The inside story of how Salesforce went from gifting ultra-luxury cars to mass layoffs and a 'showdown' between co-CEOs (2023)

In late 2021, it looked as if Salesforce had reached what Marc Benioff might call "business nirvana."

Covid had launched Salesforce into the stratosphere as demand for its cloud-based software boomed. Its stock was at record levels and Benioff was projecting that annual revenue would double to $50 billion in five years. He boasted that Salesforce had become the fastest-growing software company of all time.

That August, Salesforce brought dozens of executives to Hawaii, an annual tradition where Benioff was known to greet executives in a Hawaiian shirt and flip flops and hand out $10,000 Cartier watches. Among those in attendance was Stewart Butterfield, who had just handed over Slack for a staggering $27.7 billion.

With success like this, it looked as if Benioff could step back. Benioff tapped his lieutenant, Bret Taylor, as co-CEO in November. After Taylor's promotion, he joined the occasional all-hands meeting from his home office in Hawaii, where 12 ukuleles made up his video call background. He cut in with the occasional "Benioff riff," as his monologues about corporate values were known, perhaps name-dropping his friends in Metallica or how he'd meditated with the Dalai Lama.

Then came the downturn, and everything changed. Benioff's co-CEO, Taylor, resigned after a "showdown," kicking off an executive exodus. Salesforce missed internal sales goals, according to documents viewed by Insider. Activist investors entered the picture, pushing drastic cost-cutting measures. In January, Salesforce began layoffs of 10% of its workforce.

Now, Benioff appears to be righting the ship as far as investors are concerned — averting a proxy battle, and making progress on improving its profit margins by posting 22.5% for the most recent year and a goal of 27% this year. Asked about his stewardship of Salesforce during this rocky period, he gave himself high marks.

"If it hasn't been a master class in the last six months on how to manage for all stakeholders, then I've made a mistake, because that's what I've been trying to do," Benioff said in the second of two lengthy interviews with Insider. "This is how to do it."

But did he bail on "Ohana" to do it?

Interviews with dozens of current and recent Salesforce executives and employees offered an intimate lens into this difficult 18-month period and what it has meant for Salesforce and its larger-than-life CEO.

For Benioff, who could once use phrases like "business nirvana" without eliciting too much push-back, the downturn brought certain criticisms to center stage.

For more than 20 years, Benioff has grown Salesforce from startup to global software giant, all while minting himself as a celebrity-like ambassador of "compassionate capitalism" — as he titled his 2004 book. The Salesforce promise was that it was possible to run a hugely profitable business while also "giving back" to the community with its philanthropy. Taking Ohana, the Hawaiian word for family, as his mantra, Benioff fashioned himself as the benevolent CEO who treated employees and customers "the way we would treat our closest relatives," as he wrote in his 2019 memoir "Trailblazer."

These days, there are fewer references to "Ohana" and "compassionate capitalism," and more to "performance-based culture." Within Salesforce, Benioff riffs are at times met with backlash from an angry workforce.

"Should we consider retiring the phrase 'Ohana?'" one employee asked in an internal Slack channel viewed by Insider when Benioff announced layoff plans in January. "You're not going to fire your family during times of need," a former Salesforce executive told Insider.

To Benioff, who's 58, nothing has changed at Salesforce, regardless of what some employees say.

"I don't think they understand Ohana," Benioff told Insider. "We are a performance-based culture. We always have been. We always will be... My job is to be a high performance software executive."

Capitalism done differently

Benioff often says he got the idea for Salesforce as an epiphany while swimming with dolphins in Hawaii.

It was 1996, and Benioff was a star in software sales at Oracle and the protégé of its formidable chief executive Larry Ellison. Though very different at first glance, Benioff and Ellison had a close relationship. Benioff, who was known to wear Hawaiian shirts to work, was a natural marketer and showman. Ellison, a minimalist, had a reputation for being hard-driving and brash. "It's not enough that we win; all others must lose," he once said, borrowing from Genghis Khan.

After a decade at Oracle, Benioff was burnt out and seeking purpose. It was Ellison who urged him to "take a look around and pull yourself back together," as Benioff would write in his memoir.

Benioff rented a hut on the Big Island of Hawaii, where the initial idea of an internet business came to him. Following in the footsteps of his idol Steve Jobs, he'd later tell a Salesforce executive, he next headed to India. A meeting with the "hugging saint," Hindu spiritual leader Mata Amritanandamayi, led him to "compassionate capitalism" — that a tech company could make piles of money while also being a force for good in the world.

Salesforce launched in 1999, and debuted on the New York Stock Exchange in 2004. Ellison invested $2 million. It was one of the first companies to sell software entirely in the cloud: Its products, which helped salespeople manage customer relationships, were accessible anytime, anywhere. And it paved the way for the software-as-a-service, or SaaS, industry, which today is worth $3 trillion globally.

The product was innovative, but Benioff proved equally successful at selling himself.

One showcase for Benioff is Dreamforce, a sort of corporate version of Burning Man that Salesforce puts on every year near its San Francisco headquarters. It's known internally as "the Marc show," and Benioff often sports custom-designed Christian Louboutin sneakers, adorned with Salesforce-themed motifs, for the occasion. One executive told Insider the annual event costs the company around $100 million. A Salesforce spokesperson said a significant portion of the costs associated with Dreamforce are offset by sponsorships and registration costs.

While Benioff borrowed from the Ellison playbook of growing rapidly through acquisitions, in many ways he built a culture at Salesforce that was in contrast to the cutthroat one he left behind at Oracle.

Like so many tech CEOs of the era, Benioff embraced the idea of himself and his colleagues as world-changers.

"Look, we have to be the example of stakeholder capitalism," Benioff told Insider. "We're holding that flag for the whole world."

"I can't tell you how many large company CEOs have told me, 'As you go through these challenges and all these different things that are going on — and we've been through every possible challenge — don't forget, you are holding the flag for stakeholder capitalism. You have no choice but to be successful."

And who are these stakeholders? Pretty much everyone, according to Benioff.

"Yes, our investors are our stakeholders. Our employees, our customers, the homeless in San Francisco we've advocated for. Our public schools are a stakeholder. Our planet, and journalists — you're key stakeholders also," he told Insider. "And I have to manage for all of them. And that's what it means to be a modern CEO today."

As Salesforce prospered, the two sides of Benioff— the do-gooder who wants to run Salesforce like a family and the businessman who touts himself as the highest-performing software executive — were thought to co-exist, and Benioff turned this into a brand.

Succession

Salesforce has always been inextricable from its larger-than-life CEO. As the company grew, Benioff found himself fending off questions about his succession plan.

In fact, Taylor's promotion to co-CEO in November 2021 came by way of a previous failed succession attempt.

The first co-CEO to serve alongside Benioff was Keith Block, a former Oracle executive who joined Salesforce in 2013 and got the promotion in the summer of 2018. According to the plan, they would serve together for 18 months, at which point Benioff would step down as CEO and Block would take over, a source close to Benioff said.

But Benioff had trouble letting go, insiders said. Eventually, he asked that several executives continue to report to him rather than Block. This put Block in an impossible situation and his authority was constantly being undermined, insiders said.

The last straw came in 2019, a person familiar with the situation said. Without consulting Block, Benioff named a new chief operating officer — Taylor. A mild-mannered entrepreneur best known as the co-creator of Google Maps, Taylor had joined Salesforce in 2016 when it acquired his company, the Google Docs competitor Quip.

In late February 2020, just weeks before Covid shuttered Salesforce's global offices, Block chose to resign rather than take over, a source close to Benioff said. Within hours, Block's bio had been deleted from the leadership page of Salesforce's website, Insider reported at the time. (Benioff has said that Block "retired." Block didn't respond to requests for comment.)

Cut to November 2021. Sales were booming, stock prices had reached all-time highs, and Salesforce was on a hiring spree, ultimately adding more than 25,000 employees between October 2020 and January 2023. The company's future had never looked brighter, and Benioff was saying he could use some help at the top of the company. Salesforce picked Taylor.

If the company's choice to stick to the co-CEO model came as a surprise, the choice of Taylor did not. To the rank-and-file employee, as COO, Taylor appeared to have already taken over day-to-day operations.

After Taylor's promotion, Benioff only occasionally joined the weekly all-hands meetings the company implemented in the pandemic, calling in from his sprawling compound in Hawaii, to which a jet used by Benioff makes frequent trips to San Francisco, according to a flight-track website reviewed by Insider.

Benioff would speak about wanting to "empower" Taylor and the rest of his reports, and gave updates on the company's latest corporate giving endeavors such as donations to San Francisco schools, the move to make Salesforce a net-zero company, and his plan to plant 1 trillion trees.

"Marc was definitely more of a spokesperson — the 'rah-rah' CEO rather than the hands-on CEO," a person present for the meetings said.

Within a year, Taylor would be throwing in the towel.

Trouble at the top

After seeing record growth in 2020 and 2021, by early 2022 the ground was starting to shift beneath Benioff's feet. Instead of the soaring growth that Benioff had forecast, sales were slowing down.

There were mutterings that Salesforce was buying its growth by acquiring innovative new products rather than building them in-house. Since 2006, Salesforce has acquired 60 companies at increasingly high prices, including ExactTarget in 2013 for $2.5 billion, MuleSoft in 2018 for $6.5 billion, Tableau for $15.7 billion in 2019, and finally Slack for $27.7 billion in 2021.

Insiders said Benioff had grown too distracted by the prospect of introducing new product features and enhancements — the stuff of big public announcements at events like Dreamforce. But what was really needed was the unsexy, technical work of making sure all of Salesforce's products worked together seamlessly on the back end. (Salesforce disputes this, and cited its new Data Cloud as an example of in-house innovation.)

Competing products seemed to improve at a faster clip than the products Salesforce had acquired, insiders said, and several, like Tableau, were seen as stagnating under Salesforce.

Then there was Slack—Salesforce's biggest-ever deal.

It was Taylor who largely brokered the Slack acquisition. Benioff only had one meeting, via Zoom, with Butterfield during the negotiation process, a former Salesforce executive familiar with the negotiations told Insider.

Benioff and Taylor both pushed to make the Slack acquisition look good. At the 2021 Dreamforce, for example, "everything was Slack," one former executive said. Executives who presented during the Dreamforce keynote were asked to incorporate Slack into their talks, whether or not it was a natural fit. "The goal was to show not only integration but that we were already innovating with Slack — which was not happening at the speed Marc wanted," the person said.

Wall Street, along with some executives, saw the $27.7 billion Slack acquisition as too expensive and an unnecessary answer to Microsoft's Teams chat app, which was gaining popularity amid the pandemic shift to remote work.

"Slack was just silly," one former executive said. "We did it because Microsoft had Teams, but it didn't align with our culture." Another former executive said: "Why buy Slack if you're not able to improve it or roll it into the product?"

A Salesforce spokesperson said the company has significantly innovated upon Slack, including introducing 90 different innovations in 2022.

But even as Taylor took the lead on certain projects, there was a general sense that Benioff had not loosened his grip on the company even after Taylor was elevated to co-CEO.

According to people close to the executives,Taylor pushed for cutting costs to increase profitability while Benioff wanted to see revenue growth. A Salesforce spokesperson disagreed, saying the company's strategy has always been finding the right mix of growth and profitability. (Taylor did not respond to multiple attempts to contact him.)

Salesforce's success had allowed for costs to run wild.

For many years, Salesforce bought six-figure cars for executives, like an Aston Martin for Chief Marketing Officer Sarah Franklin, and an electric BMW for Alex Dayon, according to insiders. Regulatory filings show Salesforce bought former co-CEO Keith Block a $211,703 automobile and a $86,423 watch in 2019, and a $271,439 automobile for co-founder Parker Harris in 2017.

By May, Salesforce shares had slumped 38 percent since the start of 2022, as its customers pulled back spending on cloud software amid a weakening economy, prompting the company to slow hiring and cancel some of its upcoming offsites. Wall Street was now looking at Salesforce, one of the biggest SaaS companies in the world, as a barometer for how hard a post-peak pandemic downturn would hit the entire industry.

And things would only get worse.

Vultures are circling

By summer 2022, the other shoe had dropped. That June, Salesforce stock dipped to $155, and in August it adjusted down its revenue and profit projections.

The vultures began to circle over Benioff.

Activist investor Starboard Value quietly approached Salesforce and pushed executives to take more aggressive cost-cutting measures, a person familiar with the meetings told Insider.

Echoing some of Taylor's points, investors argued it was time for Salesforce to tighten its belt and, soon after, it would make cuts to its largest expenditure, Salesforce's workforce — Benioff's Ohana.

Salesforce responded that September by announcing a new profitability target, which executives marketed to investors as an ambitious move: A new target of 25% adjusted operating margins, a marker of a company's profitability, by fiscal 2026.

But Starboard didn't think it was ambitious enough, arguing that Salesforce's growth was coming at the cost of profit margins, and that its profits lagged significantly behind its peers.

That fall, the row broke out into public view.

In October, Starboard disclosed its $400 million stake in the company (per SEC filings from February 2023).

The hedge fund proposed that Salesforce push for more than 30% margins, which according to its analysis would put Salesforce in line with other software giants like Oracle and Microsoft.

In the coming months, four more activist investors — including the world's most-feared hedge fund Elliott Management — would disclose significant stakes in Salesforce.

Benioff sat at the helm of an established company. These activist investors were saying that it was time to start acting like it.

A 'showdown' with Taylor

While it might have appeared to the rank-and-file that Benioff was taking it easy, behind the scenes Benioff had never actually let go of the reins, former executives said. He and Taylor were equals, but only on paper.

"Benioff didn't want to relinquish control," one former executive said.

All but three of Salesforce's top 13 executives reported to Taylor, according to an organization chart viewed by Insider. But Benioff was still conducting performance reviews.

He also still assumed control at meetings with Salesforce's top people, where he was known to pit people against one another in order to see the big picture more clearly. If sales were down, he might invite executives from product, sales, and strategy to argue who was to blame, former executives said.

"Every employee at Salesforce reported to Marc, even if they reported to him through Bret," a Salesforce spokesperson said. "Marc was a CEO. It's not exactly uncommon to get to the best outcomes through healthy debate."

Taylor saw the writing on the wall. With so many activist investors getting involved, Salesforce would have to cut costs significantly and lay off thousands of people, and it would be hard for the company to innovate for a while. Would he go through all of that just to maintain the illusion of being in charge?

"You could feel and sense the frustration level of not being able to change the place," a former Salesforce executive said of Taylor's final months at the company. "And he was the top dog. If you can't feel like you're changing the place as the top dog, it's gotta be frustrating right?"

So, Taylor made an "abrupt" play to become Salesforce's sole CEO, according to a former executive familiar with the matter.

"It was a showdown," the person said, with Benioff saying that Taylor wasn't ready.

Taylor said he was done.

In an interview, Benioff didn't directly address this version of events, saying "the past is the past." He did say that Taylor's departure came as a surprise.

"Nobody expected that, including me. It was a disappointment. That's all there is to it. And then based on that, we had to pivot," he said.

Benioff publicly shared the news during an earnings call on Nov. 30, exactly a year to the day that he named Taylor co-CEO. "We have to let him be free, let him go, and I understand, but I don't like it," Benioff said on the call, seemingly going off-script. "And Bret, you know that you're always going to be our brother. We love you deeply, you have a home here, we're gonna try to get you back somehow. Don't think you're gonna somehow get out of this alive because you're not."

Other executives followed. Five top executives from Salesforce and its subsidiaries, most notably Slack CEO Stewart Butterfield and Tableau CEO Mark Nelson, announced their departure just days after Taylor. Benioff's closest confidants at Salesforce now are Alex Dayon, chairman of Salesforce's advisory board, and Salesforce President and COO Brian Milham, one former long-time executive said.

Taylor formally left Salesforce in January 2023. Benioff was once again on his own.

No-hana

As activist investors kept up the pressure, a backlash against Benioff's Ohana culture was brewing.

Salespeople lamented over micromanagement and increasing pressures to perform. In October, Salesforce executed a small round of layoffs, citing performance reasons.

Benioff had been the rare CEO during the pandemic who actively railed against return-to-office mandates. Now, Salesforce was quietly informing some of its salespeople that they should resume in-person work a few days a week.

On a Friday night in mid-December, Benioff posed a question to an all-company Slack channel. "How do we increase the productivity of our employees at Salesforce?" he asked.

New employees hired during the pandemic and younger employees, he asserted, were not as productive. "Is this a reflection of our office policy?"

Between the layoffs and the return-to office mandates, a popular Salesforce Slack channel called "the-airing-of-grievances," was rife with internal chatter of an eroding "Ohana" — or maybe one that had always been a facade, some speculated.

On January 4, Salesforce announced a plan to lay off 10% of its workforce, per an SEC filing.

The next day, Benioff showed up late to an all-hands meeting and rambled for nearly two hours. Such speeches would have once been cheerfully called a Benioff riff. One employee instead described it as a "filibuster."

"Is Marc filibustering 47,600+ employees right now by talking in circles and avoiding the topic at hand," the employee wrote in an internal Slack message viewed by Insider at the time.

When asked about the infamous all-hands call, Benioff was resolute that he'd done his best in a difficult situation.

"I'm opening my heart up and telling them exactly how I feel," Benioff said of his approach to the call. "I think that some companies in our industry have taken another strategy. Microsoft, when they announced their layoffs, had Sting playing at Davos that night. There was no all-hands call."

The meeting was a major blow to both morale, and it fed a growing backlash against Benioff's beloved "Ohana" mantra.

Annoyance over Benioff's use of "Ohana" wasn't necessarily new.

Back in 2019, Salesforce diversity and PR leaders had approached Benioff about the company's co-opting of Hawaiian terms, according to a person familiar with the meeting. Some changes followed. An annual employee bonus, for example, was thereafter referred to as a "gratitude," rather than "Kokua," the Hawaiian word for "to help." (Salesforce just cut its gratitude bonus to 70%).

But Benioff refused to let go of "Ohana."

Benioff was "dead set" on keeping the term, according to another person familiar with the discussions.

But then, events overtook him.

Once layoffs started being announced at a regular clip early this year, at least some references to "Ohana" have been replaced by talk of Salesforce's "performance-based culture."

"The employees more than the execs took that at face value," one former executive said of the company's commitment to "Ohana."

A 'New Day' at Salesforce

"I use the Japanese principle of shoshin, beginner's mind," Benioff told Insider in a phone interview in March.

Benioff was in a euphoric mood after delivering a far better than expected fourth-quarter earnings report, and was spinning the mounting pressure campaign from a group of activist investors as a learning opportunity. "It's been fantastic," he had told analysts and investors.

As Benioff reveled in Salesforce's progress in meeting Wall Street's demands — it was a "New Day," the company said — the first congratulatory text had come from his old mentor.

"Huge call out to my mentor Larry Ellison, who has spent a lot of time with me giving me the Oracle playbook and I'm very grateful to him," Benioff had told investors on the company's most recent earnings call, answering a question about improving Salesforce's profitability. "He was the first person who texted me after the earnings came out today."

Benioff once listed the Ellison playbook in his book, Behind the Cloud. The last point on the list reads, "Don't give others your power. Ever."

For Salesforce, this particular earnings report had been much anticipated by Wall Street and the business press. The whole world knew Benioff was under a significant amount of pressure. Elliott Management later released a statement that said Salesforce still had a significant amount of work ahead of it, but for now, the company — and Benioff — had pulled through.

To some employees, though, it felt as if Salesforce had decided to put profitability before family, and that the culture of Salesforce has started to resemble the tough environment at Oracle. After two decades of rejecting elements of the Ellison school of management, at least as it related to company culture, had Benioff become much more like his former mentor?

"We all have to be our own people," said Benioff when asked about the comparisons to Ellison. "I'm 58 years old. I've really come to the point in my life where I kind of say, 'This is just who I am.'"

Benioff said he regularly checks the "the-airing-of-grievances" Slack channel and is aware of the complaints. Many, he said, appear to be coming from employees who arrived at Salesforce through acquisitions and may not be attuned to the company culture.

Benioff also suggested that "Business Insider headlines" about his Salesforce employees' criticisms were to blame for employee morale. "I'm not kidding you," he said.

As for that other long-standing gripe — that Salesforce did not have a clear succession plan — Benioff still insists the co-CEO model is a good one.

"The co-CEO model was working," Benioff said. "I love that model."

Recently, some Salesforce executives have noticed a familiar face at meetings: George Hu, a former Salesforce chief operating officer who recently left the same position at Twilio, has been hired by Benioff as an adviser.

People close to Benioff doubt if he can ever really let go.

"Salesforce is Marc and Marc is Salesforce," one former longtime Salesforce executive told Insider. "Marc will never not run the company. I don't know if there could ever be another."

Asked whether he can ever let go, Benioff said: "I don't know. I'm still running the company. I guess I'll tell you if that happens."

Do you have insight to share? Contact Ashley Stewart via email (astewart@insider.com) or send a secure message from a nonwork device via Signal (+1-425-344-8242). Reach out to Ellen Thomas via email (ethomas@insider.com) or via Signal (+1-646-847-9416).