The love affair between Salesforce.com (CRM) and Hawaii is pretty well documented. Its sales meetings there are the stuff of legend — CNNMoney noted a custom-built Tiffany’s store at one shindig, along with an appearance by Miss Hawaii – and The Wall Street Journal’s Pui-Wing Tam recently chronicled CEO Marc Benioff’s decade-long efforts to build a five-acre, 7,600-square-foot, $20-million-plus “village-like second home” on the archipelago’s biggest island.
But the island paradise theme extends into the company’s compensation arrangements as well. Until recently, Salesforce boasted a “Mahalo bonus plan,” dating to 2009 and named after the Hawaiian word for gratitude, that benefited employees from executive to peon. (Well, we aren’t sure exactly how far down the pecking order the bonuses went, but they seem to go pretty far).
Now, however, the Mahalo plan is being replaced by the “Kokua bonus plan,” filed with an 8-K on Friday and named after a Hawaiian term for help or assistance. The big change seems to be dividing up what used to be a single “Mahalo Bonus Pool” into three separate pools, one for those at the “director” level and below, one for vice presidents and above, and the last for the real bigwigs, Section 16 officers.
There are some features that suggest this move isn’t designed simply to line the to brass’s pockets — the bigwigs’ pool is capped at 100% of each year’s target amount, while the little guys’ can grow an additional 10%; and money from the upper two pools can be shifted into the lowest one, but not vice versa. Still, all of this is a little squishy, after all: Management gets to set those initial thresholds, for one thing. (For another, the term “discretion” appears a dozen times in the new plan, up from eight in the old.)
The new plan also appears to eliminate the company’s deadline for paying bonuses (previously the middle of the third month after the end of a fiscal year) and it dramatically expands the performance measures used to fund the bonus pools, replacing “bookings,” operating income and revenue growth with “bookings, customer attrition, non-GAAP operating income, revenue, and operating cash flow…” There’s also this new line, which is pretty nice for anyone who benefits (but notice that reference to discretion again):
“Notwithstanding anything herein to the contrary … during a Bonus Period, the Administrator may, in its discretion, choose to pay all or a portion of a then-current employee’s Target Bonus for the Bonus Period without regard to whether the Bonus Pool has been funded or Company Performance or Individual Performance Objectives have been achieved.”
The “Administrator” referred to there, and throughout the plan, refers to the compensation committee for the top dogs, and some combination of the CEO, chief financial officer and executive committee for everyone else. But the upshot of the excerpt is that, the details of the plan are all very nice, but in the end, management and the board can pretty much do what they want.
Whether the changes leave employees saying “mahalo” remains to be seen. Meantime, Salesforce’s shares lost 9% over the last 12 months, trailing the S&P 500 significantly, and the stock’s total return trailed the software application industry by almost 19 points in 2011 (though it’s doing much better so far this year). All in all, we’d say shareholders could use a little kokua.
Image source: Hawaiian sunset via Shutterstock.com
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