and Proxy Statement.

Thank you for your ongoing support of Salesforce. We look forward to seeing you at the meeting.

Aloha,

 

LOGO

Marc Benioff

Chairman of the Board of Directors and

Chief Executive Officer


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LOGO

salesforce.com, inc.

The Landmark @ One Market

Suite 300

San Francisco, California 94105

 

NOTICE OF 2015

ANNUAL MEETING OF STOCKHOLDERS

 

To be held Thursday, June 4, 2015

TO THE STOCKHOLDERS OF SALESFORCE.COM, INC.:

NOTICE IS HEREBY GIVEN that the 2015 Annual Meeting of Stockholders (the “Annual Meeting”) of salesforce.com, inc., a Delaware corporation (“Salesforce”), will be held on Thursday, June 4, 2015 at 2:00 p.m. local time at 50 Fremont Street, San Francisco, California 94105, for the following purposes:

 

  1. To elect Marc R. Benioff, Keith G. Block, Craig A. Conway, Alan G. Hassenfeld, Colin L. Powell, Sanford R. Robertson, John V. Roos, Lawrence J. Tomlinson, Robin L. Washington, Maynard G. Webb and Susan D. Wojcicki to serve as directors until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified, subject to earlier resignation or removal;  

 

  2. To amend our 2013 Equity Incentive Plan to increase the number of shares authorized for grant by 37 million shares;  

 

  3. To amend our 2004 Employee Stock Purchase Plan to increase the number of shares authorized for employee purchase by 7 million shares;  

 

  4. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2016;  

 

  5. To approve, on an advisory basis, the fiscal 2015 compensation of our named executive officers; and  

 

  6. To transact such other business as may properly come before the Annual Meeting.  

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. We are not aware of any other business to come before the Annual Meeting.

Only stockholders of record at the close of business on April 9, 2015 and their proxies are entitled to attend and vote at the Annual Meeting and any and all adjournments, continuations or postponements thereof.

All stockholders are invited to attend the Annual Meeting in person. Any stockholder attending the Annual Meeting may vote in person even if such stockholder returned a proxy. You will need to bring your Notice of Internet Availability of Proxy Materials, or other proof of ownership of Salesforce stock as of the record date, as well as photo identification, to enter the Annual Meeting.

This Notice, the Notice of Internet Availability, the Proxy Statement and the 2015 Annual Report are being made available to stockholders on or about April 22, 2015.

By Order of the Board of Directors

 

LOGO

Burke F. Norton

Chief Legal Officer and Secretary

San Francisco, California

April 22, 2015

ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE ONLINE OR BY TELEPHONE OR, IF YOU REQUESTED PRINTED COPIES OF THE PROXY MATERIALS BE MAILED TO YOU, COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD USING THE RETURN ENVELOPE PROVIDED (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.


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LOGO

PROXY STATEMENT FOR 2015 ANNUAL MEETING OF STOCKHOLDERS

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     Page  

About the Annual Meeting

     1   

Who is soliciting my vote?

     1   

When and where will the Annual Meeting take place?

     1   

Where can I access the proxy materials?

     1   

What will I be voting on?

     1   

What are the Board’s voting recommendations?

     1   

How many votes do I have?

     2   

How do I vote?

     2   

What do I need to bring to attend the Annual Meeting?

     2   

Procedural Matters

     3   

General

     3   

Stockholders Entitled to Vote; Record Date

     3   

Quorum; Abstentions; Broker Non-Votes

     3   

Voting; Revocability of Proxies

     3   

Expenses of Solicitation

     4   

Procedure for Submitting Stockholder Proposals

     4   

Delivery of Proxy Materials

     5   

Directors and Corporate Governance

     6   

Board Members

     6   

Board Independence

     10   

Board Leadership Structure

     11   

Board Meetings and Director Communications

     11   

Corporate Governance and Board Committees

     12   

Compensation of Directors

     15   

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     16   

Equity Compensation Plan Information

     18   

Material Features of the 2014 Inducement Equity Incentive Plan

     18   

Compensation Discussion and Analysis

     19   

Introduction

     19   

Executive Summary

     19   

Compensation Objectives and Challenges

     22   

Compensation-Setting Process

     23   

Compensation for New Executive Officers

     24   

Compensation Elements

     25   

Decisions Regarding Fiscal 2016 Compensation

     29   

 

2015 Proxy Statement  

 

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     Page  

Other Compensation Policies

     30   

Post-Employment Compensation

     30   

Tax and Accounting Considerations

     31   

Compensation Risk Assessment

     32   

Summary Compensation Table

     33   

Grants of Plan-Based Awards

     34   

Option Exercises and Stock Vested

     35   

Outstanding Equity Awards at Fiscal 2015 Year-End

     36   

Employment Contracts and Certain Transactions

     38   

Compensation Committee Interlocks and Insider Participation

     41   

Section 16(a) Beneficial Ownership Reporting Compliance

     41   

Committee Reports

     42   

Report of the Compensation Committee of the Board of Directors

     42   

Report of the Audit Committee of the Board of Directors

     43   

Proposal 1—Election of Directors

     44   

Vote Required and Board of Directors’ Recommendation

     44   

Proposal 2—Approval of the Amended and Restated 2013 Equity Incentive Plan to Increase Shares Reserved for Issuance Thereunder

     45   

Increasing the Number of Shares Reserved for Issuance Under the 2013 Plan

     45   

Summary of the 2013 Plan

     47   

Summary of U.S. Federal Income Tax Consequences

     53   

Number of Awards Granted to Employees, Consultants and Directors

     55   

Vote Required and Board of Directors’ Recommendation

     55   

Proposal 3—Approval of the Amended and Restated Employee Stock Purchase Plan to Increase Shares Reserved for Issuance Thereunder

     56   

Increasing the Number of Shares Reserved for Issuance Under the ESPP

     56   

Summary of the ESPP

     57   

Number of Shares Purchased by Certain Individuals and Groups

     59   

U.S. Federal Income Tax Consequences

     60   

Summary

     60   

Vote Required and Board of Directors’ Recommendation

     60   

Proposal 4—Ratification of Appointment of Independent Auditors

     61   

Engagement Letter and Fee Disclosure

     61   

Pre-Approval of Audit and Non-Audit Services

     61   

Vote Required and Board of Directors’ Recommendation

     62   

Proposal 5—Advisory Vote to Approve Named Executive Officer Compensation

     63   

Fiscal Year 2015 Business Highlights

     63   

Advisory Vote and Board of Directors’ Recommendation

     63   

Transaction of Other Business

     64   

 

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          ABOUT THE ANNUAL MEETING   

 

ABOUT THE ANNUAL MEETING

Who is soliciting my vote?

 

The Board of Directors of salesforce.com, inc. (the “Board”) is soliciting your vote at the 2015 Annual Meeting of Stockholders (the “Annual Meeting”) of salesforce.com, inc. Unless otherwise indicated, references in this Proxy Statement to “Salesforce,” “we,” “us” and the “Company” refer to salesforce.com, inc.

When and where will the Annual Meeting take place?

 

The Annual Meeting will take place on Thursday, June 4, 2015 at 2:00 p.m. local time at 50 Fremont Street, San Francisco, California 94105.

Where can I access the proxy materials?

 

Pursuant to the rules of the Securities and Exchange Commission, or SEC, we have provided access to our proxy materials over the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) has been sent to our stockholders of record and beneficial owners as of the record date, April 9, 2015. Instructions on how to access the proxy materials over the Internet or to request a printed copy by mail may be found in the Internet Notice.

By accessing the proxy materials on the Internet or choosing to receive your future proxy materials by email, you will save us the cost of printing and mailing documents to you and will reduce the impact of the Annual Meeting on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials. If you choose to receive future proxy materials by mail, you will receive a paper copy of those materials, including a form of proxy. Your election to receive proxy materials by mail or email will remain in effect until you notify us that you are terminating your request.

What will I be voting on?

 

You will be voting on:

 

1. the election of Marc Benioff, Keith Block, Craig Conway, Alan Hassenfeld, Colin Powell, Sanford Robertson, John Roos, Lawrence Tomlinson, Robin Washington, Maynard Webb and Susan Wojcicki to serve as directors until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified, subject to earlier resignation or removal;

 

2. the amendment of our 2013 Equity Incentive Plan to increase the number of shares authorized for grant by 37 million shares;

 

3. the amendment of our 2004 Employee Stock Purchase Plan to increase the number of shares authorized for employee purchase by 7 million shares;
4. the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2016;

 

5. an advisory vote to approve named executive officer compensation; and

 

6. any other business as may properly come before the Annual Meeting.

An agenda and rules of procedure will be distributed at the Annual Meeting.

 

 

What are the Board’s voting recommendations?

 

The Board recommends that you vote your shares:

 

 

FOR each of Marc Benioff, Keith Block, Craig Conway, Alan Hassenfeld, Colin Powell, Sanford Robertson, John Roos, Lawrence Tomlinson, Robin Washington, Maynard Webb and Susan Wojcicki;

 

 

FOR the amendment of our 2013 Equity Incentive Plan to increase the number of shares authorized for grant by 37 million shares;

 

FOR the amendment of our 2004 Employee Stock Purchase Plan to increase the number of shares authorized for employee purchase by 7 million shares;

 

 

FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2016; and

 

 

FOR the advisory vote to approve named executive officer compensation.

 

 

2015 Proxy Statement  

 

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  ABOUT THE ANNUAL MEETING (CONTINUED)          

 

How many votes do I have?

 

You will have one vote for every share of Salesforce common stock (“Common Stock”) you owned as of April 9, 2015, our record date.

How do I vote?

 

You can vote in person at the Annual Meeting or by proxy whether or not you attend the Annual Meeting.

 

 

To vote over the Internet, for shares held of record, use the procedures and instructions described on your Internet Notice or proxy card; for shares held in street name, refer to the voting instructions provided by your broker.

 

 

To vote by telephone, for shares held of record, refer to the instructions on your Internet Notice or proxy card; for shares held in street name refer to the voting instructions provided by your broker.

 

To vote by mail (if you requested printed copies of the proxy materials to be mailed to you), fill out the enclosed proxy card, date and sign it, and return it in the postage-prepaid envelope provided.

If you want to vote in person at the Annual Meeting, and you hold your Salesforce stock through a brokerage firm, bank, broker-dealer, trust or other similar organization (that is, in street name), you must obtain a legal proxy from the broker or other organization and bring that proxy to the Annual Meeting.

 

 

What do I need to bring to attend the Annual Meeting?

 

A stockholder must bring the Internet Notice or other proof of ownership of Salesforce stock as of the record date, as well as photo identification for entrance to the Annual Meeting.

 

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          PROCEDURAL MATTERS  

 

PROCEDURAL MATTERS

General

 

The Salesforce Board of Directors is soliciting your vote with this Proxy Statement and proxy card for use at the Annual Meeting, to be held on Thursday, June 4, 2015 at 2:00 p.m. local time and for any adjournment or postponement of the Annual Meeting. The Annual Meeting will be held at 50 Fremont Street, San Francisco, California 94105. You will need to bring proof of ownership of Salesforce stock as of the record date, as well as photo

identification, to enter the Annual Meeting. Our Annual Report for the fiscal year ended January 31, 2015, or “fiscal 2015,” including our financial statements for fiscal 2015, is also enclosed or available online at the same website as this Proxy Statement. These proxy materials are first being made available to stockholders on or about April 22, 2015.

 

 

Stockholders Entitled to Vote; Record Date

 

As of the close of business on April 9, 2015, the record date for determination of stockholders entitled to vote at the Annual Meeting, there were outstanding 655,555,993 shares of Common Stock of the Company, all of which are entitled to vote with respect to all matters to be acted upon at the Annual Meeting. Each stockholder is entitled to one vote for each share of Common Stock held by such stockholder.

All valid proxies received before the Annual Meeting will be voted according to the instructions thereon. Stockholders of record may

vote at the Annual Meeting (1) over the Internet at www.edocumentview.com/CRM, (2) by telephone at 1-800-652-VOTE (8683), or (3) by mail (if you requested printed copies of the proxy materials to be mailed to you) by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage-prepaid envelope. Stockholders who hold shares in street name should refer to instructions from their broker or organization serving as the recordholder.

 

 

Quorum; Abstentions; Broker Non-Votes

 

The Company’s Bylaws provide that a majority of all shares entitled to vote, whether present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting.

Shares that are voted “abstain” and broker non-votes (as defined below) are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting.

In the election of directors, abstentions will not impact the election of that nominee. In tabulating the voting results for the election of directors, only “for” and “against” votes are counted.

For the other proposals, an “abstain” vote counts the same as voting against the proposal.

 

If you hold your Common Stock through a broker, the broker may be prevented from voting shares held in your brokerage account (a “broker non-vote”) unless you have given the broker voting instructions. Thus, if you hold your Common Stock through a broker, it is critical that you cast your vote if you want it to count. If you hold your Common Stock through a broker and you do not instruct your broker how to vote on Proposals 1, 2, 3 or 5, it will be considered a broker non-vote and no votes will be cast on your behalf with respect to such Proposal.

Your broker will have discretion to vote any uninstructed shares on Proposal 4, the ratification of the appointment of the Company’s independent registered public accounting firm.

 

Voting; Revocability of Proxies

 

Voting by attending the meeting.    Stockholders whose shares are registered in their own names may vote their shares in person at the Annual Meeting. Stockholders whose shares are held beneficially through a brokerage firm, bank, broker-dealer, trust or other similar organization (that is, in street name) may vote in person at the Annual Meeting only if such stockholders obtain a legal proxy from the broker, bank, trustee or nominee that holds their shares giving the stockholders the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described

below so that your vote will be counted if you later decide not to attend the Annual Meeting. If a stockholder attends the Annual Meeting and validly submits his or her vote in person, any previous votes that were submitted by the stockholder will be superseded by the vote that such stockholder validly casts at the Annual Meeting. Your attendance at the Annual Meeting in and of itself will not revoke any prior votes you may have cast. For directions to attend the Annual Meeting, please contact Investor Relations by telephone at (415) 536-6250.

 

 

 

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  PROCEDURAL MATTERS (CONTINUED)          

 

Voting of proxies; Discretionary Voting.    Stockholders may vote over the Internet, by telephone, by mail, or in person, as described above. All shares entitled to vote and represented by properly executed proxy cards received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxy cards. The telephone and Internet voting procedures are designed to authenticate the stockholder’s identity and to allow stockholders to vote their shares and confirm that their voting instructions have been properly recorded. If you vote by telephone or over the Internet, you do not need to complete and mail your proxy card. If you do not provide specific voting instructions on a properly executed proxy card or when voting over the phone or Internet, your shares will be voted as recommended by the Board.

If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named in the proxy card and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. The Company does not currently anticipate that any other matters will be raised at the Annual Meeting.

Effect of not casting your vote.    If you hold your shares in street name it is critical that you cast your vote if you want it to count in the election of directors, the amendment of our 2013 Equity Incentive Plan, the amendment of our 2004 Employee

Stock Purchase Plan and the advisory vote to approve named executive officer compensation (Proposals 1, 2, 3 and 5 of this Proxy Statement). Your bank or broker will have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 4 of this Proxy Statement).

If you are a stockholder of record, it is also critical that you cast your vote. If you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.

Revocability of proxy.    You may revoke your proxy by (1) entering a new vote by telephone or over the Internet, (2) filing with the Secretary of the Company, at or before the taking of the vote at the Annual Meeting, a written notice of revocation or a duly executed proxy card, in either case dated later than the prior proxy card relating to the same shares, or (3) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself revoke a proxy). Any written notice of revocation or subsequent proxy card must be received by the Secretary of the Company prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to the Secretary of the Company or should be sent to the Company’s principal executive offices, salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105, Attention: Corporate Secretary.

If a broker, bank or other nominee holds your shares, you must contact them in order to find out how to change your vote.

 

 

Expenses of Solicitation

 

The Company will bear the entire cost of solicitation. In addition, the Company may arrange with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of the stock held of record by such persons, and the Company will reimburse them for their reasonable out-of-pocket expenses. The Company may use the services of the Company’s directors, officers, employees and

others to solicit proxies, personally or by telephone, without additional compensation. The Company has retained Morrow & Co., LLC, 470 West Ave., Stamford, Connecticut, 06902, a proxy solicitation firm, for assistance in connection with the Annual Meeting at a cost of approximately $14,000, plus reasonable out-of-pocket expenses.

 

Procedure for Submitting Stockholder Proposals

 

All proposals of stockholders intended to be presented at the Company’s next annual meeting of stockholders, regardless of whether such proposals are intended to be included in the Company’s proxy statement for the next annual meeting of stockholders, must satisfy the requirements set forth in the advance notice of stockholder business provision under the Company’s Bylaws. As summarized below, such provision states that in order for stockholder business to be properly brought before a meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Company at salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105, Attention: Corporate Secretary (our “principal executive offices”).

To be timely, a stockholder proposal must be received at our principal executive offices no later than the 45th day and no earlier

than the 75th day before the one-year anniversary of the date the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. If the date of the annual meeting is advanced by more than 30 days prior to, or delayed by more than 60 days after, the one-year anniversary of the date of the previous year’s annual meeting, then notice must be received no earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting, or the tenth day following the day on which public announcement of the date of such annual meeting is first made. Stockholder proposals to be presented at the next annual meeting of stockholders must be received by the Secretary of the Company at our principal executive offices no earlier than February 7, 2016 and no later than March 8, 2016.

 

 

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          PROCEDURAL MATTERS (CONTINUED)  

 

To be in proper written form, a stockholder’s notice to the Secretary of the Company must set forth as to each matter of business the stockholder intends to bring before the annual meeting (i) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address of the stockholder(s) proposing such business, (iii) the class and number of shares of the Company which are held of record or are beneficially owned by the stockholder(s), (iv) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder(s) with respect to any securities or the Company, and a description of any other similar agreement, arrangement or understanding, (v) any material interest of the stockholder(s) in such business and (vi) a statement whether such stockholder(s) will deliver a proxy statement and form of proxy to the Company’s stockholders. In addition, to be in proper written form, a stockholder’s notice to the Secretary of the Company must be supplemented not later than ten days following the record date to disclose the information contained in clauses (iii) and (iv) in this paragraph as of the record date.

In addition, any stockholder proposal intended to be included in the Company’s proxy statement for the next annual meeting of

stockholders of the Company must also satisfy SEC regulations under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and be received not later than December 24, 2015. In the event the date of the annual meeting is moved by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, then notice must be received within a reasonable time before the Company begins to make its proxy materials available. Upon such an occurrence, the Company will publicly announce the deadline for submitting a proposal by means of disclosure in a press release or in a document filed with the SEC.

The requirements for providing advance notice of stockholder business as summarized above are qualified in their entirety by our Bylaws, which we recommend that you read in order to comply with the requirements for bringing a proposal. You may contact the Company’s Secretary at our principal executive offices for a copy of our current Bylaws, including the relevant provisions regarding the requirements for making stockholder proposals and nominating director candidates, or you may refer to the copy of our Bylaws filed with the SEC on June 11, 2013 as Exhibit 3.2 to a Current Report on Form 8-K, available at www.sec.gov.

 

 

Delivery of Proxy Materials

 

To receive current and future proxy materials in either paper or electronic form, please contact Investor Relations at (415) 536-6250 or investor@salesforce.com.

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders, unless the Company has received contrary instructions from one or more of the stockholders. This process, which is commonly referred to as

“householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single set of materials per household, even if more than one stockholder resides in that household. If your proxy statement is being householded and you would like to receive separate copies, or if you are receiving multiple copies and would like to receive a single copy, please contact Investor Relations at (415) 536-6250 or investor@salesforce.com, or write to salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105, Attention: Investor Relations.

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 2015

 

The Notice of Annual Meeting, Notice of Internet Availability of Proxy Materials, Proxy Statement and Annual Report are available for shares held of record at www.edocumentview.com/CRM and for shares held in street name refer to the notice provided by your broker.

 

 

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  DIRECTORS AND CORPORATE GOVERNANCE          

 

DIRECTORS AND CORPORATE GOVERNANCE

Board Members

 

Our Board is composed of eleven directors who serve until the next Annual Meeting and until their successors are elected and qualified, subject to earlier resignation or removal.

On June 6, 2013, the stockholders of the Company approved an amendment and restatement of the Company’s Certificate of Incorporation to eliminate the classified structure of the Company’s Board. In eliminating the classified structure, no director’s existing term was shortened and directors became

subject to annual election once their classified terms expired. The phase-out of the classified structure will be completed as of the 2015 Annual Meeting with all directors now being subject to annual election. Please see Proposal 1 in this Proxy Statement for more information about the election of our directors.

The names and certain information about members of our Board as of March 31, 2015 are set forth below. There are no family relationships among any of our directors or executive officers.

 

 

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Marc Benioff

Chairman of the Board and
Chief Executive Officer

Age: 50

Director Since: 1999

Marc Benioff co-founded Salesforce in February 1999 and has served as our Chairman of the Board since inception. He has served as Chief Executive Officer since 2001. From 1986 to 1999, Mr. Benioff was employed at Oracle Corporation, where he held a number of positions in sales, marketing and product development, lastly as a Senior Vice President. Mr. Benioff also serves as Chairman of the Board of The Salesforce.com Foundation, a philanthropic private foundation, and Salesforce.org, a non-profit mutual benefit corporation. In the past five years, Mr. Benioff served as a director of Cisco Systems, Inc. Mr. Benioff received a B.S. in Business Administration from the University of Southern California, where he is also on the Board of Trustees.

Mr. Benioff’s status as one of our founders, as well as his tenure as our Chief Executive Officer and Chairman of the Board, brings unique and invaluable experience to the Board. Further, his experience in sales, marketing and product development at other technology companies supports our conclusion that Mr. Benioff has the necessary and desired skills, experience and perspective to serve on our Board.

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Keith Block

President and Vice Chairman

of the Board

Age: 54

Director Since: 2013

Keith Block has served as our President, Vice Chairman and as a Director since joining Salesforce in June 2013. Prior to that, Mr. Block was employed at Oracle Corporation from 1986 to June 2012 where he held a number of positions, most recently Executive Vice President, North America. Mr. Block serves on the Board of Trustees at the Concord Museum, the Board of Trustees at Carnegie-Mellon University Heinz Graduate School and the President’s Advisory Council for Carnegie-Mellon University. Mr. Block received both a B.S. in Information Systems and an M.S. in Management & Policy Analysis from Carnegie-Mellon University.

Mr. Block’s extensive background in the technology sector and in business management, including his experience as an executive officer of a technology company, supports our conclusion that Mr. Block has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

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LOGO   

Craig Conway

Former CEO, PeopleSoft

Age: 60

Director Since: 2005

Craig Conway has served as a Director since October 2005. From 1999 to 2004, Mr. Conway served as President and Chief Executive Officer of PeopleSoft, Inc., an enterprise application software company. Mr. Conway also served as President and Chief Executive Officer of One Touch Systems from 1996 to 1999 and TGV Software from 1993 to 1996. Prior to that, Mr. Conway held executive management positions at a variety of leading technology companies including Executive Vice President at Oracle Corporation. Mr. Conway currently serves as a director and chairman of Guidewire Software, Inc. During the past five years, Mr. Conway also served as a director of Advanced Micro Devices, Inc. and Pegasystems Inc. Mr. Conway received a B.S. in computer science and mathematics from the State University of New York at Brockport.

Mr. Conway’s extensive and broad background in business management, including his experience as president and chief executive officer of three technology companies, as well as his service on the boards of other publicly-held companies, supports our conclusion that Mr. Conway has the necessary and desired skills, experience and perspective to serve on our Board.

LOGO   

Alan Hassenfeld

Director and former Chairman

and CEO of Hasbro, Inc.

Age: 66

Director Since: 2003

Alan Hassenfeld has served as a Director since December 2003. Mr. Hassenfeld has been a Director of Hasbro, Inc., a provider of children’s and family entertainment products, since 1978. He served as its Chairman from 1989 to 2008, and also served as its Chairman and Chief Executive Officer from 1989 to 2003. Mr. Hassenfeld is a trustee of the Hasbro Charitable Trust and Hasbro Children’s Foundation. During the past five years, Mr. Hassenfeld also served as a director of Global Cornerstone Holdings Limited. He also serves as a director of The Salesforce.com Foundation and other not-for-profit organizations. Mr. Hassenfeld received a B.A. from the University of Pennsylvania.

Mr. Hassenfeld has an extensive and broad background in business management, including his experience as a chief executive officer of a publicly traded company. This deep business knowledge, combined with the leadership roles he plays within many philanthropic organizations, supports our conclusion that Mr. Hassenfeld has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

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LOGO   

General Colin Powell

General, Former U.S. Secretary of State, Former Chairman, Joint Chiefs of Staff

Age: 78

Director Since: 2014

General Colin Powell has served as a Director since March 2014. General Powell is a retired four star general and served for 35 years in the United States Army. He has served as U.S. National Security Advisor, Commander of the U.S. Army Forces Command, Chairman of the Joint Chiefs of Staff and was the 65th Secretary of State of the United States. General Powell is a member of the Board of Directors of the Council on Foreign Relations, the Chair of the Board of Visitors of the Colin Powell School for Civic and Global Leadership at the City College of New York and the Founder and Chairman Emeritus of the America’s Promise Alliance. Since 2005, General Powell has served as a strategic limited partner at Kleiner Perkins Caufield & Byers, a venture capital firm. General Powell received a B.S. from the City College of New York and an M.B.A. from the George Washington University.

General Powell has an extensive background in management and leadership, including at the highest levels of the U.S. government. This extensive experience, combined with his leadership positions in various philanthropic organizations, supports our conclusion that General Powell has the necessary and desired skills, experience and perspective to serve on our Board.

LOGO   

Sanford Robertson

Principal, Francisco Partners

Age: 83

Director Since: 2003

Sanford Robertson has served as a Director since October 2003. He is a principal of Francisco Partners, a technology buyout fund. Prior to founding Francisco Partners in 2000, Mr. Robertson was the founder and chairman of Robertson, Stephens & Company, a technology investment bank. Mr. Robertson has been an active technology investor and advisor to several technology companies. Mr. Robertson was also the founder of Robertson, Colman, Siebel & Weisel, later renamed Montgomery Securities, another prominent technology investment bank. Mr. Robertson currently serves as a director of Pain Therapeutics, Inc. and RPX Corporation, and in the past five years, served as a director of Dolby Laboratories, Inc. Mr. Robertson received a B.B.A. and an M.B.A. from the University of Michigan.

Mr. Robertson brings valuable financial expertise to our Board of Directors. His extensive experience in investment banking, private equity and capital markets transactions, as well as his service on the boards of other publicly held companies, supports our conclusion that Mr. Robertson has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

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John V. Roos

Former U.S. Ambassador to Japan

Age: 60

Director Since: 2013

John V. Roos has served as a Director since September 2013. From 2009 to 2013, he served as the U.S. Ambassador to Japan. Ambassador Roos currently serves as CEO of The Roos Group, a strategic consulting firm facilitating relationships between U.S. and Japan businesses. Since April 2014 he also has served as Senior Advisor to Centerview Partners, an international investment banking advisory firm, and since October 2013 he has served on the global advisory board of Mitsubishi UFJ Financial Group, a Japanese banking and financial network. Ambassador Roos also serves on the Board of Sony Corporation since June 2014. From 1985 to 2009, Ambassador Roos practiced corporate and securities law at Wilson Sonsini Goodrich & Rosati, P.C., where he most recently served as Chief Executive Officer. Ambassador Roos received an A.B. in Political Science and a J.D. from Stanford University.

Ambassador Roos brings valuable international and strategic expertise to our Board of Directors, and possesses an extensive and broad background in management and leadership. This extensive experience supports our conclusion that Ambassador Roos has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

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LOGO   

Lawrence Tomlinson

Former Senior Vice President,

Treasurer, Hewlett-Packard

Age: 74

Director Since: 2003

Lawrence Tomlinson has served as a Director since May 2003. Mr. Tomlinson served as Treasurer of the Hewlett-Packard Company, a global provider of technology products, from 1993 to 2003, as well as a Senior Vice President from 2002 to 2003, and a Vice President from 1996 to 2002. During the past five years, Mr. Tomlinson has served as a director of Coherent, Inc. Mr. Tomlinson received a B.S. from Rutgers University and an M.B.A. from Santa Clara University.

Mr. Tomlinson is an experienced financial leader with the skills necessary to serve as a director and to lead our Audit Committee. He has a deep understanding of accounting principles and financial reporting rules and regulations, including how internal controls are effectively managed within organizations. Additionally, our Board’s determination that Mr. Tomlinson is the Audit Committee’s “financial expert,” as well as Mr. Tomlinson’s service on the boards and audit committees of other public companies, supports our conclusion that Mr. Tomlinson has the necessary and desired skills, experience and perspective to serve on our Board.

LOGO   

Robin Washington

Executive Vice President and CFO,

Gilead Sciences Inc.

Age: 52

Director Since: 2013

Robin Washington has served as a Director since September 2013. Ms. Washington has served as Executive Vice President and Chief Financial Officer of Gilead Sciences, Inc., a research-based biopharmaceutical company, since February 2014. She joined Gilead as Senior Vice President and Chief Financial Officer in 2008. From 2006 to 2007, Ms. Washington served as Chief Financial Officer of Hyperion Solutions, an enterprise software company that was acquired by Oracle Corporation in 2007. Prior to Hyperion, Ms. Washington served in a number of executive positions with PeopleSoft, a provider of enterprise application software, most recently as Senior Vice President and Corporate Controller. Ms. Washington currently serves as a member of the Board of Directors of Honeywell International, Inc. and the Board of Visitors of Graziadio School of Business and Management at Pepperdine University. During the past five years, Ms. Washington has also served as a director of MIPS Technology, Inc. Ms. Washington is a certified public accountant and received a B.A. in Business Administration from the University of Michigan and an M.B.A. from Pepperdine University.

Ms. Washington brings extensive experience in management, operations and accounting in the technology sector to our Board of Directors. Additionally, her financial expertise in tax, financial reporting, accounting and controls, corporate finance, mergers and acquisitions and capital markets, along with her service on the boards of other public companies, supports our conclusion that Ms. Washington has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

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LOGO   

Maynard Webb

Chairman of the Board, Yahoo! Inc.

Age: 59

Director Since: 2006

Maynard Webb has served as a Director since September 2006. Mr. Webb is the founder of Webb Investment Network, an early stage venture capital firm he started in 2010. From 2006 to 2011, Mr. Webb served as Chief Executive Officer of LiveOps, Inc., a provider of on-demand call center solutions. From 2002 to 2006, Mr. Webb served as Chief Operating Officer of eBay Inc., an online global marketplace. From 1999 to 2002, Mr. Webb served as President of eBay Technologies. Prior to that Mr. Webb served as Senior Vice President and Chief Information Officer at Gateway, Inc., a computer manufacturer, and Vice President and Chief Information Officer at Bay Networks, Inc., a manufacturer of computer networking products. Mr. Webb currently serves as Chairman of the Board of Yahoo! Inc. and as a director of Visa Inc. Mr. Webb received a B.A.A. from Florida Atlantic University.

Mr. Webb brings extensive experience in management, engineering and technical operations to our Board of Directors. Additionally, his tenure in management positions at various technology companies, along with his service on the boards of other companies, supports our conclusion that Mr. Webb has the necessary and desired skills, experience and perspective to serve on our Board.

LOGO   

Susan Wojcicki

CEO, YouTube

Age: 46

Director Since: 2014

Susan Wojcicki has served as a Director since December 2014. Ms. Wojcicki has served as Chief Executive Officer of YouTube, a digital video platform and subsidiary of Google Inc., since February 2014. She joined Google as its marketing manager in 1999, and after serving in various positions in marketing, from April 2011 to January 2014, Ms. Wojcicki served as Google’s Senior Vice President of Advertising & Commerce. Prior to joining Google, she worked at Intel, and served as a management consultant at both Bain & Company and R.B. Webber & Company. During the past five years, Ms. Wojcicki has also served as a director of HomeAway, Inc. Ms. Wojcicki received an A.B. in History and Literature from Harvard University, an M.S. in Economics from the University of California, Santa Cruz and an M.B.A. from the University of California, Los Angeles.

Ms. Wojcicki brings extensive experience in management, operations and marketing in the technology sector to our Board of Directors. Additionally, her expertise in technology, brand building and product development supports our conclusion that Ms. Wojcicki has the necessary and desired skills, experience and perspective to serve on our Board.

 

 

Board Independence

 

The Board has determined that, except for Mr. Benioff, Mr. Block and General Powell, each of the directors of the Company has no material relationship with the Company and is independent within the meaning of the standards established by the New York Stock Exchange, or NYSE, as currently in effect. In making that determination, the Board considered all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The Board also applied the following standards from the Company’s Corporate Governance Guidelines, which provide that a director will not be considered independent if he or she:

 

 

is currently an employee of the Company or has an immediate family member who is an executive officer of the Company;

 

 

has been an employee of the Company within the past three years or has an immediate family member who has been an executive officer of the Company within the past three years;

 

 

has, or has an immediate family member who has, received within the past three years more than $120,000 during any twelve month period in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

 

is a current partner or employee of a firm that is the Company’s internal or external auditor; has an immediate family member who is a current partner of such a firm; has an immediate family member who is a current employee of such firm and personally works on the Company’s audit; or was, or has an immediate family member who was within the last three years, a partner or employee of such a firm and personally worked on the Company’s audit within that time;

 

 

has, or has an immediate family member who has, been employed as an executive officer of another company where any of the Company’s present executives have served on the other company’s compensation committee during the past three years; or

 

 

is currently employed as an executive officer or employee, or has an immediate family member who is currently employed as an executive officer, of another company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of (a) $1 million or (b) 2% of such other company’s consolidated gross revenues.

 

 

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Board Leadership Structure

 

Currently, the Company’s Chief Executive Officer, Marc Benioff, also serves as Chairman of the Board. The Board believes that the current Board leadership structure, coupled with a strong emphasis on Board independence, provides effective independent oversight of management while allowing both the Board and management to benefit from Mr. Benioff’s leadership and years of experience in the Company’s business. Serving as both Chairman of the Board and Chief Executive Officer since 2001, Mr. Benioff has been the director most capable of effectively identifying strategic priorities, leading critical discussion and executing the Company’s strategy and business plans. Mr. Benioff possesses detailed and in-depth knowledge of the issues, opportunities, and challenges facing the Company and its business. We believe this extensive Company-specific experience and expertise of our CEO, together with the outside experience, oversight and expertise of our independent directors, allows for

differing perspectives and roles regarding strategy development that benefit our stockholders. Further, the Board believes that Mr. Benioff’s combined role enables decisive leadership, ensures clear accountability and enhances the Company’s ability to communicate its message and strategy clearly and consistently to its stockholders, employees and customers.

In June 2007, the Board approved the creation of the position of Lead Independent Director. Sanford Robertson has served as the Lead Independent Director since June 2007, and his current two-year term will expire in June 2015. The Lead Independent Director presides over the meetings of the independent directors, serves as a liaison between the independent directors and the Chairman of the Board and Chief Executive Officer, and has such other authority as generally held by a lead independent director and as the independent directors may determine from time to time.

 

 

Board Meetings and Director Communications

 

During fiscal 2015, the Board held nine meetings and each director attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by any of the committees of the Board on which such director served. Directors are also expected to attend annual meetings of the stockholders of the Company absent an unavoidable and irreconcilable conflict. All of the directors who were then members of the Board attended the Company’s 2014 Annual Meeting of Stockholders.

The non-management members of the Board also meet in executive sessions without management present. At these sessions, the Lead Independent Director acts as Presiding Director. In the absence of the Lead Independent Director at any

such executive session, the chair of the Audit and Finance Committee serves as Presiding Director.

Stockholders and other interested parties may communicate with the Lead Independent Director, or with any and all other members of the Board, by mail to our principal executive offices addressed to the intended recipient and care of our Corporate Secretary or by email to corporatesecretary@salesforce.com. The Corporate Secretary maintains a log of such communications and transmits them promptly to the identified recipient, unless safety or security concerns mitigate against further transmission. The intended recipient is advised of any communications withheld for safety or security reasons as soon as practicable.

 

 

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Corporate Governance and Board Committees

 

The Company and the Board regularly review and evaluate the Company’s corporate governance practices. The Board has adopted corporate governance principles that address the composition of, and policies applicable to, the Board as well as a Code of Conduct applicable to all directors, officers and employees of the Company, including our Chief Executive Officer and Chief Financial Officer. The Company’s corporate governance principles, set forth as Corporate Governance Guidelines, and its Code of Conduct are available in the Corporate Governance section of the Company’s website at www.salesforce.com/company/investor/governance/ or in print by contacting Investor Relations at our principal executive offices. Any substantive amendments to or waivers of the Code of Conduct relating to the

executive officers or directors of the Company will be disclosed promptly on our website. The Company’s philosophy related to executive compensation is described in the “Compensation Discussion and Analysis” section of this Proxy Statement.

The Board has also adopted a written charter for the Audit and Finance Committee (the “Audit Committee”), the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee charter is available in the Corporate Governance section of the Company’s website at www.salesforce.com/company/investor/governance/ or in print by contacting Investor Relations at our principal executive offices.

 

 

Committees of the Board of Directors

 

Director    Audit & Finance      Compensation      Nominating and
Corporate
Governance
 

Marc Benioff

        

Keith Block

        

Craig Conway

        Member      

Alan Hassenfeld

     Member            Member   

Colin Powell

        

Sanford Robertson

     Member            Chair   

John Roos

        Chair      

Lawrence Tomlinson

     Chair            Member   

Robin Washington

     Member         

Maynard Webb

     Member         Member      

Susan Wojcicki

        

Total Meetings

     10         9         5   

 

Audit Committee.    The Audit Committee oversees our corporate accounting and financial reporting process. Among other matters, the Audit Committee: evaluates the independent registered public accountants’ qualifications, independence and performance; determines the engagement of the independent registered public accounting firm; approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; considers the rotation of partners of the independent registered public accounting firm on the Salesforce engagement team; reviews our consolidated financial statements; reviews our critical accounting policies and estimates; oversees our internal audit function; reviews with management and the Company’s independent auditors and internal auditors the adequacy of internal financial controls; oversees the Company’s financial and treasury policies, strategies and capital structure; annually reviews its charter and its performance; reviews and approves the scope of the annual audit and the audit fee; discusses guidelines and policies to govern the process by which risk assessment and management is undertaken and handled; and discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial

statements. The Audit Committee held ten meetings in fiscal 2015. The report of the Audit Committee is included in this Proxy Statement.

The current members of the Audit Committee are Messrs. Tomlinson, who is the committee chair, Hassenfeld, Robertson and Webb, and Ms. Washington. The Board has determined that all members of our Audit Committee meet the applicable tests for independence and the requirements for financial literacy under applicable rules and regulations of the NYSE and the SEC. The Board has further determined that Mr. Tomlinson is the Company’s audit committee financial expert as defined by the SEC.

Compensation Committee.    The Compensation Committee reviews and recommends policies relating to compensation and benefits of our executive officers, including: reviewing and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other executive officers; evaluating the performance of these officers in light of those goals and objectives; and setting compensation of these officers based on such evaluations. The Compensation Committee may delegate its authority to one or more

 

 

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subcommittees or to one member of the Compensation Committee. The Compensation Committee also oversees our equity and incentive-based plans and administers the issuance of stock options, restricted stock units and other awards under these plans. Although the Compensation Committee does not currently do so, it may delegate its authority to members of management to determine awards under the Company’s equity-based compensation plans for non-executive officer employees of the Company. The Compensation Committee has delegated authority to management to determine cash awards under our cash incentive plans for non-executive officers. The Compensation Committee also reviews and evaluates the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter, and prepares any report required under SEC rules. The Compensation Committee held nine meetings in fiscal 2015. The report of the Compensation Committee is included in this Proxy Statement.

The Compensation Committee has the authority to engage independent advisors, such as compensation consultants, to assist it in carrying out its responsibilities. The Compensation Committee periodically engages an outside consultant to advise on compensation-related matters.

The current members of the Compensation Committee are Messrs. Roos, who is the committee chair, Conway and Webb. The Board has determined that all members of the Compensation Committee meet the applicable tests for independence under the applicable rules and regulations of the SEC, the NYSE and the Internal Revenue Service.

Nominating and Corporate Governance Committee.    The Nominating and Corporate Governance Committee is responsible for: identifying individuals qualified to become members of the Board; recommending to the Board director nominees for each election of directors; developing and recommending to the Board criteria for selecting qualified director candidates; considering committee member qualifications, appointment and removal; recommending corporate governance principles applicable to the Company; and providing oversight in the evaluation of the Board and each committee. The Nominating and Corporate Governance Committee held five meetings in fiscal 2015.

The current members of the Nominating and Corporate Governance Committee are Messrs. Robertson, who is the committee chair, Hassenfeld and Tomlinson. The Board has determined that all members of the Nominating and Corporate Governance Committee meet the applicable tests for independence under the applicable rules and regulations of the NYSE.

The Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating director nominees. The Nominating and Corporate Governance Committee regularly assesses the appropriate size, composition and needs of the Board and its respective committees and the qualifications of candidates in light of these needs. Candidates may come to the attention of the Nominating and Corporate Governance Committee through directors or management. If the Nominating and Corporate Governance Committee believes that

the Board requires additional candidates for nomination, the Nominating and Corporate Governance Committee may engage, as appropriate, a third party search firm to assist in identifying qualified candidates. The evaluation of these candidates may be based solely upon information provided to the Nominating and Corporate Governance Committee or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the Nominating and Corporate Governance Committee deems appropriate, including the use of third parties to review candidates. In December 2015, Ms. Wojcicki was appointed to the Board. She was initially identified and recommended by Mr. Benioff, our CEO, Chairman of the Board and a significant stockholder. She was then considered by the Nominating and Corporate Governance Committee, which recommended her to the full Board for approval.

The Nominating and Corporate Governance Committee will evaluate and recommend candidates for membership on the Board consistent with criteria established by the committee. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of our stockholders. They must have an inquisitive and objective perspective and mature judgment. They must also have experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. The Nominating and Corporate Governance Committee also focuses on issues of diversity, such as diversity of gender, race and national origin, education, professional experience and differences in viewpoints and skills. The Nominating and Corporate Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and Corporate Governance Committee believe that it is essential that the Board members represent diverse viewpoints. Director candidates must have sufficient time available in the judgment of the Nominating and Corporate Governance Committee to perform all Board and committee responsibilities. Members of the Board are expected to prepare for, attend and participate in all Board and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider such other factors as it may deem, from time to time, are in the best interests of the Company and its stockholders. The Nominating and Corporate Governance Committee will also seek appropriate input from the Chief Executive Officer from time to time in assessing the needs of the Board for relevant background, experience, diversity and skills of its members.

Stockholders may propose director candidates for general consideration by the Nominating and Corporate Governance Committee by submitting in proper written form the individual’s name, qualifications, and the other information set forth below in “Procedure for Nominating Directors for Election at an Annual Meeting or a Special Meeting” to the Secretary of the Company. The Nominating and Corporate Governance Committee will evaluate any candidates recommended by stockholders against the same criteria and pursuant to the same policies and procedures applicable to the evaluation of candidates proposed by directors or management.

 

 

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Other Committees.    Pursuant to the Company’s Bylaws, the Board may designate other standing or ad hoc committees to serve at the pleasure of the Board from time to time. For example, in fiscal 2015, the Board delegated authority to a Real Estate Committee comprised of Craig Conway (chair), Sanford Robertson and Lawrence Tomlinson. This committee met six times in fiscal 2015.

Board’s Role in Risk Oversight.    The Board as a whole has responsibility for risk oversight. This oversight is conducted primarily through committees of the Board, as disclosed in the descriptions of each of the committees above and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through reports by each committee chair regarding the committee’s considerations and actions. The Audit Committee oversees risks associated with our financial statements, financial reporting and accounting policies. The Compensation Committee considers the risks associated with our compensation policies and practices, with respect to both executive compensation and employee compensation generally. All committees receive regular reports from officers responsible for oversight of particular risks within the Company.

Procedure for Nominating Directors for Election at an Annual Meeting or a Special Meeting.    Stockholders may nominate directors for election at an annual meeting or at a special meeting at which directors are to be elected, provided that the advance notice requirements for director nominations set forth in the Company’s Bylaws have been met. As summarized below, this advance notice provision requires a stockholder to give timely notice of a director nomination in proper written form to the Secretary of the Company at salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105, Attention: Corporate Secretary.

In order for a stockholder to give timely notice of a director nomination for an annual meeting, the notice must be received by the Secretary of the Company at our principal executive offices not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. However, if no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to, or delayed by more than 60 days after, the one-year anniversary of the date of the previous year’s annual meeting, then notice must be received no earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting, or the tenth day following the day on which public announcement of the date of such annual meeting is first made. Director nominations to be made at the next annual meeting of stockholders must be received by the Secretary of the Company at the Company’s principal executive offices no earlier than February 7, 2016 or later than March 8, 2016.

In order for a stockholder to give timely notice of a director nomination for a special meeting at which directors are to be elected, the notice must be received by the Secretary of the Company at our principal executive offices not later than the later

of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

To be in proper written form, a stockholder’s notice to the Secretary of the Company must set forth:

 

 

as to each nominee whom the stockholder proposes to nominate for election or re-election as a director: (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation or employment of the nominee, (iii) the class and number of shares of the Company that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (iv) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the Company, and a description of any other similar agreement, arrangement or understanding, (v) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons pursuant to which the nominations are to be made by the stockholder, (vi) a written statement executed by the nominee acknowledging that as a director of the Company, the nominee will owe a fiduciary duty under Delaware law with respect to the Company and its stockholders, and (vii) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and

 

 

as to such stockholder(s) giving notice of the director nomination, (i) the name and address of the stockholder(s) proposing the director nomination, (ii) the class and number of shares of the Company which are held of record or are beneficially owned by the stockholder(s), (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder(s) with respect to any securities or the Company, and a description of any other similar agreement, arrangement or understanding, (iv) any material interest of the stockholder(s) in such director nomination, and (v) a statement whether such stockholder(s) will deliver a proxy statement and form of proxy to the Company’s stockholders. In addition, to be in proper written form, a stockholder’s notice to the Secretary must be supplemented not later than ten days following the record date to disclose the information contained in clauses (ii) and (iii) of this paragraph as of the record date.

At the request of the Board, any person nominated by a stockholder for election as a director must furnish to the Secretary of the Company (1) that information required to be set forth in the stockholder’s notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person’s nomination was given and (2) such other information as may reasonably be required by the Company to determine the

 

 

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          DIRECTORS AND CORPORATE GOVERNANCE (CONTINUED)  

 

eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. In the absence of the furnishing of such information if requested, such stockholder’s nomination will not be considered in proper form pursuant to these requirements.

The requirements for providing advance notice of a director nomination as summarized above are qualified in their entirety by our Bylaws, which we recommend you read in order to comply with the requirements for making a director nomination.

 

 

Compensation of Directors

 

Under our compensation arrangement for non-employee directors, each non-employee director receives a fee of $12,500 per fiscal quarter. In addition, the chair of the Audit Committee receives an additional $10,000 per quarter, and the chair of each other Board committee receives an additional $5,000 per quarter. The Lead Independent Director also receives an additional $30,000 per year.

During fiscal 2015, each non-employee director received a quarterly grant of fully-vested shares of Common Stock for service during the respective preceding quarter with a dollar value intended to approximate $125,000 based on the average recent trading price over a period of time before the grant date. All equity awards were made pursuant to our 2013 Equity Incentive Plan.

We reimburse our non-employee directors for travel, lodging and other reasonable expenses incurred in connection with attending Board and committee meetings.

The Board periodically evaluates the compensation of our non-employee directors, including considering input from the Compensation Committee’s compensation consultant, and recommendations of the Nominating and Corporate Governance Committee.

The Board’s stock ownership policy provides that each non-employee director is required to attain, by the later of March 16, 2015 or the fifth anniversary of such director’s initial election to the Board, a minimum share ownership position of the lesser of (i) 20,000 shares of Common Stock or (ii) such number of shares of Common Stock having an aggregate value of $200,000. As of March 16, 2015, all applicable non-employee directors were in compliance with this stock ownership policy.

The following table sets forth information concerning the compensation earned during fiscal 2015 by our Board members. The table excludes Messrs. Benioff and Block who are named executive officers of the Company and did not receive separate compensation as directors for fiscal 2015.

 

 

DIRECTOR COMPENSATION FOR FISCAL 2015

 

Name    Fees Earned
or Paid in
Cash ($)
     Stock
Awards
($) (1)
       Total ($)  

Craig Conway

     86,250         587,001(4)           673,251   

Alan Hassenfeld

     68,750         587,001(4)           655,751   

Colin Powell

     37,500         383,290(5)           420,790   

Craig Ramsey (2)

     68,750         458,768(6)           527,518   

Sanford Robertson

     127,500         587,001(4)           714,501   

John Roos

     76,250         587,001(4)           663,251   

Lawrence Tomlinson

     118,750         587,001(4)           705,751   

Robin Washington

     62,500         587,001(4)           649,501   

Maynard Webb

     67,500         587,001(4)           654,501   

Susan Wojcicki (3)

     12,500         —               12,500   
(1) Stock awards consist solely of grants of fully-vested shares of Common Stock. The amounts reported are the aggregate grant date fair value, which is calculated by multiplying the number of shares subject to the stock grant by the closing price of one share of Common Stock on the date of grant. No directors held unvested stock awards as of the end of fiscal 2015.
(2) Mr. Ramsey retired from the Board of Directors on September 9, 2014.
(3) Ms. Wojcicki was appointed to the Board of Directors on December 5, 2014.
(4) During fiscal 2015, this director received a stock award of fully-vested shares of Common Stock on February 25, 2014, May 27, 2014, August 26, 2014 and November 25, 2014 with grant fair values of $203,712, $119,375, $135,681 and $128,234, respectively.
(5) During fiscal 2015, General Powell received a stock award of fully-vested shares of Common Stock on May 27, 2014, August 26, 2014 and November 25, 2014 with grant fair values of $119,375, $135,681 and $128,234, respectively.
(6) During fiscal 2015, Mr. Ramsey received a stock award of fully-vested shares of Common Stock on February 25, 2014, May 27, 2014 and August 26, 2014 with grant fair values of $203,712, $119,375 and $135,681, respectively.

 

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  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND  RELATED STOCKHOLDER MATTERS           

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of March 1, 2015 by: (i) all those known by us to be beneficial owners of more than five percent of the outstanding shares of our Common Stock; (ii) each of our directors and director nominees; (iii) each executive officer named in the Summary Compensation Table below; and (iv) all current directors and executive officers as a group. This table is based on information provided to us or filed with the SEC by our directors, executive officers and principal stockholders. Unless otherwise indicated in the footnotes below,

and subject to community property laws where applicable, each of the named persons has sole voting and investment power with respect to the shares shown as beneficially owned.

Except as set forth below, the address of each stockholder listed in the following table is salesforce.com, inc., The Landmark @ One Market, Suite 300, San Francisco, California 94105. Applicable percentage ownership in the following table is based on 652,937,248 shares of Common Stock outstanding as of March 1, 2015:

 

 

Name and Address of Beneficial Owner    Number of Shares
Beneficially Owned
     Percent of
Class
 

Five Percent Stockholders

                 

FMR LLC (1)

     92,245,152         14.13%   

245 Summer Street, Boston, Massachusetts 02210

     

T. Rowe Price Associates, Inc. (2)

     42,159,845         6.46%   

100 E. Pratt Street, Baltimore, Maryland 21202

     

BlackRock, Inc. (3)

     37,841,427         5.80%   

55 East 52nd Street, New York, New York 10022

     

Directors and Named Executive Officers

                 

Marc Benioff (4)

     42,357,094         6.45%   

Keith Block (5)

     572,916         *   

Craig Conway

     11,643         *   

Alexandre Dayon (6)

     150,597         *   

Parker Harris (7)

     2,647,489         *   

Alan Hassenfeld (8)

     129,341         *   

Mark Hawkins

     0         *   

Burke Norton (9)

     403,218         *   

Colin Powell

     34,066         *   

Sanford R. Robertson

     184,791         *   

John V. Roos

     15,191         *   

Graham Smith (10)

     168,708         *   

Lawrence Tomlinson

     27,991         *   

Robin Washington

     15,191         *   

Maynard Webb (11)

     70,354         *   

Susan Wojcicki

     2,613         *   

Directors and Executive Officers as a Group (18 Persons) (12)

     46,938,933         7.12%   
* Less than 1%.
(1) Based solely upon a Schedule 13G/A filed with the SEC on February 13, 2015 by FMR LLC, on behalf of itself, Crosby Advisors LLC, Fidelity Management & Research (Hong Kong) Limited, Fidelity Management Trust Company, Inc., FMR Co., Inc., Pyramis Global Advisors Trust Company, Pyramis Global Advisors, LLC, and Strategic Advisers, Inc.
(2) Based solely upon a Schedule 13G/A filed with the SEC on February 11, 2015 by T. Rowe Price Associates, Inc.

 

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          SECURITY OWNERSHIP (CONTINUED)  

 

(3) Based solely upon a Schedule 13G filed with the SEC on February 6, 2015 by BlackRock, Inc., on behalf of itself, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia), Limited BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, BlackRock Japan Co Ltd and BlackRock Life Limited.
(4) Includes 4,157,094 shares issuable upon the exercise of options that are vested and exercisable or will vest within 60 days of March 1, 2015. All other shares are held in the Marc R. Benioff Revocable Trust.
(5) Includes 572,916 shares issuable upon the exercise of options that are vested and exercisable or will vest within 60 days of March 1, 2015.
(6) Includes 150,597 shares issuable upon the exercise of options that are vested and exercisable or will vest and be exercisable, and upon the settlement of RSUs that are vested or will vest, within 60 days of March 1, 2015.
(7) Includes 575,008 shares issuable upon the exercise of options that are vested and exercisable or will vest and be exercisable, and upon the settlement of RSUs that are vested or will vest, within 60 days of March 1, 2015. Also includes 2,046,179 shares held in trusts.
(8) Includes 1,350 shares held by a family member.
(9) Includes 357,967 shares issuable upon the exercise of options that are vested and exercisable or will vest and be exercisable, and upon the settlement of RSUs that are vested or will vest, within 60 days of March 1, 2015.
(10) Includes 109,883 shares issuable upon the exercise of options that are vested and exercisable or will vest and be exercisable, and upon the settlement of RSUs that are vested or will vest, within 60 days of March 1, 2015.
(11) All shares held in a trust.
(12) Includes 6,024,029 shares issuable upon the exercise of options that are vested and exercisable or will vest and be exercisable, and upon the settlement of RSUs that are vested or will vest, within 60 days of March 1, 2015.

 

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  EQUITY COMPENSATION PLAN INFORMATION          

 

EQUITY COMPENSATION PLAN INFORMATION

 

We currently maintain three equity compensation plans that provide for the issuance of shares of Common Stock to our officers and other employees, directors and consultants. These are the 2004 Employee Stock Purchase Plan (the “ESPP”) and the 2013 Equity Incentive Plan (the “2013 Equity Plan”), which have both been approved by stockholders, and the 2014 Inducement Equity Incentive Plan (the “2014 Inducement Plan”), which has not been approved by stockholders. We previously maintained the 1999 Stock Option Plan, as amended (the “1999 Stock Option Plan”), which expired by its terms in April 2009. The expiration of the 1999 Stock Option Plan did not affect awards outstanding under the plan, which continue to be governed by the terms and conditions of the 1999 Stock Option Plan. We also previously maintained the 2004 Equity Incentive Plan and the 2004 Outside Directors Stock Plan (collectively, the “Prior Plans”), both of which had been approved by stockholders and both of which we

replaced with the 2013 Equity Plan when that plan was established in June 2013, and the 2006 Inducement Equity Incentive Plan (the “Prior Inducement Plan”), which had not been approved by stockholders and was replaced with the 2014 Inducement Plan when that plan was established in July 2014. We no longer grant new awards out of the Prior Plans or the Prior Inducement Plan, but the Prior Plans and the Prior Inducement Plan continue to govern awards previously granted under such plans. We have also assumed certain plans in connection with acquisitions, which plans have not been approved by Salesforce’s stockholders.

The following table sets forth information regarding outstanding stock options and restricted stock units as well as shares reserved for future issuance under the foregoing plans as of January 31, 2015:

 

 

Plan category  

Number of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights

(a)

    

Weighted-average
exercise price of
outstanding
options,

warrants

and rights

(b) (1)

    

Number of securities
remaining available for
future issuance under  equity
compensation plans
(excluding securities
reflected in column (a))

(c)

 

Equity compensation plans approved by security holders

    48,946,531(2)       $ 26.04         32,542,963(3)   

Equity compensation plans not approved by security holders

    2,382,809(4)       $ 13.59         587,399(5)   

Total

    51,329,340       $ 25.46         33,130,362   
(1) The weighted average exercise price of outstanding options, warrants and rights includes the purchase price of $0.001 per restricted stock unit.
(2) Consists of options granted under the 1999 Stock Option Plan as well as options and restricted stock units granted under the 2004 Equity Plan and the 2013 Equity Plan.
(3) Consists of 2,340,824 shares available under the ESPP and 30,202,139 shares available under the 2013 Equity Plan. Offerings under the ESPP were authorized by the Board of Directors in September 2011.
(4) Consists of the 2014 Inducement Plan, the Prior Inducement Plan and the following plans which have been assumed by us in connection with certain of our acquisition transactions solely with respect to outstanding securities at the time of the acquisition: the Radian6 Technologies Inc. Third Amended and Restated Stock Option Plan assumed by us with our acquisition of Radian6 Technologies, Inc. in May 2011; the Assistly, Inc. 2009 Stock Plan assumed by us with our acquisition of Assistly, Inc. in September 2011; the Model Metrics, Inc. 2008 Stock Plan assumed by us with our acquisition of Model Metrics, Inc. in December 2011; the 2Catalyze, Inc. Second Amended 2008 Stock Option Plan assumed by us with our acquisition of 2Catalyze, Inc. d/b/a Rypple in February 2012; the Buddy Media, Inc. 2007 Equity Incentive Plan assumed by us with our acquisition of Buddy Media, Inc. in August 2012; the Goinstant, Inc. Stock Option Plan assumed by us with our acquisition of Goinstant, Inc. in September 2012; the EdgeSpring, Inc. 2010 Equity Incentive Plan assumed by us with our acquisition of EdgeSpring, Inc. in June 2013; the ExactTarget, Inc. 2004 Stock Option Plan and the ExactTarget, Inc. 2008 Equity Incentive Plan assumed by us with our acquisition of ExactTarget, Inc. in July 2013; and the RelateIQ, Inc. 2011 Stock Plan assumed by us with our acquisition of RelateIQ, Inc. in August 2014.
(5) Consists of the 2014 Inducement Plan. The material features of this plan are described below.

Material Features of the 2014 Inducement Equity Incentive Plan

 

In July 2014, the Board approved the 2014 Inducement Plan and has granted awards under the 2014 Inducement Plan in accordance with NYSE rules. At that time, 335,000 shares of Common Stock were reserved solely for the granting of inducement stock options, restricted stock, restricted stock units and other awards. In addition, 319,957 shares that were previously authorized for issuance under the Prior Inducement Plan as of July 9, 2014 were added to the 2014 Inducement Plan and any shares subject to outstanding awards under the Prior Inducement Plan that, after July 9, 2014, otherwise would have returned to the Prior Inducement Plan under its terms (for

example, due to the expiration or forfeiture of an award under the Prior Inducement Plan) will become available for issuance under the 2014 Inducement Plan, provided that the maximum number of such shares will not exceed 2,750,000. The 2014 Inducement Plan provides for the granting of stock options with exercise prices equal to the fair market value of our Common Stock on the date of grant. The Company has also granted restricted stock awards under the 2014 Inducement Plan. As of January 31, 2015, 1,007,381 shares of Common Stock remained available for issuance under the 2014 Inducement Plan.

 

 

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          COMPENSATION DISCUSSION AND ANALYSIS  

 

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

 

This Compensation Discussion and Analysis provides information regarding the fiscal 2015 compensation program for our principal executive officer, our principal financial officer, our former principal financial officer and the four other executive officers who were our next most highly-compensated executive officers in fiscal 2015. These individuals were:

 

 

Marc Benioff, our Chairman of the Board and Chief Executive Officer (our “CEO”);

 

 

Mark Hawkins, our Chief Financial Officer (our “CFO”) beginning August 1, 2014;

 

 

Graham Smith, who served as our CFO until July 31, 2014 and currently serves as Executive Vice President;

 

 

Keith Block, our President and Vice Chairman;

 

 

Parker Harris, our Co-Founder;

 

 

Alexandre Dayon, our President of Products; and

 

 

Burke Norton, our Chief Legal Officer.

We refer to these executives as our “Named Executive Officers” for fiscal 2015.

This Compensation Discussion and Analysis describes the material elements of our executive compensation program, providing an overview of our executive compensation philosophy, policies and practices. It also describes how and why the Compensation Committee of the Board (the “Compensation Committee” or “Committee”) arrived at specific fiscal 2015 executive compensation decisions and key factors the Committee considered in making those decisions.

Executive Summary

 

Fiscal 2015 Business Highlights

Salesforce is unique as both a high growth and top 10 software company. In fiscal 2015, we generated nearly $5.4 billion in annual revenue, up 32% year-over-year, surpassing the $5 billion milestone faster than any other enterprise software company in history. We are now the sixth largest software company and the largest enterprise cloud computing company in the world. Companies use our Customer Success Platform to connect with their customers in entirely new ways, using the latest advancements in cloud, social, mobile and data science technologies.

Our Company began in 1999 with the Sales Cloud, and evolved to include the Service Cloud, the Marketing Cloud, and the Salesforce1 Platform. In fiscal 2015, we significantly enhanced our business intelligence capabilities with the launch of the Analytics Cloud. We also introduced the Community Cloud, and we now offer six world-class cloud services, which are integrated on our unified Customer Success Platform and delivered via our trusted enterprise cloud.

We are honored that our commitment to innovation and our Company culture have been recognized in the industry. In fiscal 2015, Forbes named Salesforce as the World’s Most Innovative Company for the fourth year in a row, and Fortune Magazine ranked us among its top ten World’s Best Places to Work as well as the World’s Most Admired Software Company.

Giving back is part of our culture. As Salesforce grows, so does our ability to give back. Since inception, the Salesforce Foundation (a separate 501(c)3 organization) has given more than $80 million in grants, our employees have given more than 840,000 volunteer hours to the community, and our service offerings now reach more than 24,000 nonprofits and NGOs.

Fiscal 2015 Financial Highlights

In fiscal 2015, Salesforce delivered more than 30% year-over-year growth in revenue, deferred revenue, and operating cash flow. While we created significant topline revenue growth, we also improved our profitability by increasing our fiscal 2015 non-GAAP operating margin by 175 basis points over fiscal 2014, ahead of our publicly stated goal of achieving 125 to 150 basis points of non-GAAP operating margin improvement.

Our financial results demonstrate the value of our Customer Success Platform, and the level at which customers are embracing our cloud services. Customer attrition continued to decline to the lowest levels we’ve seen in the history of the Company, to between 9% and 10%.

Key financial results from fiscal 2015 are highlighted below:

 

 

Generated record revenue of $5.37 billion, up 32% year-over-year;

 

 

Generated cash from operations of $1.17 billion, up 34% year-over-year; and

 

 

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Completed fiscal 2015 with a deferred revenue balance of $3.3 billion, up 32% year-over-year, and an unbilled deferred revenue balance of approximately $5.7 billion.

Please see the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed on March 6, 2015, for a more detailed discussion of our fiscal 2015 financial results and, beginning on page 51 of that Form 10-K, a discussion regarding, and reconciliation of, our non-GAAP to GAAP financial measures.

 

Return to Stockholders

Over time, the Company has delivered significant long-term Total Stockholder Return (TSR). The following chart shows how a $100 investment in Salesforce on January 31, 2010, would have grown to $355 on January 31, 2015. The chart also compares the total stockholder return on an investment in the Company’s Common Stock to the same investment in the S&P 500 Index and the Nasdaq Computer & Data Processing Index over the last five fiscal years.

 

 

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Data for the Standard & Poor’s 500 Index and the Nasdaq Computer & Data Processing Index assume reinvestment of dividends. The comparisons in the graph above are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Common Stock.

Our Compensation Philosophy

Our compensation philosophy is driven by our objective to attract and retain the right talent needed to ensure our success in an innovative and extremely competitive environment. To accomplish this, we use compensation structures with strong links to Company performance. Our executive compensation is aligned with our overall business strategies, with a focus on driving growth and long-term value for our stockholders.

Our executive compensation program is structured to use a mix of base salary, short-term performance-based cash bonus awards and long-term equity compensation awards to incentivize and reward those individuals who make the greatest contributions to our Company performance over time.

For our Named Executive Officers, this means that the greatest proportion of compensation is in the form of equity and therefore directly tied to increases in stockholder value over the long term.

Summary of Fiscal 2015 Executive Compensation Actions

As described in more detail below, with respect to fiscal 2015, the Compensation Committee took the following actions regarding the compensation of our Named Executive Officers:

 

 

Taking into account corporate performance against pre-established metrics, awarded annual executive cash bonus payments at 97.8% of the applicable target bonus opportunity pursuant to our Company bonus plan, called the Kokua Bonus Plan (see the “Compensation Elements—Performance-Based Cash Bonuses—Fiscal 2015 Cash Bonus Payout Results” section in this Proxy Statement);

 

 

Generally increased base salaries by between 0% and 13% of fiscal 2014 levels, with an increase of 20% for Mr. Benioff (in light of the Company’s continuing growth and success, the increase in the size and complexity of the Company’s business, including as a result of the acquisition of

 

 

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ExactTarget, Inc. and the Company’s overall fiscal 2014 performance, including significant revenue growth and TSR), as well as an increase of 30% for Mr. Dayon (who took on new responsibilities and became an executive officer in fiscal 2015); and

 

 

Approved equity awards at levels that the Committee believes appropriately rewarded individual performance, met competitive market conditions and retention objectives, and reinforced our executives’ incentive to manage our business as owners.

Fiscal 2015 Compensation and Corporate Governance Highlights

We endeavor to maintain strong governance standards in our executive compensation related corporate governance policies and practices. Below is a summary of key executive compensation and corporate governance practices in place during fiscal 2015. Following that is a summary of certain other practices that, because we have not considered them to effectively drive long-term stockholder value, we have not implemented.

What We Did

 

 

Awarded executive compensation heavily weighted in the form of equity awards, which aligns the interests of our executives with those of our stockholders.

 

 

Awarded the vast majority of equity awards (80-100%) in the form of stock options, which unlike other forms of equity awards, will result in realized value only to the extent stockholder value increases.

 

 

Awarded equity to our two most senior members of the executive team, Messrs. Benioff and Block, only in the form of stock options, to further enhance their focus on increasing long-term stockholder value.

 

 

Tied pay to performance, with 50% of each non-CEO Named Executive Officer’s target annual cash compensation being tied to pre-established corporate performance metrics as well as individual performance, and 67% in the case of our CEO.

 

 

Established and enhanced dialogue between the Company and significant stockholders, to better understand their perspectives regarding our executive compensation practices and executive compensation best practices generally.

 

 

Utilized the services of an independent compensation consultant that is retained directly by the Compensation Committee and that does not perform other consulting or other services for the Company.

 

 

Maintained an engaged, independent and experienced Compensation Committee comprised of leaders with significant business and technology industry experience, which met nine times in fiscal 2015;

 

Periodically reviewed our compensation strategy, program, and risks.

 

 

Maintained stock ownership guidelines for all executive officers and directors.

 

 

Maintained a clawback provision confirming that the Company will seek to recover or cancel any performance-based awards resulting from the achievement of financial performance targets awarded as a result of achieving performance targets that would not have been met under financial statements that are later restated, where required by law or NYSE listing provisions.

 

 

In connection with a change of control of the Company, required a “double trigger” severance event (both a qualifying termination of employment in addition to a change of control of the Company) before accelerated vesting or other change of control severance benefits would be triggered for our Named Executive Officers.

What We Did Not Do

 

 

Provide pension arrangements or retirement plans other than our 401(k) plan to our executive officers, including our Named Executive Officers.

 

 

Provide for excise tax gross-ups related to change of control-related compensation.

 

 

Reprice our stock options or permit option repricing without stockholder approval.

 

 

Permit our executive officers or directors to engage in hedging or pledging of our securities.

Impact of Stockholder Advisory Vote on Executive Compensation

Annually at our stockholder meeting, we conduct a non-binding advisory vote of our stockholders on the compensation of the named executive officers for the most recent fiscal year, commonly referred to as a “say-on-pay” vote. The say-on-pay vote is conducted on an annual basis pursuant to a policy adopted by our Board and approved by our stockholders in 2011.

In June 2014, stockholders voted in favor of our executive compensation program with more than 75% of the votes cast in favor. To gain a better understanding of stockholders’ views on our executive compensation practices and on executive compensation best practices generally, management subsequently contacted the Company’s largest stockholders, representing more than 50% of our outstanding Common Stock, to discuss these matters, and relayed the perspectives shared by these stockholders to our Compensation Committee.

The Compensation Committee is mindful of the results of the most recent say-on-pay vote and is taking under consideration the perspectives our stockholders have shared.

 

 

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Compensation Objectives and Challenges

 

Objectives. Our overall compensation objective is to compensate our executives and other employees in a manner that attracts and retains the caliber of individuals needed to manage and staff a high growth business operation in an innovative and very competitive industry. For our executives, including the Named Executive Officers, a key compensation

objective is to align our executive compensation program with the interests of our stockholders, and we do so by tying a significant portion of their compensation to the performance of our Common Stock and other metrics of Company performance (“Variable Compensation”), as illustrated below:

 

 

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Challenges.    We are in a highly competitive market and industry and we face challenges in hiring and retaining executives due to a number of factors, including:

 

 

Highly Competitive Cloud Computing Industry—The market for cloud computing enterprise business applications and development platforms is highly competitive, rapidly evolving, and fragmented, and is subject to changing technology, shifting customer needs and frequent introduction of new products and services. Our position as a pioneer in an innovative and highly competitive area of business makes us a more attractive employer to some executives but a less attractive employer to others. Additionally, some prospective executives may believe there is less opportunity to realize significant appreciation through equity compensation at an established public company than there may be by joining a privately-held or early stage public company.

 

 

Fiercely Competitive Employee Retention Environment— In the technology industry, there is substantial and continuous competition for executive officers with the experience and aptitude to motivate and lead engineers with high levels of experience in designing, developing and managing software and Internet-related services, as well as qualified sales and operations personnel familiar with the technology industry. Our headquarters are located in the San Francisco Bay Area, an intensely difficult location in which to retain qualified employees and executives. Further, our success has made our employees and executives more attractive as candidates for

   

employment with other companies, and they are subject to recruiting efforts by other companies in the technology industry, creating additional challenges for us to retain them.

 

 

High Growth—We are a high growth company that continues to experience rapid changes to our technology, personnel and business tactics. We have experienced rapid growth in the geographic breadth and technical scope of our operations, along with the number of personnel we employ. Not all executives desire or are suited to manage in such an environment, making the services of our current executives more valuable and recruiting new executives more difficult.

 

 

Executive Background—Typically, we hire experienced executives with specific skills in key functional areas who have worked in a high growth environment like ours. The number of executives with the most desirable experience is relatively low and proven executives are difficult to find. We have expanded our recruiting efforts both geographically and into other industries and sectors, which leads to increased complexity in recruiting efforts and has required us to be more flexible with our executive compensation packages.

 

 

Corporate Environment—We are a demanding employer and prospective executives are not always suited to our fast-moving culture. Like many high growth companies in very dynamic markets, we place extraordinary demands on executive time and attention, and this has resulted in both voluntary and involuntary executive departures.

 

 

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Table of Contents
          COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)  

 

Compensation-Setting Process

 

Role of the Compensation Committee, Tally Sheets and Competitive Data

The Compensation Committee oversees and administers our executive compensation program in accordance with its Charter, which can be viewed in the Corporate Governance section of our Investor Relations website at http://investor.salesforce.com/about-us/investor/corporate-governance/. The Committee’s role includes oversight of our equity and incentive-based plans.

The Compensation Committee meets regularly throughout the year. At least annually, either before or near the beginning of each fiscal year, it reviews the executive compensation program and establishes base salaries and target annual cash bonus opportunities for the next fiscal year. Typically at this time it also considers and makes equity awards to executives and other eligible employees.

In setting the various elements of compensation, including base salaries, target annual cash bonus opportunities, and equity award amounts, the Compensation Committee reviews the total target compensation for our executives and also considers developments in compensation practices outside of the Company. Specifically, the Compensation Committee is provided with competitive positioning data, including base salary and bonus payout history and unvested equity award holdings for similarly situated executives at companies in our peer group, as well as summary consolidated information about our executives’ total compensation and pay history (commonly called “tally sheets”) to use in setting individual compensation elements and making decisions on total executive compensation levels.

Competitive pay data is a helpful reference for the Compensation Committee to assess the competitiveness and appropriateness of our executive compensation program within our industry sector and the broader business community. While peer data is important, the Committee is also mindful that the roles of some of our executives may be broader than those of similarly-titled executives at our peer companies. For example, our Chief Legal Officer currently oversees our corporate development, information technology, compliance, internal audit, real estate, business operations, legal and government affairs organizations. Ultimately, the Committee applies its own business judgment and experience to determine the individual compensation elements, the amount of each compensation element and total target compensation; the Committee does not set or target the compensation of our executives at specific levels or within specified percentile ranges. Depending upon Company and individual performance, as well as the various other factors discussed in this Compensation Discussion and Analysis, target and actual total direct compensation of our executives, as well as individual compensation elements, may be within, below, or above the market range for their positions.

Role of Committee Advisors

The Compensation Committee has the authority to engage its own advisors to assist in carrying out its responsibilities. As in the past, the Compensation Committee continued to engage the

services of Compensia, Inc., an independent, national compensation consulting firm (the “compensation consultant”) that provides the Compensation Committee and the Board with guidance regarding the amount and types of compensation that we provide to our executives, how these compare to peer company compensation practices and advice regarding other compensation-related matters. The compensation consultant also provides the Compensation Committee with advice related to the Company’s equity plans and provides the Board with data that helps the Board develop the Board’s compensation program.

Representatives of the compensation consultant attend meetings of the Compensation Committee as requested and also communicate with the Compensation Committee outside of meetings. The compensation consultant reports to the Compensation Committee rather than to management, although representatives of the firm may meet with members of management, including our CEO and executives in our Employee Success (human resources) department, for purposes of gathering information on proposals that management may make to the Compensation Committee. During fiscal 2014 and fiscal 2015, the compensation consultant met with various executives to collect data and obtain management’s perspective on the fiscal 2015 compensation for our executives. The compensation consultant also provided services and advice, at the request of the Compensation Committee, in connection with various equity plan matters. The Compensation Committee may replace its compensation consultant or hire additional advisors at any time.

Role of Peer Companies

The Compensation Committee regularly reviews the appropriateness of the compensation peer group used by the compensation consultant to generate competitive pay data for the Committee’s review in connection with executive compensation decisions.

In the second half of fiscal 2014, when the Committee was evaluating our executive compensation program and considering fiscal 2015 base salaries and target bonus opportunities, as well as fiscal 2014 equity awards, the compensation consultant provided a comparative analysis of the Company’s executive compensation program based on pay practices of the group of peer companies listed below (the “2015 Peer Group”). Selected based on similarity to us on various financial and other metrics, such as industry, revenue, market capitalization, number of employees and growth history and potential, the 2015 Peer Group was:

 

Adobe Systems, Inc.      Juniper Networks, Inc.
Altera Corporation      LinkedIn Corporation
Autodesk, Inc.      Netflix, Inc.
CA Technologies, Inc.      Priceline.com, Inc.
Cerner Corporation      Red Hat, Inc.
Citrix Systems, Inc.      Symantec Corporation
Expedia Inc.      VMware, Inc.
Facebook, Inc.      Yahoo! Inc.
Intuit, Inc.     
 

 

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In addition, the Compensation Committee reviewed aggregated survey data from other technology companies with similar revenue characteristics, which provided additional context regarding executive compensation practices in the marketplace. This data was drawn from the Radford 2013 Executive Compensation Survey and publicly available information about peer company practices.

Similarly, in the second half of fiscal 2015, when the Committee was evaluating our executive compensation program and considering fiscal 2015 equity awards, as well as 2016 base salaries and target bonus opportunities, the compensation consultant provided a comparative analysis of the Company’s executive compensation program based on pay practices of the group of peer companies listed below (the “2016 Peer Group”). Also selected based on similarity to us on various financial and other metrics, such as industry, revenue, market capitalization, number of employees and growth history and potential, the 2016 Peer Group was:

 

Adobe Systems, Inc.      Juniper Networks, Inc.
Autodesk, Inc.      LinkedIn Corporation
CA Technologies, Inc.      Netflix, Inc.
Cerner Corporation      Priceline.com, Inc.
Citrix Systems, Inc.      Symantec Corporation
Expedia, Inc.      Twitter, Inc.
Facebook, Inc.      VMware, Inc.
Intuit, Inc.      Yahoo! Inc.

In addition, the Compensation Committee reviewed survey data, which provided additional context regarding executive

compensation practices in the marketplace. This data was drawn from the Radford 2014 Custom Compensation Survey. The Committee also from time to time reviews compensation data from certain other companies in the market for the executive talent in which we compete.

Role of Executive Officers

Our CEO provides general input to the Compensation Committee with respect to the compensation of executive officers who report directly to him, including the other Named Executive Officers, and reviews their performance at least annually. Our CEO considers all relevant factors in his review, including each executive officer’s performance and accomplishments during the year, areas of strength and areas for development. Our CEO may also meet with the compensation consultant if he chooses to do so as he prepares his recommendation. Historically, our CEO has generally advocated minimal compensation differentiation among the executive officers who report to him to foster a spirit of teamwork and cooperation that he believes is a critical component of our success. The Compensation Committee takes our CEO’s general input into consideration when determining and approving executive officer compensation, including for the Named Executive Officers other than the CEO.

Our Chief Legal Officer, General Counsel and our Senior Vice President of Global Employee Success provide general administrative support to the Compensation Committee throughout the year, including providing legal advice and overseeing the documentation of equity plans and awards as approved by the Compensation Committee, and attending Compensation Committee meetings as requested.

 

 

Compensation for New Executive Officers

 

Mark Hawkins.    Mr. Hawkins, an experienced Chief Financial Officer and financial leader in the technology industry, joined the Company in August 2014 as our Chief Financial Officer and Executive Vice President. After a negotiation of employment terms, to attract Mr. Hawkins to join the Company, the Compensation Committee approved the following compensation elements for Mr. Hawkins, as described in more detail below:

 

 

Annual base salary of $650,000;

 

 

Target annual cash bonus opportunity for fiscal 2015 of 100% of base salary earnings;

 

 

A sign-on bonus of $500,000, with half payable upon hire and half payable after six months of employment, all subject to pro-rated repayment if within twelve months of his start date, Mr. Hawkins voluntarily terminates his employment or is terminated for cause;

 

 

A non-qualified stock option to purchase 413,974 shares of our Common Stock, subject to the Company’s standard four-year time-based vesting provisions;

 

 

An award of 30,013 restricted stock units (“RSUs”), subject to the Company’s standard four-year time-based vesting provisions;

 

Certain severance protections in the event of qualifying terminations; and

 

 

A Change of Control and Retention Agreement with materially identical terms as the agreements previously entered into with the Company’s other non-CEO executive officers, providing for certain payments and benefits if his employment is terminated without cause or he resigns for good reason within three months prior to, or 18 months after, a change of control of the Company.

These compensation elements were determined as part of the arm’s-length negotiation of his terms of employment, and in approving these terms, the Compensation Committee considered his industry knowledge and experience, competitive market data, as well as considerations related to internal parity with respect to similarly situated executives.

The Compensation Committee also approved certain relocation benefits, including payment of any associated taxes, consistent with benefits offered to other employees of the Company, to facilitate Mr. Hawkins’ relocation to a residence closer to Company headquarters. Please see the “Summary Compensation Table for Fiscal 2015,” “Grants of Plan-Based Awards for Fiscal 2015” and “Employment Contracts and Certain Transactions—

 

 

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Change of Control” sections elsewhere in this Proxy Statement for additional details regarding the various elements of Mr. Hawkins’ compensation arrangements.

Alexandre Dayon.    At the time Mr. Dayon’s fiscal 2015 base salary and target bonus were set, Mr. Dayon was in a very senior role but had not yet been appointed as an executive officer of the Company. Accordingly, his fiscal 2015 base salary and target

bonus were set initially by the CEO, in consultation with management, after reviewing competitive compensation data, in accordance with the standard compensation-setting process for all non-executive officers of the Company. The Compensation Committee ratified Mr. Dayon’s compensation in connection with his appointment as an executive officer in March 2014. In ratifying his compensation, the Committee considered his expanded role and responsibilities as an executive officer of the Company.

 

 

Compensation Elements

 

We award cash compensation to executives in the form of base salaries and annual cash bonuses, equity compensation to executives in the form of stock options and RSUs, and to a lesser extent, provide certain other benefits, generally consistent with what we provide to other employees, all as described further below. We believe that each of these compensation elements is generally necessary to attract and retain individuals in a very competitive market for executive talent.

Base Salaries

We believe we must offer competitive base salaries to attract, motivate and retain all employees, including our executives. The Compensation Committee has generally set the base salaries for our executives, including the Named Executive Officers other than our CEO, based on three primary factors:

 

 

a comparison to the base salaries paid by the companies in the compensation peer group;

 

 

the overall compensation that each executive may potentially receive during his or her employment with us; and

 

 

generally, internal parity with the base salaries for other executives who are peers in reporting structure and level of responsibility.

Typically, the Compensation Committee sets the base salaries of our executive officers after consideration of the market for the executive talent for which we compete, taking into account the competitive positioning information described above. In both fiscal 2014 and fiscal 2015, the Compensation Committee conducted a review of our executive compensation program, considering compensation data with respect to companies in the 2015 Peer Group and 2016 Peer Group, respectively, as well as overall Company and individual performance and the roles and responsibilities of each of our executives.

The Compensation Committee set executive officers’ base salaries for fiscal 2015 in the second half of fiscal 2014. The Committee considered the need to retain executive talent and the highly competitive market for executive talent, and considered analysis and advice of the compensation consultant. The Compensation Committee determined that increases to some of the Named Executive Officers’ base salaries would assist with retention of those officers. The Compensation Committee also considered the importance of internal parity with respect to similarly situated executives, and determined it would be appropriate to continue using a simplified tiered approach for

senior executive cash compensation, under which similarly situated executives would generally have similar base salaries and target bonus opportunities.

Based on this review and discussions with its compensation consultant, the Compensation Committee set the base salaries of the Named Executive Officers (other than Mr. Dayon) to those shown in the table below, effective February 1, 2014. Mr. Dayon was not an executive officer when the Committee set base salaries for the Named Executive Officers, but the Committee ratified his compensation, including base salary, when he became an executive officer in March 2014.

During fiscal 2015, the base salaries of the Named Executive Officers were:

 

Named Executive Officer    Fiscal 2015 Base Salary  

Mr. Benioff

   $ 1,440,000   

Mr. Hawkins (1)

   $ 650,000   

Mr. Block

   $ 1,000,000   

Mr. Harris

   $ 650,000   

Mr. Dayon

   $ 650,000   

Mr. Norton

   $ 650,000   

Mr. Smith (2)

   $ 650,000   

 

(1) Mr. Hawkins joined the Company as Chief Financial Officer on August 1, 2014 and earned $325,000 in base salary during fiscal 2015.
(2) Mr. Smith ceased being Chief Financial Officer on July 31, 2014 and remained employed with the Company under the terms of a Transition Services Agreement described below and, currently, under the terms of a new Services Agreement described below.

Fiscal 2015 base salaries represented increases over fiscal 2014 levels of 20% for Mr. Benioff, 0% for Mr. Block (who joined the Company less than six months before the Compensation Committee set fiscal base salaries for fiscal 2015), 4% for Mr. Harris, 30% for Mr. Dayon, 13% for Mr. Norton and 8% for Mr. Smith. Other than the increase for Mr. Benioff, a primary factor considered in approving these increases was the importance of internal parity with respect to similarly situated executives. The increase for Mr. Benioff was awarded in light of the Company’s continuing growth and success, the increase in the size and complexity of the Company’s business, including as a result of the acquisition of ExactTarget, Inc., and the Company’s overall fiscal 2014 performance, including significant revenue growth and TSR.

 

 

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Performance-Based Cash Bonuses

The Company provides short-term, performance-based cash bonus awards linked to achievement against certain corporate performance goals under the Company’s broad-based cash incentive plan called the Kokua Bonus Plan. While the Compensation Committee considers short-term performance-based cash bonuses to be a less significant compensation tool than equity awards in terms of driving long-term stockholder value, the Committee believes they play an important role in influencing executive performance and are an appropriate component of our compensation program to help attract, motivate and retain our executives and other employees.

Under the Kokua Bonus Plan, the Compensation Committee establishes three bonus pool targets: one for our executive officers, including the Named Executive Officers, another for non-executive officers at the Vice President level and above, and a third for employees at the level of Senior Director and below. Each pool may be funded based on achievement of certain Company performance goals pre-established by the Committee for each of the three groups. The performance goals applicable to executive officers in fiscal 2015 are discussed in more detail below.

Typically, after the first half of the fiscal year, we pay 25% of the full target bonus amount, and after the end of the fiscal year, we pay the remaining amount, which may be increased or decreased based on the level of achievement against the applicable Company performance goals, and may also take into account individual performance.

The Compensation Committee administers the Kokua Bonus Plan with respect to the Company’s executive officers and determines the amounts of any awards under this plan to the Company’s executive officers. The Committee may increase or decrease awards under this plan in its discretion based on factors the Committee deems appropriate, including an assessment of individual performance and input from the CEO.

Fiscal 2015 Target Cash Bonus Opportunity

To establish executive officers’ individual target cash bonus opportunities, which are expressed as a percentage of base salary, the Compensation Committee considers competitive pay data, input from its compensation consultant, and the level, position, objectives and scope of responsibilities of each executive, as well as considerations of internal parity among similarly situated Company executives.

In November 2013, based on its review of our executive compensation program as described above and practices of companies in our 2015 Peer Group, the Compensation Committee approved the following target bonus opportunities of the Named Executive Officers (other than Mr. Hawkins and Mr. Dayon) for fiscal 2015.

Named Executive
Officer
  

Fiscal 2015 Target

Cash Bonus
Opportunity (as a
Percentage of
Base Salary)

    Fiscal 2015 Target
Cash Bonus
Opportunity
 

Mr. Benioff

     200%      $ 2,880,000   

Mr. Hawkins (1)

     100%      $ 325,000   

Mr. Block

     100%      $ 1,000,000   

Mr. Harris

     100%      $ 650,000   

Mr. Dayon (2)

     100%      $ 650,000   

Mr. Norton

     100%      $ 650,000   

Mr. Smith

     100%      $ 650,000   

 

(1) Mr. Hawkins joined the Company on August 1, 2014 and earned $325,000 in base salary during fiscal 2015.
(2) Mr. Dayon’s fiscal 2015 target bonus opportunity was established in November 2013 by the CEO in consultation with management and was ratified in March 2014 by the Compensation Committee in connection with Mr. Dayon’s appointment as an executive officer.

For fiscal 2015, the target bonus opportunity for our Named Executive Officers other than Mr. Benioff, expressed as a percentage of base salary, remained unchanged from fiscal 2014 and 2013 levels. For those Named Executive Officers whose base salaries increased for fiscal 2015, the dollar value of the cash bonus opportunity increased accordingly. The Compensation Committee increased Mr. Benioff’s target bonus opportunity from the fiscal 2014 level of 150% of base salary to 200% of base salary for fiscal 2015 in light of the Company’s continuing growth and success, the increase in the size and complexity of the Company’s business, including as a result of the acquisition of ExactTarget, Inc., and the Company’s overall fiscal 2014 performance, including significant revenue growth and TSR.

Fiscal 2015 Cash Bonus Pool Payout Metrics

For fiscal 2015, the amount of the bonus pool for executive officers was based on the Company’s performance during the fiscal year compared to pre-established target levels for three equally-weighted measures: revenue, operating cash flow and non-GAAP income from operations. The Compensation Committee believes that basing the executive officer bonus pool under the Kokua Bonus Plan on these measures aligns executive incentives with stockholder interests in accordance with our compensation philosophy.

The Compensation Committee has the discretion to increase or decrease the bonus pool funding levels and the bonus amounts actually paid to individual executives, although the Compensation Committee did not choose to exercise this discretion with respect to the Named Executive Officers for fiscal 2015. For fiscal 2015, the Compensation Committee set a maximum funding level of 100% for the bonus pool for the executive officers, with a maximum possible individual performance multiplier of 125%.

 

 

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The bonus pool target performance levels for our executive officers for fiscal 2015 were:

 

Performance Measure (1)    Target Performance
Level (in millions)
 

Revenue

   $ 5,406.6   

Operating Cash Flow

   $ 1,135.0   

Non-GAAP Income from operations

   $ 605.4   

 

(1) For these purposes, “Revenue” is defined as our GAAP revenues, as adjusted for certain acquisitions. “Operating Cash Flow” is defined as our GAAP operating cash flow. “Non-GAAP Income from operations” is defined as our non-GAAP income from operations (revenues less cost of revenues and operating expenses, excluding the impact of stock-based compensation expense and amortization of acquisition-related intangible assets), as adjusted for certain acquisitions. A reconciliation of the non-GAAP income from operations to GAAP income from operations can be found in our Form 10-K as filed with the SEC on March 6, 2015.

Fiscal 2015 Cash Bonus Payout Results

Each Named Executive Officer participated in the Kokua Bonus Plan during fiscal 2015 and was awarded a bonus under that plan with respect to fiscal 2015. For fiscal 2015, our performance against our executive officer target performance measures (as defined above) was:

 

Performance Measure (1)    Actual Performance
Level (in millions)
 

Revenue

   $ 5,373.6   

Operating Cash Flow

   $ 1,173.7   

Non-GAAP Income from operations

   $ 574.1   

Based on its assessment of these combined results, the Compensation Committee determined that while the Company had exceeded its Operating Cash Flow performance measure, overall the Company had not met all of the pre-established target levels for these performance measures, and determined to fund the executive officer bonus pool at 97.8% of the target funding level established by the Compensation Committee earlier in the year. This resulted in our executive officers, including the Named Executive Officers other than Mr. Smith, receiving fiscal 2015 bonuses short of their target bonus opportunities.

Our CEO did not recommend that the Compensation Committee approve any adjustments to any Named Executive Officer’s fiscal 2015 bonus payment and the Compensation Committee did not make any such adjustments. Accordingly, the cash bonuses paid to the Named Executive Officers for fiscal 2015 under the Company bonus plan were:

 

Named Executive Officer    Fiscal 2015 Bonus Payment  

Mr. Benioff

   $ 2,816,640   

Mr. Hawkins (1)

   $ 317,850   

Mr. Block

   $ 978,000   

Mr. Harris

   $ 635,700   

Mr. Dayon (2)

   $ 636,892   

Mr. Norton

   $ 635,700   

Mr. Smith (3)

   $ 650,000   
(1) Mr. Hawkins’ fiscal 2015 bonus was based on the actual amount of base salary earned by him during fiscal 2015. He joined the Company on August 1, 2014, and he earned $325,000 in base salary during fiscal 2015. Amount excludes the sign-on bonus described above.
(2) Excludes this year’s annual installment of the employee recognition bonus Mr. Dayon was awarded in May 2011, the one-time recognition bonus Mr. Dayon was awarded in November 2014 and a nominal patent bonus, as described below. Mr. Dayon’s bonus reflects a blended payout rate due to the fact that he became an executive officer in March 2014 and for bonus attributable to the period beginning February 1, 2014 through the date he became an executive officer, the percentage of payout reflected that applicable for non-executive officers of the Company, as provided for in the Kokua Bonus Plan.
(3) The Company entered into a transition services agreement with Mr. Smith to help facilitate a smooth transition of his responsibilities as Chief Financial Officer in February 2014. As part of this negotiated agreement, we agreed to pay Mr. Smith, after the first half of the fiscal year, 25% of the full target bonus amount for which he was eligible, in accordance with our normal practice, provided he remained employed through the payment date. Under the transition agreement, we also agreed to pay him the remaining portion of his target bonus regardless of actual levels of performance, subject to his continued employment. Mr. Smith received the payment of 25% of his full target bonus amount in September 2014, along with the other Named Executive Officers, and received the remaining 75% of his full target bonus amount in March 2015. These amounts also would have been payable to Mr. Smith if, prior to the payment, he had been terminated without cause or we had asked him to resign and the request was not for cause.

Employee Recognition Bonuses

In 2011, Mr. Dayon was awarded an employee recognition bonus that also served as an incentive for him to remain with the Company over the next several years. This bonus was payable in equal annual installments of $250,000 each year for four years, subject to Mr. Dayon’s continued employment through the applicable installment’s payment date. In addition, in recognition of Mr. Dayon’s efforts and success in the development and launch of the Company’s new Analytics Cloud, the Compensation Committee approved a special one-time recognition bonus to Mr. Dayon of an automobile and all associated taxes, with an aggregate value of $360,686 (see footnote (8) to Summary Compensation Table for details). The Committee approved this award because it believes that recognizing success in achieving Company goals, such as Mr. Dayon’s, and doing so in a memorable and visible way, can be motivational not only for the executive, but for the other employees who observe exceptional performance being rewarded in exceptional ways, consistent with the Company’s philosophy of paying for performance.

Equity Compensation

The Compensation Committee periodically reviews our equity compensation program from a market perspective as well as in the context of our overall compensation philosophy. The Compensation Committee also considers the advantages and disadvantages of various equity vehicles, such as stock options and RSU awards, as well as overall program costs (which include both stockholder dilution and compensation expense), when

 

 

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making equity award decisions. Further, in making equity awards to our executives, including the Named Executive Officers, the Compensation Committee considers the competitive positioning analysis described above, as well as each executive’s individual performance, as described below.

Stock Options

We grant stock options to our executives when they join us, and periodically thereafter, to align their interests with those of our stockholders and as an incentive to remain with the Company. The Compensation Committee believes that options to purchase shares of our Common Stock, with an exercise price equal to the market price of the Common Stock on the date of grant, are inherently performance-based and are the best tool to motivate executives to build stockholder value. With stock options, executives can realize value only to the extent that the market price of our Common Stock increases during the period that the option is outstanding, which provides a strong incentive to our executives to increase stockholder value. Further, because these options typically vest over a four-year period, they incentivize our executives to build value that can be sustained over time.

Restricted Stock Units

We also grant RSU awards to our executives and other employees to help manage the dilutive effect of our equity compensation program. Because RSU awards have value to the recipient even in the absence of stock price appreciation, RSUs help us retain and incentivize employees while granting fewer shares of our Common Stock than through stock options of equivalent grant date fair value. To date, all RSU awards granted have been subject to a time-based vesting requirement. Our equity plan also permits us to grant performance-based RSU awards or other full-value awards.

Equity Award Decisions

In November 2014, based on the review described below, the Compensation Committee granted equity awards to each of the Named Executive Officers (other than Mr. Hawkins, given how recently he had joined the Company, and Mr. Smith, considering his anticipated retirement at the time), as follows:

 

Named Executive Officer    Shares of our
Common Stock-
subject to Stock
Options (1)
    

Shares of our

Common Stock
subject to
Restricted Stock
Unit Awards (1)

 

Mr. Benioff

     1,966,358         —    

Mr. Hawkins (2)

     —          —    

Mr. Block

     595,866         —    

Mr. Harris

     333,685         24,193   

Mr. Dayon

     333,685         24,193   

Mr. Norton

     333,685         24,193   

Mr. Smith

     —          —    
(1) Each of the options to purchase shares of our Common Stock was granted with an exercise price of $59.34 per share and all equity awards were subject to our standard four-year time-based vesting schedule.
(2) In August 2014, in connection with the hiring of Mr. Hawkins, the Compensation Committee granted him an option to purchase 413,974 shares of our Common Stock and 30,013 RSUs. The stock option was granted with an exercise price of $59.64 per share, and both the stock options and the RSUs were subject to our standard four-year time-based vesting schedule.

The Compensation Committee determined to grant the above equity awards to the Named Executive Officers (other than Mr. Hawkins and Mr. Smith) after considering the recommendations of our CEO (except with respect to his own equity award), its assessment of the performance and expected future contributions of each executive and its assessment of the highly competitive market for executive talent in which we operate.

After determining which Named Executive Officers would receive equity awards and the aggregate intended fair value of equity awards for each executive, the Compensation Committee determined what proportion of the equity award would be in the form of stock options and what proportion, if any, would be in the form of RSUs. For Mr. Benioff and Mr. Block, the Committee determined that 100% of the equity award would be in the form of stock options. Accordingly, neither our CEO and Chairman, nor our President and Vice Chairman, will realize any value from their fiscal 2015 equity-based awards except to the extent that the market price of our stock increases above its market price on the grant date. The Committee believes this strongly aligns their compensation package with the creation of long-term stockholder value and reflects our philosophy of tying pay to performance.

For the other Named Executive Officers, awards were significantly but not exclusively weighted toward stock options, with approximately 80% of the aggregate grant date fair value of that Named Executive Officer’s equity awards in the form of stock options and approximately 20% in the form of RSUs.

Equity Award Grant Policies

For fiscal 2015 and historically up until February 2015, the Compensation Committee generally granted stock options on the fourth Tuesday of each month and RSU awards on the fourth Tuesday of the first month of each fiscal quarter. Beginning February 2015, the Compensation Committee began granting both stock options and RSU awards on a monthly basis, generally on the 22nd day of the month.

Additional discretionary equity awards to our existing executives and other employees may also be made periodically in accordance with these practices. The majority of such awards are made in November, with a smaller number occurring throughout the fiscal year, depending upon our internal performance review cycle, individual performance, and other circumstances.

CEO Security Program

The Company has provided a security program for our CEO since fiscal 2012. The Compensation Committee established this program, and continues to believe that ensuring our CEO’s

 

 

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personal safety is prudent and vital to our continued success. The CEO security program provides comprehensive physical and personal security services; accordingly, the program is not limited to providing security services only at business facilities or during business-related travel. The Compensation Committee believes amounts paid by the Company for this security program are reasonable and necessary and for the Company’s benefit.

Because the security services provided to our CEO may be viewed as conveying a personal benefit to him, we have reported certain incremental costs to the Company of the program in the “All Other Compensation” column in the Summary Compensation Table that accompanies this Compensation Discussion and Analysis. The Compensation Committee periodically reviews amounts budgeted and spent for the CEO security program.

Other Benefits

Like other employees, our executive officers, including the Named Executive Officers, participate in our employee benefit and welfare plans, including medical and dental care plans, a fitness

reimbursement plan and a 401(k) plan. We generally do not provide our executives, including the Named Executive Officers, with additional retirement benefits, pensions, perquisites or other personal benefits, except, in the case of our CEO, providing personal security as described above. We also occasionally provide certain benefits on an ad hoc basis, as noted for our Named Executive Officers in our Summary Compensation Table, if we believe that doing so is appropriate, reasonable and serves the interests of the Company, typically on the same terms we would provide such benefits for other employees. For example, to facilitate his relocation to a residence closer to Company headquarters, which we believe is in the Company’s best interests, and consistent with our treatment of other Company employees who relocate, we paid relocation benefits to Mr. Hawkins and covered the associated taxes. The Company also paid for Mr. Block to attend a motivational Company sales team event and covered the associated taxes, consistent with how we treated this benefit for other employees who attended. The Company also gave Mr. Smith a watch in recognition of his years of service as our CFO and covered the associated taxes.

 

 

Decisions Regarding Fiscal 2016 Compensation

 

In November 2014, the Compensation Committee conducted a review of our executive compensation program for purposes of determining the base salaries and bonus opportunity for our executives for fiscal 2016. The Compensation Committee also considered overall Company and individual performance and the roles and responsibilities of each of our executives as well as considerations of internal parity with respect to similarly situated executives. For fiscal 2016, the Compensation Committee set base salaries for the Named Executive Officers, effective February 1, 2015, as follows:

 

Named Executive Officer   

Fiscal 2016

Base Salary

 

Mr. Benioff

   $ 1,550,000   

Mr. Hawkins

   $ 700,000   

Mr. Block

   $ 1,077,000   

Mr. Harris

   $ 700,000   

Mr. Dayon

   $ 700,000   

Mr. Norton

   $ 700,000   

Mr. Smith

   $ 650,000   

Other than for Mr. Smith, these base salaries represented increases from fiscal 2015 levels of approximately 7.6% for our CEO and 7.7% for each Named Executive Officer other than our CEO. In light of his then-pending retirement, Mr. Smith did not receive any increase to his base salary.

The Committee did not make any increases to the target bonus opportunity of the Named Executive Officers, keeping the CEO’s fiscal 2016 target bonus opportunity at 200% of base salary and each other Named Executive Officer’s target bonus opportunity for fiscal 2016 at 100% of base salary.

 

 

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Other Compensation Policies

 

Stock Ownership Guidelines

The Company has a stock ownership policy for its non-employee directors, as described earlier in “Directors and Corporate Governance—Compensation of Directors” set forth in our Corporate Governance Guidelines (the “Guidelines”). The Guidelines include stock ownership guidelines for our executive officers, including our Named Executive Officers. The Guidelines provide that our CEO must attain ownership of, by no later than March 14, 2018, a number of shares of our Common Stock equal to the lesser of 112,000 shares or the number of shares equivalent in value to four times his or her annual salary. The Guidelines also provide that each other executive officer must attain, by no later than the later of March 14, 2018 or the fifth anniversary from the date he or she becomes an executive officer, the number of shares equivalent in value to his or her annual salary. Mr. Benioff currently meets his ownership requirements under these guidelines.

Performance-Based Compensation Recoupment “Clawback” Policy

The Guidelines include a clawback provision, which provides that if we restate our reported financial results, the Board will review

the performance-based awards made to our executive officers. If and to the extent required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, other clawback provisions of applicable law, or New York Stock Exchange Listing Standards, we will seek to recover or cancel any such awards that were awarded as a result of achieving performance targets that would not have been met under the restated financial results. We will also continue to monitor rule-making actions of the SEC and the New York Stock Exchange related to clawback policies. In addition, if the Company is required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our CEO and CFO may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive pursuant to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002.

Hedging Transactions

Our insider trading policy prohibits, among other things, short sales, hedging of stock ownership positions and transactions involving derivative securities relating to our Common Stock.

 

 

Post-Employment Compensation

 

We recognize that it is possible that we may be involved in a transaction involving a change of control of the Company, and that this possibility could result in the departure or distraction of our executives to the detriment of our business. The Compensation Committee and the Board of Directors believe that the prospect of such a change of control transaction would likely result in our executives facing uncertainties about their future employment and distractions resulting from concern over how the potential transaction might personally affect them.

To allow our executives to focus solely on making decisions that are in the best interests of our stockholders in the event of a possible, threatened, or pending change of control transaction, and to encourage them to remain with us despite the possibility that a change of control might affect them adversely, we have entered into Change of Control and Retention Agreements with each of our executive officers, including each of the Named Executive Officers, that provide them with certain payments and benefits in the event of the termination of their employment within the three-month period prior to, or the 18 month period following, a change of control of the Company (referred to as the “change of control period”). Severance payments and benefits under these agreements are conditioned on the executive’s signing a release of claims in favor of the Company. The Compensation Committee and the Board believe that these agreements serve as an important retention tool to ensure that personal uncertainties do not dilute our executives’ complete focus on building stockholder value. As discussed below, Mr. Smith’s transition agreement, which was in effect until March 31, 2015, and his new services agreement, which became effective on the same date, each

provided that Mr. Smith would only be entitled to receive benefits under his Change of Control and Retention Agreement if a change of control takes place during the course of his employment.

These agreements provide each of the Named Executive Officers (other than, as described below, our CEO) who has a qualifying termination during the change of control period with a payment equal to 150% of his annual base salary and target cash bonus, Company-paid premiums for health care (medical, dental and vision) continuation coverage for a period of up to 18 months following termination of employment, and the full and immediate vesting of all outstanding and unvested equity awards.

If our CEO has a qualifying termination during the change of control period, his Change of Control and Retention Agreement provides him with a lump-sum payment equal to 200% of his annual base salary and target cash bonus, Company-paid premiums for health care (medical, dental and vision) continuation coverage for a period of up to 24 months following termination of employment, and the full and immediate vesting of all outstanding and unvested equity awards.

In establishing the terms and conditions of these agreements, the Compensation Committee and the independent members of the Board of Directors considered competitive market data and governance best practices information provided by the compensation consultant. The Compensation Committee and independent directors also determined that full and immediate vesting of all outstanding and unvested equity awards in connection with a qualifying termination during the change of

 

 

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control period was appropriate because, depending on the structure of a change of control transaction, continuing such awards may hinder a potentially beneficial transaction and that it may not be possible to replace such awards with comparable awards of the acquiring company’s stock.

The Compensation Committee and the independent members of the Board of Directors also evaluated the cost to us of these arrangements and the potential payout levels to each affected executive under various scenarios. In approving these agreements, they determined that their cost to us and our stockholders was reasonable and not excessive, given the benefit conferred to us. The Compensation Committee and the Board believe that these agreements will help to maintain the continued focus and dedication of our executives to their assigned duties without the distraction that could result from the possibility of a change of control of the Company.

In addition, in connection with the negotiation of Mr. Smith’s employment terms when he joined the Company in 2007, Mr. Block’s employment terms when he joined the Company in 2013, and Mr. Hawkins’ employment terms when he joined the Company in 2014, each of these Named Executive Officers received an offer letter that provided for eligibility for ongoing severance benefits in connection with involuntary terminations. Under Mr. Block’s offer letter, if his employment is terminated without cause or he resigns for good reason, he will be entitled to payments equal to one year of his base salary and 100% of his annual target cash bonus, as well any bonus earned as of his termination but not yet paid, and unpaid reimbursement of expenses. Receipt of these severance benefits is conditioned on Mr. Block’s signing a release of claims in favor of the Company. In addition, Mr. Block’s offer letter provides him (or his estate) with certain severance benefits in the event his termination

is due to death or disability. Under Mr. Hawkins’ offer letter, if his employment is terminated without cause or he resigns for good reason, he will be entitled to payments equal to one year of his base salary and 100% of his annual target cash bonus, and unpaid reimbursement of expenses. Receipt of these severance benefits is conditioned on Mr. Hawkins’ signing a release of claims in favor of the Company.

In February 2014, Mr. Smith announced his intention to retire from his position as Chief Financial Officer of the Company on March 31, 2015, and, in order to provide for an orderly transition of his services to the Company, Mr. Smith and the Company entered into a transition agreement that superseded his offer letter’s severance provisions. The transition agreement provided for certain severance payments and benefits if he was terminated without cause (or he resigned at the request of the Company and the request was not for cause) before his scheduled retirement date. The Committee believed that this agreement was appropriate because it was important to minimize the disruptions that can be caused when a key executive, such as the Chief Financial Officer, leaves the Company. Mr. Smith ceased serving as Chief Financial Officer on July 31, 2014 and Mr. Hawkins began serving as Chief Financial Officer on August 1, 2014. Mr. Smith assisted with this transition through March 31, 2015, at which time Mr. Smith and the Company agreed that Mr. Smith would stay on with the Company beyond March 31, 2015 as an advisor to the CEO. On March 31, 2015, he entered into a new services agreement with us that supersedes his transition agreement.

For a summary of the material terms and conditions of agreements in effect during fiscal 2015, see “Employment Contracts and Certain Transactions—Change of Control,” elsewhere in this Proxy Statement.

 

 

Tax and Accounting Considerations

 

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code imposes limitations on the deductibility for corporate federal income tax purposes of remuneration in excess of $1 million paid to the chief executive officer and each of the three next most highly compensated executive officers (other than its chief financial officer) of a public company. Generally, remuneration in excess of $1 million may only be deducted if it is “performance-based compensation” within the meaning of the Internal Revenue Code.

We monitor the application of Section 162(m) and the associated Treasury regulations on an ongoing basis and the advisability of qualifying executive compensation for deductibility. The Compensation Committee considers whether to make efforts to qualify our executive compensation for deductibility under applicable tax laws to the extent practicable, balancing the desirability of having compensation qualify for deductibility with our need to maintain flexibility in compensating executive officers in a manner designed to promote our goals. The Compensation Committee has not adopted a policy that all compensation must be deductible. For example, compensation income realized upon

the vesting of time-based RSU awards and fiscal 2015 bonuses paid to our executives are not designed to qualify as “performance-based” for purposes of Section 162(m) and so will not be deductible to the extent that they and the executive’s other non-“performance-based” compensation for the taxable year totals in excess of $1 million. This affords us flexibility in designing the bonus structure best suited to our goals, and allows us the ability to grant time-based RSUs with strong retention value.

Taxation of “Parachute” Payments and Deferred Compensation

Sections 280G and 4999 of the Internal Revenue Code provide that executive officers, directors who hold significant equity interests, and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change of control of the Company that exceed certain prescribed limits, and that we (or our successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive, including any Named Executive Officer, with a “gross-up” or other reimbursement payment for any

 

 

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tax liability that the executive might owe as a result of the application of Sections 280G or 4999 during fiscal 2015 and we have not agreed and are not otherwise obligated to provide any executive with such a “gross-up” or other reimbursement.

Section 409A of the Internal Revenue Code imposes significant additional taxes in the event that an executive officer, director, or service provider receives “deferred compensation” that does not satisfy the restrictive conditions of the provision. Although we do not maintain a traditional nonqualified deferred compensation plan, Section 409A applies to certain equity awards and severance arrangements. To assist our employees in avoiding additional taxes under Section 409A, we have structured our equity awards in a manner intended to comply with the applicable Section 409A conditions. In addition, the Change of Control and Retention Agreements that we have entered into with the Named Executive Officers have been drafted or modified in a manner intended to comply with Section 409A.

Accounting for Stock-Based Compensation

We follow Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“ASC Topic 718”) in connection with the financial reporting of our stock options and other stock-based awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock option grants using a variety of assumptions, as well as the grant date “fair value” of their other stock-based awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executives may never realize any value from their options or other stock-based awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock option grants and other stock-based awards in their income statements over the period that an executive is required to render service in exchange for the option or other award. When determining the types and amounts of equity compensation granted to the Named Executive Officers, the Compensation Committee considers the advantages and disadvantages of various equity vehicles, such as stock options and RSU awards. As part of this consideration, the Compensation Committee takes into account the overall program cost, which includes the associated compensation expense for financial reporting purposes.

 

 

COMPENSATION RISK ASSESSMENT

 

As part of its review of the compensation to be paid to our executives, as well as the compensation programs generally available to the Company’s employees, the Compensation Committee considers any potential risks arising from our compensation programs and the management of these risks, in light of the Company’s overall business, strategy and objectives.

As is the case with our employees generally, our Named Executive Officers’ base salaries are fixed in amount and thus do not encourage risk-taking. Bonus amounts under the Company bonus plan are tied to overall corporate and individual performance, and the bonus pool for executive officers is based on the Company’s performance during the fiscal year compared to pre-established target levels for three equally-weighted measures: revenue, operating cash flow and non-GAAP income from operations. These three financial metrics counterbalance each other, decreasing the likelihood that our Named Executive

Officers will pursue any one metric to the detriment of overall financial performance. Combined, these measures limit the ability of an executive to be rewarded for taking excessive risk on behalf of the Company by, for example, seeking revenue enhancing opportunities at the expense of profitability. Moreover, a significant portion of compensation provided to our Named Executive Officers is in the form of long-term equity awards that help further align their interests with those of the Company’s stockholders. The Compensation Committee believes that these awards do not encourage unnecessary or excessive risk-taking because the ultimate value of the awards is tied to the Company’s stock price and because the awards are staggered and subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance. The Company has also implemented controls such as the Code of Conduct and periodic sub-certification processes for its executives to mitigate the risks of unethical behavior.

 

 

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          SUMMARY COMPENSATION TABLE  

 

SUMMARY COMPENSATION TABLE

The following table sets forth, for fiscal 2015 and prior years where applicable, the compensation reportable for our Named Executive Officers, as determined under SEC rules.

 

Name and Principal Position   Fiscal
Year
     Salary
($)
    Bonus
($)
    Stock
Awards
($) (1)
     Option
Awards
($) (2)
     Non-Equity
Incentive
Plan
Compens-
ation
($)
    All Other
Compens-
ation
($)
    Total
($)
 

Marc Benioff

    2015         1,440,000        —          —           34,359,353         2,816,640        1,291,541  (3)      39,907,534   

Chief Executive Officer and

    2014         1,200,000        —          —           27,662,644         1,686,600        784,088        31,333,332   

Chairman of the Board

    2013         1,000,000        —          —           18,864,075         1,302,000        934,829        22,100,904   

Mark Hawkins

    2015         325,000 (4)      250,000 (5)      1,789,975         7,200,788         317,850        61,795 (6)     9,945,408   

Chief Financial Officer

                                                                  

Keith Block

    2015         1,000,000        —          —           10,411,924         978,000        69,493 (7)      12,459,417   

President and Vice Chairman

    2014         666,667        —          —           12,792,250         624,667        —          14,083,584   

Alexandre Dayon

    2015         650,000        611,686 (8)      1,435,613         5,830,678         636,892 (9)      —          9,164,869   

President, Products

                                                                  

Parker Harris

    2015         650,000        —          1,435,613         5,830,678         635,700        —          8,551,991   

Co-Founder

    2014         625,000        250,000        908,033         3,245,944         585,625        —          5,614,602   
      2013         500,000        —          828,761         3,028,313         434,000        —          4,791,074   

Burke Norton

    2015         650,000        —          1,435,613         5,830,678         635,700        —          8,551,991   

Chief Legal Officer

    2014         575,000        —          908,033         3,245,944         538,775        —          5,267,752   
      2013         500,000        200,000        719,302         2,651,031         434,000        —          4,504,333   

Graham Smith

    2015         650,000        24,963 (10)      —           —           650,000 (11)      —          1,324,963   

Executive Vice President

    2014         600,000        —          908,033         3,245,944         562,200        —          5,316,177   

(Former Chief Financial Officer)

    2013         500,000        —          719,302         2,651,031         434,000        —          4,304,333   

 

(1) Stock awards consist solely of restricted stock unit awards. Amounts reported do not reflect compensation actually received by the Named Executive Officer. The amounts reported are the aggregate grant date fair value, which is calculated by multiplying the number of shares subject to the award by the closing price of one share of Common Stock on the date of grant.
(2) Option awards consist solely of stock options. Amounts reported do not reflect compensation actually received by the Named Executive Officer. Instead, the amounts reported are the grant date fair value as determined pursuant to FASB ASC Topic 718, excluding estimated forfeitures. The assumptions used to calculate the value of option awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in the Company’s annual report on Form 10-K for fiscal 2015 filed with the SEC on March 6, 2015.
(3) This amount represents amounts paid by the Company for security arrangements for Mr. Benioff in addition to security arrangements provided at business facilities and for business travel. As further described in “Compensation Discussion and Analysis—Compensation Elements—CEO Security Program,” the personal safety and security of our CEO are of paramount importance to the Company. Although we view the security services provided to our CEO as a necessary and appropriate business expense, because they may be viewed as conveying a personal benefit to him, we have reported certain incremental costs to the Company of the program in the “All Other Compensation” column in the table.
(4) Mr. Hawkins’ fiscal 2015 base salary reported in the table represents his actual base salary earnings during the fiscal year. His annualized base salary for fiscal 2015 was $650,000.
(5) This amount represents the first of two installments of a sign-on bonus awarded for joining the Company. The second installment of equal amount was paid on February 1, 2015 for fiscal year 2016.
(6) This amount represents reimbursement for certain relocation expenses provided in connection with Mr. Hawkins’ appointment as CFO, including a tax gross-up of $21,937.
(7) This amount represents the Company-paid benefit of attending a motivational Company sales team event and associated taxes, consistent with how we treated this benefit for other employees who attended. The value of the tax gross-up was $22,620.
(8) Represents (i) annual installment of $250,000 from an employee recognition bonus awarded to Mr. Dayon in 2011, (ii) the value of an automobile ($172,480) and a related tax gross-up ($188,206), with an aggregate value of $360,686, awarded in recognition of Mr. Dayon’s achievements in launching the Company’s new analytics cloud, and (iii) a patent bonus of $1,000.
(9) Mr. Dayon was appointed as an executive officer in March 2014. Accordingly, pursuant to the terms of the Kokua Bonus Plan, this amount was determined by multiplying Mr. Dayon’s target amount by the executive officer 97.8% funding level for the period in which he was an executive officer and by the non-executive officer funding level for the period he was not an executive officer.
(10) Represents the value of a watch awarded in recognition of Mr. Smith’s years of service as CFO, as well as a tax gross-up of $12,783 thereon.
(11) Pursuant to the terms of the Transition Services Agreement entered into with Mr. Smith in connection with his then-expected retirement, Mr. Smith’s Kokua Bonus Plan cash bonus was paid at 100% of target.

 

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  GRANTS OF PLAN-BASED AWARDS          

 

GRANTS OF PLAN-BASED AWARDS

The following table sets forth certain information with respect to all plan-based awards granted to the Named Executive Officers during fiscal 2015.

 

          Estimated Future Payouts
Under Non-Equity Incentive
                    Plan Awards                    
    All
Other Stock
Awards:
Number
of Shares
of Stock
or Units
(#) (2)
     All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (2)
     Exercise
or Base
Price of
Option
Awards
($) (3)
     Grant
Date Fair
Value of
Stock
and Option
Awards
($) (4)
 
Name    Grant
Date
   Threshold
($)
     Target
($) (1)
    Maximum
($) (1)
            

Marc Benioff

   N/A      —           2,880,000        3,600,000        —           —           —           —     
   11/25/2014      —           —          —          —           1,966,358         59.34         34,359,353   

Mark Hawkins

   N/A      —           325,000 (5)      406,250 (6)      —           —           —           —     
   08/26/2014      —           —          —          —           413,974         59.64         7,200,788   
   08/26/2014      —           —          —          30,013         —           —           1,789,975   

Keith Block

   N/A      —           1,000,000        1,250,000        —           —           —           —     
   11/25/2014      —           —          —          —           595,866         59.34         10,411,924   

Parker Harris

   N/A      —           650,000        812,500        —           —           —           —     
   11/25/2014      —           —          —          —           333,685         59.34         5,830,678   
   11/25/2014      —           —          —          24,193         —           —           1,435,613   

Alexandre Dayon

   N/A      —           650,000        812,500        —           —           —           —     
   11/25/2014      —           —          —          —           333,685         59.34         5,830,678   
   11/25/2014      —           —          —          24,193         —           —           1,435,613   

Burke Norton

   N/A      —           650,000        812,500        —           —           —           —     
   11/25/2014      —           —          —          —           333,685         59.34         5,830,678   
   11/25/2014      —           —          —          24,193         —           —           1,435,613   

Graham Smith

   N/A      —           650,000        N/A (7)      —           —           —           —     

 

(1) The Company’s non-equity incentive plan awards, and how they were determined, are based upon a formula that may include some discretion as to amounts paid, as discussed under “Compensation Discussion and Analysis—Compensation Elements—Cash Bonuses.”
(2) All restricted stock units and stock options were granted pursuant to the 2013 Equity Plan.
(3) The exercise price of the option awards is equal to the closing market price of the Company’s Common Stock on the date of grant.
(4) The value of a stock award or option award is based on the fair value as of the grant date of such award determined pursuant to FASB ASC Topic 718. Stock awards consist only of restricted stock unit awards. The exercise price for all options granted to the Named Executive Officers is 100% of the fair market value of the Company’s Common Stock on the grant date. Regardless of the value placed on a stock option on the grant date, the actual value of the option will depend on the excess, if any, of the market value of the Company’s Common Stock over the exercise price if and when the option is exercised.
(5) Mr. Hawkins joined the Company on August 1, 2015. The amount reported in the table represents Mr. Hawkins’ fiscal 2015 target cash bonus opportunity based on his actual base salary earnings during fiscal 2015.
(6) The amount reported in the table represents Mr. Hawkins’ fiscal 2015 maximum cash bonus opportunity based on his actual base salary earnings during fiscal 2015.
(7) Pursuant to the Transition Services Agreement dated February 27, 2014, Mr. Smith’s bonus was not subject to increase or decrease from his target amount based on Company or individual performance.

 

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          OPTION EXERCISES AND STOCK VESTED  

 

OPTION EXERCISES AND STOCK VESTED

The following table sets forth certain information concerning option exercises and value realized upon exercise by the Named Executive Officers during fiscal 2015.

 

                          Option Awards                                               Stock Awards                      
Name    Number of
Shares Acquired
on Exercise (#)
     Value Realized
on Exercise ($) (1)
     Number of
Shares Acquired
on Vesting (#)
     Value Realized
on Vesting ($) (2)
 

Marc Benioff

     300,000        11,957,828        —          —    

Mark Hawkins

     —          —          —          —    

Keith Block

     —          —          —          —    

Parker Harris

     302,000         11,825,079         18,940         1,120,406   

Alexandre Dayon

     76,483         2,303,260         39,206         2,249,134   

Burke Norton

     —          —          53,940         3,174,371   

Graham Smith

     293,400         7,166,845         18,240         1,078,490   

 

(1) The value realized on exercise is the difference between the market price of the shares of the Company’s Common Stock underlying the options when exercised and the applicable exercise price.
(2) The value realized on vesting is determined by multiplying the number of vested restricted stock units by the closing price of the Company’s Common Stock on the vesting date.

 

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  OUTSTANDING EQUITY AWARDS AT FISCAL 2015 YEAR-END           

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2015 YEAR-END

The following table sets forth information with respect to the value of all outstanding equity awards held by the Named Executive Officers at the end of fiscal 2015.

 

                                      OPTION AWARDS                                              STOCK AWARDS          
 Name    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
     Option
Exercise
Price ($)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) (2)
    

Market
Value of
Shares or
Units of Stock

That Have

Not Vested
($) (3)

 

Marc Benioff

     1,400,000         —           35.63         11/23/2015         —           —     
     1,108,333         291,667         27.06         11/22/2016         —           —     
     812,500         687,500         39.09         11/27/2017         —           —     
     539,421         1,310,020         52.30         11/26/2020         —           —     
     —           1,966,358         59.34         11/25/2021         —           —     

Mark Hawkins

     —           413,974         59.64         08/26/2021         —           —     
     —           —           —           —           30,013         1,694,234   

Keith Block

     494,791         755,209         37.95         6/5/2018         —           —     
     —           595,866         59.34         11/25/2021         —           —     

Parker Harris

     210,000         —           35.63         11/23/2015        —           —     
     164,666         43,334         27.06         11/22/2016         —           —     
     130,433         110,367         39.09         11/27/2017         —           —     
     63,296         153,718         52.30         11/26/2020         —           —     
     —           333,685         59.34         11/25/2021         —           —     
     —           —           —           —           4,300         242,735   
     —           —           —           —           10,600         598,370   
     —           —           —           —           13,022         735,092   
     —           —           —           —           24,193         1,365,695   

Alexandre Dayon

     18,334         5,001         35.63         11/23/2015         —           —     
     113,333         41,667         36.84         06/28/2016         —           —     
     37,343         26,065         27.06         11/22/2016         —           —     
     39,560         96,074         52.30         11/26/2020         —           —     
     —           333,685         59.34         11/25/2021         —           —     
     —           —           —           —           420         23,709   
     —           —           —           —           10,428         588,661   
     —           —           —           —           32,896         1,856,979   
     —           —           —           —           32,553         1,837,617   
     —           —           —           —           24,193         1,365,695   

Burke Norton

     142,500         37,500         27.06         11/22/2016         —           —     
     114,183         96,617         39.09         11/27/2017         —           —     
     63,296         153,718         52.30         11/26/2020         —           —     
     —           333,685         59.34         11/25/2021         —           —     
     —           —           —           —           45,000         2,540,250   
     —           —           —           —           9,200         519,340   
     —           —           —           —           13,022         735,092   
     —           —           —           —           24,193         1,365,695   

Graham Smith

     132,666         43,334         27.06         11/22/2016         —           —     
     90,183         96,617         39.09         11/27/2017         —           —     
     51,296         153,718         52.30         11/26/2020         —           —     
     —           —           —           —           4,300         242,735   
     —           —           —           —           9,200         519,340   
     —           —           —           —           13,022         735,092   

 

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          OUTSTANDING EQUITY AWARDS AT FISCAL 2015 YEAR-END  (CONTINUED)  

 

 

(1) Options shown in this table were granted under the 2004 Equity Plan and the 2013 Equity Plan and vest over four years, with 25% of the total shares granted vesting on the first anniversary of the date of grant and the balance vesting in equal monthly installments over the remaining 36 months.
(2) Restricted stock unit awards shown in this table were granted under the 2004 Equity Plan and the 2013 Equity Plan and vest over four years, with 25% of the units vesting on the first anniversary of the date of grant and the balance vesting in equal quarterly installments over the remaining 36 months.
(3) The market value of unvested restricted stock units is based on the closing market price of the Company’s Common Stock on January 30, 2015 of $56.45.

 

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  EMPLOYMENT CONTRACTS AND CERTAIN TRANSACTIONS          

 

EMPLOYMENT CONTRACTS AND CERTAIN TRANSACTIONS

 

Executive Officer Offer Letters and Agreements.    Each of the Named Executive Officers is an at-will employee. Offer letters with our Named Executive Officers provide for one or more of the following: salary, annual bonus based on Company and individual performance, stock options and other equity-based awards and participation in our Company-wide employee benefit plans. In addition, the offer letters we have entered into with Messrs. Block, Smith and Hawkins provide for severance benefits as described below.

Keith Block.    Under Mr. Block’s offer letter with the Company, dated June 6, 2013, in the event the Company terminates Mr. Block’s employment without cause (as defined in his offer letter) or if Mr. Block voluntarily terminates his employment for good reason (as defined in his offer letter), he will be entitled to receive the following benefits (less applicable tax withholdings), subject to his execution of a release of claims in favor of the Company:

 

 

An amount equal to 100% of his annual base salary and target bonus to be payable in monthly installments for 12 months following the termination date, but ending early if he accepts employment with another party during the 12 months following his termination (for the fiscal year ended January 31, 2015, Mr. Block’s annual base salary and target bonus amount were each $1,000,000);

 

 

Payment equal to any performance or special incentive bonus earned as of the termination date but not yet paid; and

 

 

Any compensation and benefits to which he may be entitled under applicable plans, programs and agreements of the Company (but ending immediately if he accepts employment with another party during the 12 months following his termination), and reimbursement of any expenses incurred but not yet reimbursed.

In the event Mr. Block’s employment terminates due to his death or disability (as defined in his offer letter), he or his estate will be entitled to receive the following benefits (less applicable tax withholdings), in addition to any other compensation and benefits to which he (or his estate) may be entitled under applicable plans, programs and agreements of the Company:

 

 

In the case of death, an amount equal to 100% of his annual base salary payable in monthly installments for 12 months following his death (for the fiscal year ended January 31, 2015, Mr. Block’s annual base salary was $1,000,000);

 

 

In the case of disability, the disability benefit available under the Company’s normal procedures and policies for its most senior executives;

 

 

Payment equal to his pro rata bonus(es) for the remainder of the year in which death or disability occurs (if Mr. Block’s termination due to death or disability had occurred on January 31, 2015, his bonus payment would have been $1,000,000, less applicable withholding taxes); and

 

 

Payment equal to any base salary and any performance or special incentive bonus earned but not yet paid as of the termination due to death or disability, reimbursement of any expenses incurred but not yet reimbursed, and any compensation and benefits to which he (or his legal representatives) may be entitled under applicable plans, programs and agreements of the Company.

Mark Hawkins.    Under Mr. Hawkins’ offer letter with the Company, dated June 11, 2014, if the Company terminates Mr. Hawkins’ employment without cause (as defined in his offer letter) or if Mr. Hawkins voluntarily terminates his employment for good reason (as defined in his offer letter), he will be entitled to receive the following benefits (less applicable tax withholdings), subject to his execution of a release of claims in favor of the Company:

 

 

An amount equal to 100% of his annual base salary and target bonus to be payable in monthly installments for 12 months following the termination date, but ending early if he accepts employment with another party during the 12 months following his termination (for the fiscal year ended January 31, 2015, Mr. Hawkins’ annual base salary was $650,000 and target bonus amount was 100% of his annual base salary, pro-rated to reflect his mid-year start date); and

 

 

Any compensation and benefits to which he may be entitled under applicable plans, programs and agreements of the Company (but ending immediately if he accepts employment with another party during the 12 months following his termination), and reimbursement of any expenses incurred but not yet reimbursed.

Under his offer letter, Mr. Hawkins received a sign-on bonus of $250,000 in fiscal 2015 and, upon remaining employed through the six-month anniversary of his employment start date, an additional bonus in fiscal 2016 of $250,000. If, within twelve months following his employment start date, he voluntarily terminates his employment with the Company for any reason, or the Company terminates his employment for cause (as defined in his offer letter), he must repay to the Company a pro-rata portion of each bonus.

Alexandre Dayon.    In May 2011, Mr. Dayon was awarded an Employee Recognition Bonus in the amount of $1,000,000, which was to be paid out in four equal installments in the amount of $250,000 (less applicable withholdings) subject to Mr. Dayon’s continued employment through the applicable installment’s payment date. Mr. Dayon received the third annual installment of $250,000 on January 1, 2015 and, subject to his continued employment, the fourth and final installment will be payable January 1, 2016.

Graham Smith.    Mr. Smith’s offer letter with the Company, dated August 8, 2007, provided that if he were terminated without cause after his first 12 months of employment with the Company, he would receive 18 months of his annual base salary (less applicable tax withholdings). Mr. Smith’s offer letter was

 

 

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superseded by a Transition Services Agreement dated February 27, 2014 as described in greater detail below, and his Services Agreement dated March 31, 2015 also specifies that he will not become eligible for any consideration or separation benefits under the offer letter. If Mr. Smith’s employment had terminated without cause prior to the date his Transition Services Agreement became effective on February 27, 2014, then pursuant to his offer letter, he would have received severance payments of $975,000 (less applicable tax withholdings).

Change of Control.    In December 2008, the Company entered into a Change of Control and Retention Agreement with Mr. Benioff. Pursuant to this agreement, in the event that Mr. Benioff is terminated without cause (as defined in the agreement) or resigns for good reason (as defined in the agreement) within three months prior to, or 18 months after, a change of control (as defined in the agreement) of the Company, he will be entitled to receive the following benefits:

 

 

A lump sum payment (less applicable tax withholdings) equal to 200% of his annual base salary and target bonus;

 

 

Company-paid premiums for health care (medical, dental and vision) continuation coverage for Mr. Benioff and his eligible dependents for a period of up to 24 months following termination; and

 

 

Full vesting acceleration of the unvested portion of all equity incentive awards held by him at the time of termination.

The Company has also entered into Change of Control and Retention Agreements with the other Named Executive Officers. Pursuant to these agreements, in the event that any of these executives is terminated without cause or resigns for good reason within three months prior to, or 18 months after, a change of control of the Company, he will be entitled to receive the following benefits:

 

 

A lump sum payment (with respect to Mr. Hawkins, in equal monthly installments over 12 months) (less applicable tax withholdings) equal to 150% of the executive’s annual base salary and 150% of the executive’s target bonus;

 

 

Company-paid premiums for health care (medical, dental and vision) continuation coverage for executive and the executive’s eligible dependents for a period of up to 18 months following termination; and

 

 

Full vesting acceleration of the unvested portion of all equity incentive awards held by the executive at the time of termination.

Each Change of Control and Retention Agreement contains a “best of” provision that termination benefits will be either delivered in full or to such lesser extent as would result in no portion of such termination benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the Internal Revenue Code of 1986, as amended, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of termination benefits to the executive on an after-tax basis. Receipt of benefits under each agreement is conditioned upon execution by the executive of a release of claims in favor of the Company, which release also requires continued compliance by the executive with confidentiality obligations.

Transition Services Agreement and New Services Agreement.    The Company announced in February 2014 that Mr. Smith intended to retire from his position as Chief Financial Officer of the Company on March 31, 2015 (the “Retirement Date”). As discussed below, Mr. Smith did not retire on the Retirement Date and instead continues his employment with us under the terms of a Services Agreement.

On February 27, 2014, in connection with Mr. Smith’s expected retirement, the Company and Mr. Smith entered into a Transition Services Agreement under which Mr. Smith agreed to continue to serve as Chief Financial Officer until the earlier of the Retirement Date or the date on which the Company’s Board decided that Mr. Smith would no longer serve in such capacity. The Transition Services Agreement superseded and replaced any other compensatory or severance arrangements between the Company and Mr. Smith except for the terms of Mr. Smith’s Change of Control and Retention Agreement, which, had he retired on the expected Retirement Date, would have ceased to be effective on that date because no change of control of the Company had occurred prior to that date.

The Transition Services Agreement provided that, during the transition period from the date of the Agreement until his Retirement Date, Mr. Smith would continue to receive his salary, target bonus, other employee benefits and vesting of his equity awards at the same levels and eligibility as immediately prior to the Agreement (with his bonus paid at 100% of target bonus regardless of performance achievement). The Transition Service Agreement also provided that if, prior to the Retirement Date, Mr. Smith had been terminated by the Company for any reason other than cause (as defined in the transition agreement), or Mr. Smith had resigned at the request of the Company if such request was not for cause, then Mr. Smith would have received (i) a lump sum payment of the remaining amount of his salary to the Retirement Date, (ii) if he was covered under the Company’s group health plan as of his termination date, Company-paid group healthcare coverage for him and his eligible dependents through the Retirement Date (or a lump sum cash payment of the cost of the premiums, if continued healthcare coverage would violate certain non-discrimination requirements), (iii) payment of 100% of any then-unpaid portion of his target bonus for the 2015 fiscal year and (iv) acceleration of vesting of the portion of his outstanding equity awards that would have vested had he remained employed through the Retirement Date. If, during Mr. Smith’s transition period, the Company had completed a change of control and Mr. Smith had become entitled to receive benefits under his Change of Control and Retention Agreement, he would have received benefits under that agreement instead of his Transition Services Agreement (except that if the benefits under his transition agreement would be greater in the aggregate than the benefits under his Change of Control and Retention Agreement, he would have received the applicable benefits under his Transition Services Agreement). The “best of” provision under Mr. Smith’s Change of Control and Retention Agreement, as described above, also would have applied to any payments under his Transition Services Agreement. Because Mr. Smith remained employed through the Retirement Date, and no change of control of the Company occurred before that date, he did not did not

 

 

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receive any severance payments under the transition agreement, his Change of Control and Retention Agreement or otherwise.

On March 31, 2015, we entered into a Services Agreement with Mr. Smith that superseded his Transition Services Agreement. Under the terms of the Services Agreement, Mr. Smith will continue his employment with the Company as Executive Vice President beyond March 31, 2015, his previously anticipated retirement date, and will advise the CEO on projects reasonably assigned to him by the CEO, including projects on behalf of the Company involving the Salesforce Foundation. During his employment, Mr. Smith will continue to receive his salary, target bonus opportunity, other employee benefits and vesting of his equity awards at the same levels and eligibility as immediately prior to the Agreement. The Agreement provides that the Company will pay or reimburse Mr. Smith for his reasonable attorney’s fees in connection with the negotiation of the Agreement. The Agreement provides that subject to his continued employment, Mr. Smith’s fiscal year 2016 bonus will be payable at 100% of target regardless of performance achievement, to be pro-rated in the event Mr. Smith’s employment terminates for any reason before his fiscal year 2016 bonus otherwise would have

been due to him. If, during his employment under the Services Agreement, the Company completes a change of control, Mr. Smith remains eligible to receive benefits under his existing Change of Control and Retention Agreement in accordance with its terms, provided that any pro-rated bonus provided under the Services Agreement will reduce any like-kind payments under his Change of Control and Retention Agreement. As under the Transition Services Agreement, if no change of control of the Company occurs before Mr. Smith’s employment terminates, he will not be entitled to receive any payments under his Change of Control and Retention Agreement. The “best of” provision under Mr. Smith’s Change of Control and Retention Agreement, as described above also will apply to any payments under his Services Agreement.

Payments Upon Qualifying Termination. Assuming the employment of the Named Executive Officers had been terminated on January 31, 2015 pursuant to a qualifying termination of employment in connection a change of control of the Company, they would have been entitled to payments in the amounts set forth below:

 

 

Name   

Salary and

Bonus ($) (1)

    

Value of

Continuation

of Benefits
($)

    

Value of

Accelerated Stock

Options and

Restricted

Stock Units ($) (2)

     Total ($) (3)  

Marc Benioff

     8,640,000         46,351         25,941,228         34,627,579   

Mark Hawkins

     1,950,000         25,911         1,694,234         3,670,145   

Keith Block

     3,000,000         11,778         13,971,367         16,983,145   

Parker Harris

     1,950,000         35,334         6,768,995         8,754,329   

Alexandre Dayon

     1,950,000         35,334         7,758,484         9,743,818   

Burke Norton

     1,950,000         35,334         8,577,367         10,562,701   

Graham Smith

     1,950,000         35,334         5,085,604         7,070,938   

 

(1) Based on salary and bonus targets as of January 31, 2015. As described above in the Compensation Discussion and Analysis section, certain executive officers received salary and bonus target increases effective as of February 1, 2015.
(2) Based on a Common Stock price of $56.45, the closing market price of the Company’s Common Stock on January 30, 2015, less the applicable exercise price for each option for which vesting would have been accelerated.
(3) The amounts presented reflect the maximum severance benefits that could have been paid out without giving effect to any potential reduction as a result of the “best of” provision of the Change of Control and Retention Agreements described above.

 

Indemnification Agreements.    The Company has entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.

Policies and Procedures with Respect to Related Party Transactions.    Our Board is committed to the highest legal and ethical standards of conduct in fulfilling its responsibilities and recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest. Our Audit Committee Charter requires that the Audit Committee review and approve any related party transactions, after reviewing each such transaction for potential conflicts of interests and other improprieties.

The Company has in place Related Party Transaction Policies and Procedures, under which the Audit Committee reviews and approves or ratifies any related party transactions. In approving or rejecting the proposed transaction, our Audit Committee will consider the relevant facts and circumstances deemed relevant by the Audit Committee, including, but not limited to, the costs and benefits to the Company, the nature of the related party’s interest in the transaction, the availability and terms of other sources for comparable services or products, and, if applicable, the impact on a director’s independence.

Related Party and Other Transactions.    Except for the compensation of directors and executive officers described earlier and as set forth below, there were no transactions during fiscal 2015 in which the Company was a party, the amount involved in the transaction exceeds $120,000 and in which any director,

 

 

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director nominee, executive officer, holder of more than 5% of our capital stock, or immediate family member of any of the foregoing individuals had or will have a direct or indirect material interest.

In January 1999, The Salesforce.com Foundation, which recently became a private foundation, was chartered to build philanthropic programs that are focused on youth and technology. Beginning in 2008, Salesforce.org, which is a non-profit mutual benefit corporation, was established to resell the Company’s services to nonprofit organizations and certain higher education organizations. The Company’s chairman is the chairman of both the Foundation and Salesforce.org. The Company’s chairman, one of the Company’s employees and one of the Company’s board members hold three of the Foundation’s nine board seats. The Company’s chairman and one of the Company’s employees hold two of Salesforce.org’s six board seats. The Company does not control the Foundation’s or Salesforce.org’s activities, and accordingly, the Company does not consolidate either of the related entities’ statement of activities with its financial results.

Since the Foundation’s inception, the Company has provided at no charge certain resources to Foundation employees such as office space. The value of these items was approximately $1.3 million in fiscal 2015 and approximately $217,000 for the two months ended March 31, 2015.

Additionally, the Company has donated subscriptions to the Company’s service to other qualified non-profit organizations. The Company also allows an affiliate of the Foundation to resell the Company’s service to non-profit organizations. The Company does not charge the affiliate for these subscriptions, so any revenue from subscriptions provided to non-profit organizations is retained by the Foundation to fund its charitable work. The value of the subscriptions pursuant to reseller agreements was approximately $45.4 million in fiscal 2015 and approximately $9.2 million for the two months ended March 31, 2015.

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

During fiscal 2015, none of our executive officers served as a member of the board of directors or compensation committee of

any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who beneficially own more than 10% of the Company’s Common Stock (collectively, “Reporting Persons”) to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on our

review of such reports received or written representations from certain Reporting Persons relating to fiscal 2015, the Company believes that all Reporting Persons complied with all applicable reporting requirements in fiscal 2015, except that one Form 4 was unintentionally filed late. This was a Form 4 filed on March 28, 2014 to report a purchase of 1,350 shares on behalf of Mr. Hassenfeld’s wife on March 17, 2014.

 

 

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  SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE          

 

COMMITTEE REPORTS

 

The following reports by our Compensation Committee and Audit Committee shall not be deemed to be (i) “soliciting material,” (ii) “filed” with the SEC, (iii) subject to Regulations 14A or 14C of the Exchange Act, or (iv) subject to the liabilities of Section 18 of the Exchange Act. The reports shall not be deemed incorporated

by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent the Company specifically incorporates the report by reference into such filing.

 

 

Report of the Compensation Committee of the Board of Directors

 

We, the Compensation Committee of the Board of Directors of Salesforce, have reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on such review and discussion, we have recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and in Salesforce’s Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

THE COMPENSATION COMMITTEE

John V. Roos (Chair)

Craig Conway

Maynard Webb

 

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          REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS  

 

Report of the Audit Committee of the Board of Directors

 

Role of the Audit Committee

The Audit Committee operates under a written charter and its functions are discussed above in “Corporate Governance and Board Committees—Audit Committee.”

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. Management is responsible for the Company’s internal controls, financial reporting process and compliance with laws and regulations and ethical business standards. Ernst & Young LLP is responsible for performing an independent audit of the Company’s consolidated financial statements and an independent audit of the Company’s internal controls over financial reporting, both in accordance with the standards of the Public Company Accounting Oversight Board (United States). The Audit Committee’s responsibility is to monitor and oversee this process.

Review of Audited Financial Statements for Fiscal Year ended January 31, 2015

The Audit Committee reviewed and discussed our audited financial statements for the fiscal year ended January 31, 2015 with management. The Audit Committee discussed with Ernst & Young LLP the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

The Audit Committee received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed the independence of Ernst & Young with that firm.

The Audit Committee also discussed with management and with Ernst & Young LLP the evaluation of the Company’s internal controls and the effectiveness of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.

The Audit Committee considered the fees paid to Ernst & Young LLP for the provision of non-audit related services and does not believe that these fees compromise Ernst & Young LLP’s independence in performing the audit.

Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to the Board that the Company’s audited consolidated financial statements be included in the Company’s annual report on Form 10-K for the fiscal year ended January 31, 2015 for filing with the SEC.

In addition, the Audit Committee continued to monitor the Company’s internal and disclosure control structure, including the scope and adequacy of the Company’s internal auditing program.

Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditor. Accordingly, Audit Committee oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), that the consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles or that Ernst & Young LLP is in fact “independent.”

THE AUDIT COMMITTEE

Lawrence Tomlinson (Chair)

Alan Hassenfeld

Sanford Robertson

Robin Washington

Maynard Webb

 

 

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  PROPOSAL 1— ELECTION OF DIRECTORS          

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

As recommended by the Nominating and Corporate Governance Committee, the Board’s nominees for election by the stockholders are the following current members of the Board: Marc Benioff, Keith Block, Craig Conway, Alan Hassenfeld, Colin Powell, Sanford Robertson, John Roos, Lawrence Tomlinson, Robin Washington, Maynard Webb and Susan Wojcicki. This is the first stockholder election for Ms. Wojcicki, who was appointed on December 5, 2014.

It is intended that the proxy in the form enclosed will be voted, unless otherwise indicated, for the election of the nominees for election as directors to the Board. If any of the nominees should for any reason be unable or unwilling to serve as of the Annual Meeting, the proxies will be voted for the election of such other person as the Board may designate, if any, in place of such nominee.

 

 

Vote Required and Board of Directors’ Recommendation

 

The Company’s Amended and Restated Bylaws provide that each director nominee be elected to the Board if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. The Board, after taking into consideration the recommendation of the Nominating and Corporate Governance

Committee, will determine whether or not to accept the pre-tendered resignation of any nominee for director, in an uncontested election, who receives a greater number of votes against his or her election than votes for such election.

 

 

The Board of Directors Recommends a Vote FOR Each of the Nominees Listed Above.

 

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          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN

 

PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE THEREUNDER

 

We are seeking stockholder approval to amend and restate our 2013 Equity Incentive Plan (the “2013 Plan”) to increase the number of shares of Common Stock of the Company (the “Shares”) reserved for issuance under the 2013 Plan by an additional 37 million Shares. Our continuing ability to offer equity incentive awards under the 2013 Plan is critical to our ability to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly competitive market for employee talent in which we operate.

The Board of Directors has determined that it is in the best interests of the Company and its stockholders to approve this proposal. The Board has approved the amendment and restatement of the 2013 Plan and share increase subject to stockholder approval, and recommends that stockholders vote in favor of this proposal at the Annual Meeting. Stockholder approval

of this proposal requires the affirmative vote of a majority of the outstanding Shares that are present in person or by proxy and entitled to vote on the proposal at the Annual Meeting.

If stockholders approve this proposal, the amendment and restatement of the 2013 Plan and share increase will become effective as of the date of stockholder approval. If stockholders do not approve this proposal, the amendment and restatement of the 2013 Plan and share increase will not take effect and our 2013 Plan will continue to be administered in its current form. Our executive officers and directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the 2013 Plan. The remainder of this discussion, when referring to the 2013 Plan, refers to the amended and restated 2013 Plan as if this proposal is approved by our stockholders, unless otherwise specified or the context otherwise references the 2013 Plan prior to amendment and restatement.

 

 

Increasing the Number of Shares Reserved for Issuance under the 2013 Plan

 

Background

The 2013 Plan was initially adopted by the Board of Directors in March 2013, and our stockholders approved it in June 2013. As described in more detail below, the initial share reserve under the 2013 Plan was 48 million Shares, plus an additional 21,920,540 Shares that were available for grant under our 2004 Equity Incentive Plan and 2004 Outside Directors Stock Plan (the “Prior Plans”) as of the date stockholders approved the 2013 Plan. In addition, any Shares subject to outstanding awards under the 2013 Plan or, after the date stockholders approved the 2013 Plan, under the Prior Plans, that expire or are otherwise forfeited to, or repurchased by, the Company also become available for future grant under the 2013 Plan, although the number of Shares that become available under the 2013 Plan in this manner is limited to 54,332,000 Shares.

As discussed in our 2013 proxy statement, when we sought initial stockholder approval of the 2013 Plan, we believed the Shares reserved for issuance under it (along with Shares becoming available for future grant due to forfeitures and cancellations) would be sufficient to enable us to grant equity awards until some point in 2015. This estimate was based on forecasts that took into account our anticipated rate of growth in hiring, an estimated range of our stock price over time, and our historical forfeiture rates, as well as the number of Shares we then had available for grant under our 2006 Inducement Equity Incentive Plan (the “2006 Plan”).

As of April 1, 2015, approximately 29,887,757 Shares remained available for grant under the 2013 Plan and 703,339 Shares

remained available for grant under the 2014 Inducement Equity Incentive Plan (the “2014 Plan”), which is the successor to the 2006 Plan. The Board believes that additional Shares are necessary to meet the Company’s anticipated equity compensation needs for approximately the next one to two years from the Annual Meeting. This estimate is based on a forecast that takes into account our anticipated rate of growth in hiring, an estimated range of our stock price over time, and our historical forfeiture rates, as well as the number of Shares we have available for grant under our 2014 Plan. We have also considered proxy advisory firm guidelines in determining an appropriate number of Shares to seek to add to the 2013 Plan.

Reasons for Voting for the Proposal

Long-Term Equity is a Key Component of our Compensation Objective

As discussed in the “Compensation Discussion and Analysis” section, our overall compensation objective is to compensate our personnel in a manner that attracts and retains the highly talented employees necessary to manage and staff a high-growth business in an innovative and competitive industry. Our employees are our most valuable asset, and we strive to provide them with compensation packages that are competitive, that reward personal and company performance and that help meet our retention needs. Equity awards, whose value depends on our stock performance and which require continued service over time before any value can be realized, help achieve these objectives and are a key element of our compensation program. Equity

 

 

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  PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN          
  TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

awards also incentivize our employees to manage our business as owners, aligning their interests with those of our stockholders. We believe we must continue to use equity compensation on a broad basis to help attract, retain and motivate employees to continue to grow our business, develop new products and ultimately increase stockholder value. As of April 1, 2015, approximately 9,500 of our regular, full-time employees held outstanding equity awards.

The 2013 Plan Requires Additional Shares to Meet our Forecasted Needs

We currently forecast granting equity awards representing approximately 20,247,567 Shares (or 34,160,636 fungible shares, i.e., taking into account that full value awards such as restricted stock units deplete the 2013 Plan share reserve at a rate of 2.15 Shares for every Share subject to the full value award) over the next one year, or approximately 5% of our Common Stock outstanding as of April 1, 2015. We also anticipate Share forfeitures and cancellations of approximately 4,733,862 (or 7,234,546 fungible shares) over this period, based on our historic rates.

If our expectation for forfeitures is accurate, our net grants (grants less forfeitures and cancellations) over the next one-year period would be approximately 15,513,706 Shares (or 26,926,090 fungible shares), or approximately 4% of our Common Stock outstanding as of April 1, 2015.

As described above, the 2013 Plan has 29,887,757 Shares available for grant as of April 1, 2015. Our 2014 Plan allows us to grant awards to new employees as a material inducement to their joining the Company, such as in acquisitions, which assists us in meeting a portion of our equity compensation needs, but only with respect to a limited group. We believe additional Shares should be reserved for issuance under our 2013 Plan to meet our estimated near-term equity compensation needs.

We operate in a highly competitive industry and geography for employee talent and do not expect required rates of compensation to decline. One alternative to using equity awards would be to significantly increase cash compensation. We do not believe this would be practical or advisable. As a high-growth company, we believe that a combination of equity and cash compensation is better for attracting, retaining and motivating employees. Any significant increase in cash compensation in lieu of equity awards would reduce the cash otherwise available for operations and investment in our business. Furthermore, we do not believe a more cash-oriented program would have the same long-term retention value or serve to align employees’ interests to those of our stockholders as well as a program that includes equity.

We Manage Our Equity Incentive Program Thoughtfully

We manage our long-term stockholder dilution by limiting the number of equity awards granted annually and limiting what we grant to what we believe is an appropriate amount of equity necessary to attract, reward and retain employees. Our three-year average burn rate, which we define as the number of Shares subject to equity awards granted in a fiscal year divided by the weighted average Shares outstanding for that fiscal year, was

3.77% for fiscal years 2013 through 2015. We are also mindful of the ratio of our stock-based compensation expense to our revenues over time; this ratio has decreased in recent years.

As of April 1, 2015, equity awards outstanding under Salesforce equity plans were approximately: 24,910,055 stock options, no unvested restricted shares and 21,141,345 restricted stock units. An additional 1,153,201 stock options, 334,021 restricted stock units and 173,672 unvested restricted shares were outstanding under equity awards that had been assumed in connection with mergers and other corporate transactions as of April 1, 2015. As of April 1, 2015, we had 655,397,807 Shares outstanding. Accordingly, our approximately 47,712,294 outstanding awards (not including awards under our employee stock purchase plan) plus 30,591,096 Shares available for future grant under our equity plans (not including under our employee stock purchase plan) as of April 1, 2015 represented approximately 11% of our Common Stock outstanding (commonly referred to as the “overhang”).

As of April 1, 2015, the average weighted per share exercise price of all outstanding stock options (whether granted under Salesforce-originated equity plans or assumed in connection with corporate transactions) was $45.85 and the weighted average remaining contractual term was 4.54 years.

The 2013 Plan Incorporates Good Compensation and Governance Practices

 

 

Administration. The 2013 Plan is administered by the Compensation Committee of the Board, which is comprised entirely of independent non-employee directors.

 

 

Broad-based eligibility for equity awards. We grant equity awards to a broad range of our employees. By doing so, we align employee interests with those of stockholders. Approximately 70% of all outstanding equity awards, on a share basis, as of April 1, 2015 were held by employees who are not named executive officers or directors. In fiscal 2015, approximately 80% of all equity awards, on a share basis, were issued to employees who are not named executive officers or directors with approximately 40% of all employees who are not named executive officers or directors receiving awards.

 

 

Stockholder approval is required for additional Shares. The 2013 Plan does not contain an annual “evergreen” provision but instead reserves a fixed maximum number of Shares for issuance. Stockholder approval is required to increase that number.

 

 

Exchange or Repricing Programs are not allowed without stockholder approval. The 2013 Plan prohibits the repricing or other exchange of underwater stock options and stock appreciation rights without prior stockholder approval.

 

 

No discount stock options or stock appreciation rights. The 2013 Plan requires that stock options and stock appreciation rights issued under it must have an exercise price equal to at least the fair market value of our Common Stock on the date the award is granted, except in certain situations in which we are assuming or replacing options granted by another company that we are acquiring.

 

 

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          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

 

Share counting provisions. In general, when awards granted under the 2013 Plan expire or are canceled without having been fully exercised, or are settled in cash, the Shares reserved for those awards are returned to the share reserve and become available for future awards. However, if Shares are tendered to us or withheld by us to pay a stock option’s or stock appreciation’s right’s exercise price or satisfy such award’s tax withholding obligations, those Shares do not become available for future awards. Also, if a stock appreciation right is exercised, we subtract from the 2013 Plan share reserve the full number of Shares subject to the portion of the stock appreciation right actually exercised, regardless of how many Shares actually were used to settle the stock appreciation right.

 

 

Full-value awards count more heavily in reducing the 2013 Plan share reserve. The 2013 Plan uses a “fungible share”

   

concept, under which options and stock appreciation rights reduce the share reserve on a one-for-one basis, but full-value awards, such as restricted shares and restricted stock units, reduce the reserve on a 2.15-for-one basis.

 

 

Limited transferability. In general, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, unless otherwise approved by the Board or a committee of the Board administering the 2013 Plan.

 

 

Annual limits on non-employee director awards. The 2013 Plan limits the number of Shares available for non-employee director awards each fiscal year.

 

 

No tax gross-ups. The 2013 Plan does not provide for any tax gross-ups.

 

 

Summary of the 2013 Plan

 

The following is a summary of the operation and principal features of the 2013 Plan. The summary is qualified in its entirety by the 2013 Plan as set forth in Appendix A.

Purpose

The purposes of the 2013 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services to the Company and to promote the success of the Company’s business. These incentives are provided through the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance bonus awards, performance shares and performance units.

Authorized Shares

At the 2013 Annual Meeting, our stockholders approved reserving a total of 48 million Shares, plus

 

 

any Shares reserved but not issued, and not subject to outstanding awards, under the Prior Plans as of the date stockholders initially approved the 2013 Plan, on a one-for-one basis, but limited to a maximum of 23.8 million Shares; and

 

 

any Shares subject to equity awards outstanding under the Prior Plans as of the date of initial stockholder approval of the 2013 Plan that thereafter expire, are forfeited, repurchased, cancelled or otherwise terminate (or otherwise would have, but for termination of the applicable Prior Plan, again become available for use under such Prior Plan), in this case with Shares underlying stock options and stock appreciation rights that so become available being credited to the 2013 Plan share reserve on a one-for-one basis, and Shares subject to other types of equity awards (i.e., full value awards), being credited to the 2013 Plan share reserve on a 2.15-for-one basis; provided, however, that no more than 54,332,000 Shares may be added to the 2013 Plan pursuant to this provision.

The stockholders are now being asked to approve an additional 37 million Shares to become available for issuance under the

2013 Plan. As of April 1, 2015, we had approximately 29,887,757 Shares available for issuance under the 2013 Plan.

Share Reserve Reduction and Share Recycling

Any Shares subject to options or stock appreciation rights are counted against the 2013 Plan share reserve as one Share for every one Share subject to the award. Any Shares subject to awards granted under the 2013 Plan other than options or stock appreciation rights (i.e., full value awards, including restricted stock, restricted stock units, performance units and performance shares) are counted against the 2013 Plan share reserve as 2.15 shares for every one Share subject thereto.

If any award granted under the 2013 Plan expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an exchange program or is forfeited to or repurchased by the Company due to failure to vest, the unpurchased or forfeited or repurchased Shares subject to such award become available for future grant or sale under the 2013 Plan. When Shares underlying full value awards are so returned to the 2013 Plan share reserve, 2.15 shares are returned to the 2013 Plan reserve for each Share underlying such award.

With respect to the exercise of stock appreciation rights, the gross number of Shares covered by the portion of the exercised award, whether or not actually issued pursuant to such exercise, cease to be available under the 2013 Plan. If Shares subject to restricted stock, restricted stock units, performance shares or performance units are repurchased by or forfeited to the Company due to failure to vest, such Shares become available for future grant under the 2013 Plan (and increase the 2013 Plan reserve on the 2.15-for-one basis described above).

Shares used to pay the purchase price or satisfy tax withholding obligations of awards other than stock options or stock appreciation rights become available for future issuance under the 2013 Plan. However, Shares used to pay the exercise price or purchase price of an option or stock appreciation right or to satisfy tax withholding obligations relating to such awards do not become available for future issuance under the 2013 Plan.

 

 

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Table of Contents
  PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN          
  TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

Shares issued pursuant to awards transferred under any award transfer program will not become available for grant under the 2013 Plan. To the extent awards are settled in cash rather than Shares, the 2013 Plan reserve will not be reduced.

Subject to the adjustment provisions of the 2013 Plan described below, the maximum number of Shares that may be issued upon the exercise of incentive stock options is the total number of Shares reserved for issuance as described above plus, to the extent permitted by the incentive stock option rules, the number of Shares that become available for issuance under the 2013 Plan under the provisions described above.

Adjustments to Shares Subject to the 2013 Plan

In the event of any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property, but excepting normal cash dividends), recapitalization, stock split, reverse stock split, reorganization, reincorporation, reclassification, merger, consolidation, split-up, split-off, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure affecting the Company’s Common Stock, the Administrator (as defined below), in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2013 Plan, will adjust the number and class of Shares that may be delivered under the 2013 Plan, the number, class and price of Shares subject to outstanding awards and the numerical award limitations. Any fractional Shares resulting from the adjustment will be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any award be decreased to an amount less than the par value.

Administration

The 2013 Plan will be administered by the Board of Directors or a committee of individuals satisfying applicable laws appointed by the Board (the “Committee”). The Board has appointed its Compensation Committee as the Committee administering the 2013 Plan. Different Committees may administer the 2013 Plan with respect to different groups of service providers. If the Administrator desires to qualify grants to certain officers and key employees of the Company as exempt under Rule 16b-3 of the Exchange Act, the members of the Committee must qualify as “non-employee directors” under such rule. In the case of awards intended to qualify for the performance-based compensation exemption under Section 162(m), administration must be by a compensation committee comprised solely of two or more “outside directors” within the meaning of Section 162(m). (For purposes of this summary of the 2013 Plan, the term “Administrator” will refer to either the Committee or the Board of Directors.) The Administrator may delegate day-to-day administration of the 2013 Plan, and any of the functions assigned to it, to one or more individuals.

Subject to the terms of the 2013 Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who

will receive awards, to determine the terms and conditions of awards (including the exercise price, the method of payment for Shares purchased under awards, the method of satisfaction of any tax withholding obligation arising in connection with an award, and the exercise terms for any award), to modify or amend each award subject to the restrictions of the 2013 Plan (including to accelerate vesting or waive forfeiture restrictions), and to interpret the provisions of the 2013 Plan and outstanding awards. The Administrator may allow a participant to defer the receipt of payment of cash or delivery of Shares that otherwise would be due to such participant, provided that, unless expressly determined by the Administrator, such deferral election must comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended and the guidance promulgated thereunder (“Section 409A”). The Administrator may make rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or qualifying for favorable tax treatment under applicable foreign laws. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the 2013 Plan of any award agreement and may make all other determinations deemed necessary or advisable for administering the 2013 Plan.

Notwithstanding the foregoing, the Administrator cannot institute, without prior stockholder approval, an exchange program whereby the exercise prices of outstanding awards may be reduced, outstanding awards may be surrendered or cancelled in exchange for awards with a higher or lower exercise price, or outstanding awards may be transferred to a third party.

Eligibility

Awards may be granted to employees, directors and consultants of the Company and employees and consultants of any parent, subsidiary, or affiliate of the Company. Performance Bonus Awards also may only be granted to employees of the Company or any parent, subsidiary, or affiliate of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of April 1, 2015, there were approximately 16,500 employees, including seven Named Executive Officers, and there were nine non-employee directors, each of whom would be eligible to be granted awards under the 2013 Plan. In principle, any consultant to the Company is eligible to participate in the 2013 Plan. However, the Company’s current practice is generally not to grant equity awards to consultants except in certain limited cases. In fiscal 2015, two consultants received equity awards under the 2013 Plan.

Stock Options

Options granted under the 2013 Plan are evidenced by a written agreement between the Company and the participant specifying the number of Shares subject to the option, the exercise price, the expiration date of the option, any conditions to exercise the options, and the other terms and conditions of the option, consistent with the requirements of the 2013 Plan. At any time after the date of grant, the Administrator, in its sole discretion, may reduce or waive any vesting criteria and may accelerate the time at which the restrictions will lapse or be removed.

 

 

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Table of Contents
          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

The exercise price per Share of each option may not be less than the fair market value of a Share of the Company’s Common Stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “Ten Percent Stockholder”) must have an exercise price per share equal to at least 110% of the fair market value of a Share on the date of grant. In addition, stock options may be granted with an exercise price per share of less than the fair market value of a Share of the Company’s Common Stock in certain situations in which we are assuming or replacing options granted by another company that we are acquiring. The aggregate fair market value of the Shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. Generally, the fair market value of the Common Stock is the closing sales price per share on the relevant date as quoted on the NYSE.

The 2013 Plan provides that the Administrator will determine acceptable forms of consideration for exercising an option. An option is deemed exercised when the Company receives the notice of exercise and full payment for the Shares to be exercised, together with applicable tax withholdings.

Options are exercisable at such times or under such conditions as determined by the Administrator and set forth in the award agreement. The maximum term of an option is as specified in the award agreement, provided that options may not have a term of more than seven years, and provided further that an incentive stock option granted to a Ten Percent Stockholder must have a term not exceeding five years.

The Administrator determines and specifies in each written award agreement, and solely in its discretion, the period of post-termination exercise applicable to each option. In the absence of such a determination by the Administrator, the participant generally is able to exercise the option to the extent vested for (i) 90 days following the participant’s termination as a service provider for reasons other than death, disability, or cause and (ii) 12 months following his or her termination due to death or disability. If the exercise of the option is prevented by applicable law within the time periods otherwise applicable, the option generally will remain exercisable for 90 days (or such longer period determined by the Administrator) following the date the participant received notice that the option is exercisable. If a sale within the applicable post-termination exercise period would subject the participant to suit under Section 16(b) of the Exchange Act, the option generally will remain exercisable until the tenth day following the date on which a sale of the Shares by the participant would no longer be subject to suit. Options terminate immediately upon the participant’s termination for cause. In no event can an option be exercised after the expiration of the term of the option.

Restricted Stock Awards

Awards of restricted stock are rights to acquire or purchase Shares, which vest in accordance with the terms and conditions established by the Administrator in its sole discretion. Restricted

stock awards are evidenced by a written agreement between the Company and the participant specifying the number of Shares subject to the award and the other terms and conditions of the award, consistent with the requirements of the 2013 Plan.

Restricted stock awards may (but are not required to) be subject to vesting conditions as the Administrator specifies, and the Shares acquired may not be transferred by the participant until the vesting conditions (if any) are satisfied. The Administrator may establish vesting criteria in its discretion, which may be based on continued employment or service, company-wide, departmental, divisional, business unit, or individual goals, applicable federal or state securities laws, or any other basis and which may include the performance goals listed below, and which, depending on the extent to which they are met, will determine the number of restricted stock units to be paid out to participants. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information). Unless otherwise provided by the Administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant’s termination of service.

Participants holding restricted stock generally have the right to vote the Shares and to receive any dividends paid, except that dividends or other distributions paid in Shares generally will be subject to the same restrictions as the original award. The Administrator may, in its sole discretion, reduce or waive any vesting criteria or accelerate the time at which any restrictions will lapse or be removed.

Restricted Stock Units

The Administrator may grant restricted stock units which represent a right to receive Shares at a future date as set forth in the participant’s award agreement. Restricted stock units granted under the 2013 Plan are evidenced by a written agreement between the Company and the participant specifying the number of restricted stock units subject to the award, any vesting conditions, and other terms and conditions of the award, consistent with the requirements of the 2013 Plan.

Restricted stock units vest if the performance goals or other vesting criteria the Administrator may establish are achieved. Earned restricted stock units may be settled, in the sole discretion of the Administrator, in cash, Shares, or a combination of both. The Administrator may establish vesting criteria in its discretion, which may be based on continued employment or service, company-wide, departmental, divisional, business unit, or individual goals, applicable federal or state securities laws, or any other basis and which may include the performance goals listed below, and which, depending on the extent they are met, will determine the number of Shares or amount of cash to be paid out to participants. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

 

 

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Table of Contents
  PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN          
  TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

After the grant of a restricted stock unit award, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units as of the date or under the conditions set forth in the award agreement.

Participants holding restricted stock units have no voting rights with respect to the Shares represented by the restricted stock units until the date the underlying Shares are issued, consistent with the terms of the 2013 Plan. The Administrator, in its sole discretion, may provide in the participant’s award agreement that the participant shall be entitled to receive dividend equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the restricted stock units are settled or forfeited, consistent with the terms of the 2013 Plan. Settlement of dividend equivalents may be made in cash, Shares, or a combination thereof as determined by the Administrator. Any additional restricted stock units resulting from dividend equivalents will be subject to the same terms and conditions, including vesting conditions, as the restricted stock units to which they relate. In the event of a dividend or distribution paid in Shares or any other adjustment made upon a change in the capital structure of the Company, appropriate adjustments will be made to a participant’s restricted stock unit award so that it represents the right to receive upon settlement any new, substituted or additional securities or other property (other than normal cash dividends) to which the participant would be entitled by reason of the Shares issuable upon settlement of the award and any new, substituted, or additional securities or other property will be subject to the same vesting conditions as are applicable to the award.

Stock Appreciation Rights

A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of Company Common Stock between the date of grant of the award and the date of its exercise. Each stock appreciation right granted under the 2013 Plan is to be evidenced by a written agreement between the Company and the participant specifying the exercise price and the other terms and conditions of the award, consistent with the requirements of the 2013 Plan. At any time after the date of grant, the Administrator, in its sole discretion, may reduce or waive any vesting criteria and may accelerate the time at which the restrictions will lapse or be removed.

The exercise price per share of each stock appreciation right may not be less than the fair market value of a Share on the date of grant, except in certain situations in which we are assuming or replacing stock appreciation rights granted by another company that we are acquiring. Upon exercise of a stock appreciation right, the holder of the award will be entitled to receive an amount determined by multiplying (i) the difference between the fair market value of a Share on the date of exercise over the exercise price by (ii) the number of exercised Shares. The Company may pay the appreciation in cash, in Shares, or in some combination thereof. The term of a stock appreciation right must be no more than seven years from the date of grant. The terms and conditions relating to the period of post-termination exercise with respect to options described above also apply to stock appreciation rights.

Performance Units and Performance Shares

Performance units and performance shares may also be granted under the 2013 Plan. Each award of performance units or performance shares granted under the 2013 Plan is to be evidenced by a written agreement between the Company and the participant specifying any vesting conditions, the number of performance units or performance shares (as applicable), and other terms and conditions of the award, consistent with the requirements of the 2013 Plan. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria (if any) the Administrator may establish are achieved or the awards otherwise vest (if applicable). Earned performance units and performance shares will be paid, in the sole discretion of the Administrator, in the form of cash, Shares, or in a combination thereof. The Administrator may set vesting criteria based upon continued employment or service, the achievement of specific performance objectives (Company-wide, departmental, divisional, business unit or individuals goals, applicable federal or state securities laws, or any other basis), and which, depending on the extent to which they are met, will determine the number or value of performance units and performance shares to be paid out to participants. Notwithstanding the foregoing, if the Administrator desires that the award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

After the grant of a performance unit or performance share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or performance shares and accelerate the time at which any restrictions will lapse or be removed. Performance units will have an initial value established by the Administrator on or before the date of grant. Each performance share will have an initial value equal to the fair market value of a Share on the grant date. A participant will forfeit any performance shares or performance units that are unearned or unvested as of the date set forth in the award agreement.

Participants holding performance units or performance shares have no voting rights with respect to the Shares represented by the performance units or performance shares until the date the underlying Shares are issued, consistent with the terms of the 2013 Plan. No dividend equivalents may be granted with respect to performance units. However, the Administrator, in its sole discretion, may provide in the participant’s performance share award agreement that the participant will be entitled to receive dividend equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the performance shares are settled or forfeited, consistent with the terms of the 2013 Plan. Settlement of dividend equivalents may be made in cash, Shares, or a combination thereof as determined by the Administrator. Any additional performance shares resulting from dividend equivalents will be subject to the same terms and conditions, including vesting conditions, as the performance shares to which they relate. In the event of a dividend or distribution paid in Shares or any other adjustment made upon a change in the capital structure of the

 

 

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Table of Contents
          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

Company, appropriate adjustments will be made to a participant’s award of performance shares so that it represents the right to receive upon settlement any new, substituted or additional securities or other property (other than normal cash dividends) to which the participant would be entitled by reason of the Shares issuable upon settlement of the award and any new, substituted, or additional securities or other property will be subject to the same vesting conditions as are applicable to the award.

Performance Bonus Awards

Performance bonus awards may also be granted under the 2013 Plan to employees in the form of a cash bonus payable upon the attainment of performance goals or objectives determined by the Administrator. Notwithstanding the foregoing, if the Administrator desires that an award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information). The Administrator has complete discretion to determine the amount of the cash bonus that can be earned under a performance bonus award, provided that no one participant may be granted performance bonus awards that could result in the participant receiving more than $10,000,000 in any one fiscal year of the Company.

Performance Goals

The Administrator (in its discretion) may make performance goals applicable to an award recipient with respect to any award granted in its discretion, including but not limited to one or more of the performance goals listed below. If the Administrator desires that an award of restricted stock, restricted stock units, performance shares, performance units or performance bonuses under the 2013 Plan qualify as “performance-based compensation” under Section 162(m) (discussed below), then the award may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) and may provide for a targeted level or levels of achievement using one or more of the following measures: revenue, gross margin, operating margin, operating income, operating profit or net operating profit, pre-tax profit, earnings (which may include earnings before interest, taxes and depreciation, earnings before taxes and net earnings), net income, cash flow (including operating cash flow or free cash flow), expenses, the market price of the Company’s Common Stock, earnings per share, return on stockholder equity, return on capital, return on assets or net assets, return on equity, return on investment, economic value added, number of customers, stock price, growth in stockholder value relative to the moving average on the S&P 500 Index or another index, market share, contract awards or backlog, overhead or other expense reduction, credit rating, objective customer indicators, new product invention or innovation, attainment of research and development milestones, or improvement in productivity. The performance goals may differ

from participant to participant and from award to award. Any criteria used may be measured (as applicable), in absolute terms, in combination with another performance goal or goals (for example, as a ratio or matrix), in relative terms (including, but not limited to, results for other periods, passage of time or against another company or companies or an index or indices), on a per-Share or per-capita basis, against the performance of the Company as a whole or a segment of the Company (including, but not limited to, any combination of the Company and any subsidiary, division, joint venture, affiliate, or other segment), and on a pre-tax or after-tax basis. Prior to latest date that would meet the requirements under Section 162(m), the Administrator will determine whether any significant elements or items will be included or excluded from the calculation of performance goals with respect to any award recipient. As determined in the discretion of the Administrator by the latest date that would meet the requirements under Section 162(m), achievement of performance goals for a particular award may be calculated in accordance with the Company’s financial statements, prepared in accordance with generally accepted accounting principles (“GAAP”), or on a basis other than GAAP, including as adjusted for certain costs, expenses, gains and losses to provide non-GAAP measures of operating results.

To the extent necessary to comply with the performance-based compensation provisions of Section 162(m), with respect to any award granted subject to one or more of the above-listed performance goals and intended to qualify as “performance-based compensation” under Section 162(m), within the first 25% of the performance period, but in no event more than 90 days following the commencement of any performance period (or such other time as may be required or permitted by Section 162(m)), the Administrator will, in writing: (i) designate one or more participants who are covered employees for Section 162(m) purposes, (ii) select the performance goals applicable to the performance period, (iii) establish the performance goals, and amounts or methods of computation of the awards which may be earned for the performance period, and (iv) specify the relationship between performance goals and the amounts or methods of computation of such awards, as applicable, to be earned by each participant for such performance period. Following the completion of each performance period, the Administrator will certify in writing whether the applicable performance goals have been achieved for such performance period. In determining the amounts earned by a participant, the Administrator may reduce or eliminate (but not increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the performance period. A participant will be eligible to receive payment pursuant to an award for a performance period only if the performance goals for such period are achieved (unless otherwise permitted by Section 162(m) and determined by the Administrator).

 

 

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Table of Contents
  PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN          
  TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

 

Grants to Non-Employee Directors

Our non-employee directors are eligible to receive all awards under the 2013 Plan, except incentive stock options and performance bonus awards, and subject to the limits described below.

Individual Award Limitations (including Non-Employee Directors Award Limitations)

The 2013 Plan contains annual grant limits intended to satisfy Section 162(m). Specifically, subject to the adjustment provisions of the 2013 Plan, the maximum number of Shares or dollars that can be issued to any one employee in any fiscal year pursuant to:

 

 

Award Type   Annual Number
of Shares or
Dollar Value
    Additional Shares
or Dollar Value in
Connection with
New Hire*
    Maximum Number
of Shares and/or
Dollars
 

Stock Options, Stock Appreciation Rights or Combination Thereof

    20,000,000 shares        8,000,000 shares        28,000,000 shares   

Restricted Stock, Restricted Stock Units, Performance Shares or Combination Thereof

    10,000,000 shares        4,000,000 shares        14,000,000 shares   

Performance Units

    $15,000,000        $5,000,000        $20,000,000   

 

* May be granted in the Company’s fiscal year in which the employee’s employment with the Company (or a parent or subsidiary corporation of the Company or an affiliate of the Company) first commences.

 

In addition, the 2013 Plan permits the granting of performance bonus awards, provided that no one employee may be granted performance bonus awards that could result in the employee receiving more than $10,000,000 in any one fiscal year of the Company.

If an award is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a merger of the Company with or into another corporation or entity or a change in control of the Company), the cancelled award will be counted against the Share limitations described above.

The 2013 Plan also provides that no non-employee director may be granted awards that cover more than 60,000 Shares in any one fiscal year of the Company, subject to the adjustment provisions of the 2013 Plan, provided that any awards granted to an individual while he or she was an employee or consultant but not a non-employee director shall not count for purposes of this limitation. This limit was decided in connection with the adoption of the 2013 Plan, and after consultation with the Compensation Committee’s independent compensation consultant, Compensia, Inc. The limit accommodates the Company’s practice of granting non-employee directors Shares with a value of $125,000 per quarter, and also allows us to have the flexibility to make corresponding adjustments to the grant levels in the future in order to maintain the value of the equity compensation paid to non-employee directors should the value of our stock significantly change, and to increase the value of such compensation if we believe it is appropriate or desirable to do so; for instance, to maintain the competitiveness of our compensation program and our ability to attract talented directors.

The Administrator will adjust the Share limitations in this section in the event of any adjustment to the Company’s Shares discussed above (under “Adjustments to Shares Subject to the 2013 Plan”).

Transferability of Awards

Awards granted under the 2013 Plan generally are not transferable, and all rights with respect to an award granted to a participant generally will be available during a participant’s lifetime only to the participant (or the participant’s guardian or legal representative).

Dissolution or Liquidation

In the event of the Company’s proposed dissolution or liquidation, the Administrator will notify each participant in writing as soon as practicable prior to the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised.

Change in Control

The 2013 Plan provides that, in the event of a merger or our “change in control” (as defined in the 2013 Plan), the Administrator will have authority to determine the treatment of outstanding awards, including, without limitation, that awards be assumed or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. The Administrator will not be required to treat all outstanding awards similarly.

If the successor corporation does not assume or substitute outstanding awards, the options and stock appreciation rights will become fully vested and exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to awards with performance-based vesting, unless determined otherwise by the Administrator, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met. In addition, if an option or stock appreciation right is not assumed or substituted in the event of a change in control, the Administrator will notify the participant in writing that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.

If the successor corporation assumes or substitutes outstanding awards held by a non-employee director and the non-employee director’s status as a director of the Company or a director of the successor or acquiring company terminates other than upon voluntary resignation by the non-employee director (unless such resignation is at the request of the acquiror), then any options and stock appreciation rights held by the non-employee director will fully vest and become immediately exercisable. In addition, in

 

 

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Table of Contents
          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

such circumstances, all restrictions on restricted stock and restricted stock units held by such non-employee director will lapse, and, unless otherwise determined by the Administrator, all performance goals or other vesting requirements will be deemed achieved at 100% and all other terms and conditions met.

Termination or Amendment

The 2013 Plan will automatically terminate ten years from the date of its initial adoption by the Board, unless terminated at an earlier time by the Administrator. The Administrator may terminate or amend the 2013 Plan at any time; however, no amendment may be made without stockholder approval except as described under “Administration” above. No termination or amendment may impair the rights of any participant unless mutually agreed otherwise between the participant and the Administrator.

 

 

Summary of U.S. Federal Income Tax Consequences

 

The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the 2013 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which a participant may reside. As a result, tax consequences for any particular participant may vary from this summary based on individual circumstances.

Incentive Stock Options

An optionee recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. Optionees who neither dispose of their Shares within two years following the date the option was granted nor within one year following the exercise of the option normally will recognize a capital gain or loss equal to the difference, if any, between the sale price and the purchase price of the Shares. If an optionee satisfies such holding periods upon a sale of the Shares, the Company will not be entitled to any deduction for federal income tax purposes. If an optionee disposes of Shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the Shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the optionee upon the disqualifying disposition of the Shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

The difference between the option exercise price and the fair market value of the Shares on the exercise date is treated as an adjustment in computing the optionee’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the Shares in a disqualifying disposition, certain basis

adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the Shares and certain tax credits which may arise with respect to optionees subject to the alternative minimum tax.

Nonstatutory Stock Options

Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. An optionee generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income equal to the amount that the fair market value of the Shares on such date exceeds the exercise price. If the optionee is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonstatutory stock option or the sale of the stock acquired pursuant to such grant.

Stock Appreciation Rights

In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the fair market value of any Shares received. Any additional gain or loss recognized upon any later disposition of the Shares would be capital gain or loss.

Restricted Stock Awards

A participant acquiring restricted stock generally will recognize ordinary income equal to the fair market value of the Shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The participant may elect, pursuant to Section 83(b) of the Code, to accelerate the ordinary income tax event to the date of acquisition by filing an election with the Internal Revenue Service no later than 30 days after the date the Shares are acquired. Upon the sale of Shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.

 

 

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Table of Contents
  PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN          
  TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

 

Restricted Stock Unit Awards

There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units will be required to recognize ordinary income in an amount equal to the fair market value of Shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the Administrator or a participant. Any additional gain or loss recognized upon any later disposition of any Shares received would be capital gain or loss.

Performance Shares, Performance Units, and Performance Bonus Awards

A participant generally will recognize no income upon the grant of a performance share, a performance unit, or performance bonus award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any cash or nonrestricted Shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any Shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss.

Section 409A

Section 409A provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2013 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the

compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.

Tax Effect for the Company

The Company generally will be entitled to a tax deduction in connection with an award under the 2013 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of compensation paid to our chief executive officer and other “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1 million. However, we can preserve the deductibility of certain compensation in excess of that amount if the conditions of Section 162(m) are met. These conditions include (among others) stockholder approval of the 2013 Plan and its material terms, setting limits on the number of awards that any individual may receive and for awards other than certain stock options and stock appreciation rights, establishing performance criteria that must be met before the award actually will vest or be paid. The 2013 Plan has been designed to permit (but not require) the Administrator to grant awards that are intended to qualify as performance-based for purposes of satisfying the conditions of Section 162(m).

The foregoing is only a summary of the effects of the U.S. federal income taxation upon participants and the Company with respect to awards under the 2013 Plan. It does not purport to be complete, and does not discuss the impact of employment or other tax requirements, The tax consequences of a participant’s death or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside.

 

 

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Table of Contents
          PROPOSAL 2 — APPROVAL OF THE AMENDED AND RESTATED EQUITY INCENTIVE  PLAN  
          TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

Number of Awards Granted to Employees, Consultants, and Directors

 

 

The number of awards that an employee, director or consultant may receive under the 2013 Plan is in the discretion of the Administrator and therefore cannot be determined in advance, other than with respect to the automatic grants to non-employee directors, which have been approved by the Board based on a fixed value each quarter. The following table sets forth (i) the aggregate number of Shares subject to awards granted under the 2013 Plan during the fiscal year ended January 31, 2015, (ii) the

average per Share exercise price of such options, (iii) the aggregate number of Shares issued pursuant to awards of restricted stock and restricted stock units issued under the 2013 Plan during the fiscal year ended January 31, 2015, and (iv) the dollar value of such Shares or units based on $66.08 per share, the closing price of a Share on the NYSE on April 1, 2015.

 

 

 Name of Individual or Group   Number
of
Options
Granted
(#)
    Average Per
Share
Exercise
Price
($)
    Number of Shares
subject to Restricted
Stock Awards and/or
Restricted Stock Units
(#)
    Dollar Value of Shares
subject to Restricted
Stock Awards and/or
Restricted Stock
Units
($)
 

Marc Benioff
Chairman of the Board and Chief Executive Officer

    1,966,358        $59.34        0        $0   

Keith Block
President and Vice Chairman

    595,866        $59.34        0        $0   

Mark Hawkins
Chief Financial Officer

    413,974        $59.64        30,013        $1,983,259   

Parker Harris
Co-Founder

    333,685        $59.34        24,193        $1,598,673   

Alexandre Dayon
President of Products

    333,685        $59.34        24,193        $1,598,673   

Burke Norton
Chief Legal Officer

    333,685        $59.34        24,193        $1,598,673   

Graham Smith
Executive Vice President

    0        $0.00        0        $0   

All current executive officers as a group

    3,977,253        $59.34        102,592        $6,779,279   

All non-employee directors as a group

    0        $0.00        83,127        $5,493,032   

All other employees (including all current officers who are not executive officers) as a group

    5,393,474        $58.05        10,807,118        $714,134,357   

Vote Required and Board of Directors’ Recommendation

 

The affirmative vote of a majority of the outstanding Shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this proposal to amend and restate the 2013 Equity Incentive Plan to increase the number

of Shares reserved for issuance under such plan by 37 million Shares. Shares that are voted “abstain” are treated as the same as voting against this proposal; broker “non-votes” will have no effect on this proposal.

 

 

The Board of Directors Recommends a Vote FOR the Proposal to Amend and Restate the 2013 Equity Incentive Plan to Increase the Number of Shares Reserved for Issuance Thereunder.

 

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Table of Contents
  PROPOSAL 3 — APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK  PURCHASE          
  PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN        

 

PROPOSAL 3 — APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE THEREUNDER

 

Our 2004 Employee Stock Purchase Plan, as amended (the “ESPP”) is a benefit that we make broadly available to our employees and employees of our participating subsidiary corporations that allows them to purchase shares of Company Common Stock (“Shares”) at a discount. The ESPP helps us attract, motivate and retain highly qualified employees and promotes employee stock ownership, which aligns employees’ interests with those of our stockholders. We are asking stockholders to approve amending the ESPP to increase by 7 million Shares the number of Shares reserved for issuance under the ESPP. The amendment and restatement of the ESPP also removes references to an automatic annual increase to the Shares reserved under the ESPP, because this provision expired after a final automatic increase in February 2013. The Board of Directors has approved the amendment and restatement of the ESPP, subject to stockholder approval at the Annual Meeting. Stockholder approval of the ESPP requires the affirmative vote of a majority of the outstanding Shares present in person or by proxy at the Annual Meeting and entitled to vote on the proposal.

If stockholders approve this proposal, the total number of Shares authorized and reserved for issuance under the ESPP will be 19 million Shares. However, if this proposal is rejected by stockholders, the total number of Shares authorized and reserved

for issuance under the ESPP will remain at 12 million, of which approximately 2.85 million remain available for issuance as of April 1, 2015. Based on our current forecasts and estimated participation rates, if the increase is not approved, it is anticipated that the ESPP will run out of available Shares in approximately December 2015.

We believe that the ESPP is an essential tool that helps us compete for talent in the labor markets in which we operate. We also believe the ESPP is a crucial element in rewarding and encouraging current employees that promotes stock ownership by employees, which aligns their interests with those of our stockholders. Without stockholder approval of this proposal, we believe our ability to attract and retain talent would be hampered, and our recruiting, retention and incentive efforts would become more difficult.

Our executive officers currently are not permitted to participate in the ESPP. However, they may be permitted to participate in the ESPP in the future and therefore they have an interest in this proposal. The remainder of this discussion, when referring to the ESPP, refers to the amended and restated ESPP as if this proposal is approved by our stockholders, unless otherwise specified or the context otherwise references the ESPP prior to amendment and restatement.

 

 

Increasing the Number of Shares Reserved for Issuance under the ESPP

 

Background

The ESPP was initially adopted by the Board in December 2003 and approved by our stockholders in March 2004. In September 2011, the Board amended and restated the ESPP to provide, among other changes, that the ESPP would be implemented through consecutive and overlapping offering periods of approximately 12 months in length, with each offering period divided into two purchase periods of approximately six months each. The ESPP was implemented and made available to employees beginning with the twelve month offering period starting in December 2011.

Under the ESPP, a participant may authorize participant contributions, generally in the form of payroll deductions, which may not exceed 15% of the participant’s eligible compensation during the offering period. Payroll deductions are applied on the last day of a purchase period (the “purchase date”) to purchase a whole number of Shares on behalf of a participant. The purchase price is 85% of the fair market value of a Share on the first day of the offering period or on the purchase date, whichever date results in a lower price.

Reasons for Voting for this Proposal

We believe that the number of Shares remaining available for issuance under the ESPP will not be sufficient for the expected levels of ongoing participation in the ESPP. Therefore, increasing the number of Shares available under the ESPP would be appropriate to help the Company meet the goals of its compensation strategy. The Board believes that the interests of the Company and its stockholders will be advanced if the Company can continue to offer employees the opportunity to acquire or increase their ownership interests in the Company. We currently forecast that adding 7 million Shares to the ESPP will provide enough Shares to last until approximately June 2017, which will help us achieve our near-term goal to attract, retain and motivate qualified employees.

 

 

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Table of Contents
          PROPOSAL 3 — APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK  PURCHASE  
          PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

 

In considering its recommendation to seek stockholder approval for the addition to the ESPP of 7 million Shares, the Board considered the historical number of Shares purchased under the ESPP in the past three fiscal years, which were 3.3 million, 2.9 million, and 3 million, in fiscal years 2015, 2014 and 2013,

respectively. The Board also considered the Company’s expectation that the additional Shares should last until approximately June 2017. In the event that more Shares are required for the ESPP in the future, the prior approval of our stockholders will be required.

 

 

Summary of the ESPP

 

The following paragraphs provide a summary of the principal features of the ESPP and its operation. However, this summary is not a complete description of all of the provisions of the ESPP, and is qualified in its entirety by the specific language of the ESPP. A copy of the ESPP is provided as Appendix B to this proxy statement.

Purpose

The purpose of the ESPP is to advance the interests of the Company and its stockholders by providing the incentive to attract, retain and reward eligible employees and by motivating such employees to contribute to the growth and profitability of the Company and its participating parent and subsidiary corporations, in each case, by providing eligible employees with the opportunity to acquire a proprietary interest in the Company through the purchase of Shares. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (“Section 423”). Under an employee stock purchase plan that qualifies under Section 423, no U.S. taxable income will be recognized by a participant, and no deductions will be allowable to the Company, upon either the grant or the exercise of the purchase rights. U.S. taxable income will not be recognized until there is a sale or other disposition of the Shares acquired under the ESPP or in the event the participant should die while still owning the purchased Shares. The ESPP also authorizes the grant of rights to purchase Shares that do not qualify under Section 423 pursuant to rules, procedures or sub-plans adopted by the Administrator of the ESPP (as described below) to achieve tax, securities law or other compliance objectives in particular locations outside of the United States (the “Non-Section 423 Plan”).

Eligibility to Participate

Most employees of the Company and its participating parent and subsidiary corporations whose customary employment is for at least twenty hours per week and more than five months per calendar year are eligible to participate in the ESPP. Currently, the Administrator has excluded from eligibility those employees who are both (1) “highly compensated employees” as defined under Section 414(q) of the Code and (2) officers or subject to the disclosure requirements of Section 16(a) of the Exchange Act. In addition, an employee is not eligible if he or she would own or hold outstanding options to purchase five percent or more of the total combined voting power or value of all classes of stock of the Company or of any parent or subsidiary corporation of the Company. Also, the Administrator generally has discretion to exclude employees from participating in the ESPP, for the Section 423 portion of the ESPP (the “Section 423 Plan”) on a uniform and nondiscretionary basis or as otherwise permitted by

Section 423, if the employee normally is scheduled to work less than or equal to twenty hours per week or five months per calendar year, has worked for the Company for less than two years, or is an officer or other highly compensated employee. As of April 1, 2015, approximately 16,500 employees were eligible to participate in the ESPP.

Number of Shares and Market Price of Shares Available under the ESPP

A total of 4 million Shares (after adjusting for the Company’s 4-to-1 stock split in 2013) were initially authorized and reserved for issuance under the ESPP. The ESPP provided for an automatic annual increase in the number of shares available under the ESPP on February 1 of each year from 2005 through 2013 equal to the smaller of (i) one percent of the number of Shares issued and outstanding on the immediately preceding January 31, (ii) 4 million Shares (after adjusting for the Company’s 4-to-1 stock split in 2013), or (iii) a lesser number of Shares determined by the Administrator.

The ESPP was suspended and not active from its original approval until it resumed in December 2011. During the period of ESPP suspension, the automatic annual increase to the share reserve also was suspended. This provision came back into effect in December 2011 when the ESPP became active; the automatic annual increase provision expired after a final increase in February 2013. A total of 8 million Shares became available for issuance under the ESPP as a result of the automatic annual increase provisions, resulting in a maximum of 12 million Shares that have been authorized for issuance pursuant to the ESPP. Because approximately 2.85 million Shares remained available for issuance as of April 1, 2015, if stockholders approve the increase of 7 million Shares, approximately 9.85 million Shares would remain available for issuance under the ESPP.

As of April 1, 2015, the closing price of our Common Stock on the NYSE was $66.08 per Share.

Administration

The Board or a committee of the Board administers the ESPP (the Board and any committee of the Board administering the ESPP is referred to as the “Administrator”). Currently, the Compensation Committee acts as Administrator of the ESPP. Subject to the terms of the ESPP, the Administrator has all of the powers and discretion necessary or appropriate to control the operation and supervise the administration of the ESPP. The Administrator’s authority under the ESPP includes, among other powers, interpreting and determining the terms and provisions of the ESPP and purchase rights thereunder. All actions, interpretations and

 

 

2015 Proxy Statement  

 

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Table of Contents
  PROPOSAL 3 — APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK  PURCHASE          
  PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)        

 

decisions of the Administrator are conclusive and binding on all persons and will be given the maximum deference permitted by law.

Enrollment and Contributions

Eligible employees voluntarily elect whether or not to enroll in the ESPP by completing, signing and submitting to the Company an enrollment form in a form and manner and by the deadline set by the Administrator. Each employee who joins the ESPP (a “participant”) is granted a right to purchase Shares on each first day of the applicable offering period (the “offering date”) while participating in the ESPP and, as long as he or she has not withdrawn from participation, reduced his or her contributions down to 0% or terminated employment or eligibility, automatically is re-enrolled in the subsequent offering period. An employee may cancel his or her enrollment in an offering period at any time (subject to ESPP rules).

Participants contribute to the ESPP through payroll deductions or, if permitted by the Administrator, through other means specified by the Administrator. Currently, contributions are permitted only through payroll deductions. Participants generally may contribute a minimum of 2% and up to a maximum of 15% of their eligible compensation through after-tax payroll deductions. After the start of an offering period, a participant can decrease his or her contribution rate to 0% while remaining a participant in the offering period, but if the decrease occurs during the first purchase period in an offering period, then the participant automatically will be deemed to withdraw from the second purchase period in that offering period. From time to time, the Administrator may establish a different maximum permitted contribution percentage, change the definition of eligible compensation, limit the nature or number of contribution rate changes that may be made during an offering period or purchase period, or change the length of the offering and purchase periods (but in no event may such periods exceed 27 months). A participant may increase or decrease his or her contribution percentage by following procedures established by the Administrator.

Offering Period and Purchase Periods

Each offering period is of a duration determined by the Administrator and is comprised of a series of one or more successive purchase intervals, also as determined by the Administrator. Currently, Shares are offered for purchase under the ESPP through a series of successive, overlapping offering periods, each with a maximum duration of approximately twelve months and two consecutive purchase periods. These offering periods begin with the first trading day on or after June 15 and December 15 each year and end on the first trading day on or after the next June 15 and December 15, respectively. Purchase periods within each offering period last approximately six months and each ends with a purchase date on the first trading day on or after June 15 or December 15, as applicable. Should the fair market value of our Shares on any purchase date within an offering period be less than the fair market value per Share on the start date of that offering period, then that offering period automatically terminates immediately after the purchase of Shares on such purchase date, and a new offering period commences on the next trading day following the purchase date.

Purchase of Shares

On the last trading day of each six-month purchase period in an offering period, the Company uses each participant’s payroll deductions or contributions to purchase Shares for the participant. The price of the Shares purchased is determined under a formula established in advance by the Administrator. However, in no event may the per Share purchase price be less than 85% of the lower of (i) the fair market value of a Share on the offering date of the offering period, or (ii) the fair market value of a Share on the purchase date (subject to the adjustment provisions of the ESPP). The fair market value of a Share on any relevant date will be the closing price of our Common Stock as quoted on the NYSE for the date of purchase, and as reported in The Wall Street Journal or such other source as the Administrator deems reliable.

The number of whole Shares a participant may purchase in each purchase period during an offering period is determined by dividing the total amount of payroll deductions withheld from the participant’s eligible compensation during that purchase period by the purchase price, but may not exceed the maximum permitted. The maximum number of Shares any participant may purchase during any purchase period is determined by dividing $12,500 by the fair market value of a Share on the first day of that offering period (subject to the adjustment provisions of the ESPP). In addition, a participant’s right to buy Shares may not accrue at a rate in excess of $25,000 in the fair market value of such Shares (determined as of the offering date) for each calendar year in which the purchase right is outstanding.

The Administrator has discretion to change the maximum number of Shares that may be purchased by one participant or all participants during an offering period or purchase period and, if necessary to avoid securities law filings, achieve tax objectives or meet other Company compliance objectives in particular locations outside the United States, may generally limit the number or value of the Shares available for purchase in a qualified period by participants in specified countries, locations or participating companies.

Termination of Participation

Participation in the ESPP generally terminates when a participating employee’s employment with the Company or its participating parent or subsidiary corporations ceases for any reason, the employee withdraws from the ESPP, or the Company terminates or amends the ESPP such that the employee no longer is eligible to participate. An employee may withdraw his or her participation in the ESPP at any time in accordance with procedures, and prior to the deadline, specified by the Administrator. Upon withdrawal from the ESPP, generally the employee will receive the return of any remaining amounts not used to purchase Shares that have been credited to his or her account, without interest (unless otherwise required by applicable law), and his or her payroll withholdings or contributions under the ESPP will cease.

Non-transferability

Rights to purchase Shares and any other rights and interests under the ESPP may not be assigned, transferred, pledged or otherwise disposed of (other than by will or the laws of descent

 

 

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  2015 Proxy Statement

 


Table of Contents
          PROPOSAL 3 — APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK  PURCHASE  
          PLAN TO INCREASE SHARES RESERVED FOR ISSUANCE UNDER SUCH PLAN (CONTINUED)

 

and distribution). A right to purchase shares under the ESPP is exercisable during the lifetime of a participant only by the participant.

Adjustments; Certain Transactions

Subje