Author: Brittany Adams| UC Berkeley School of Law | J.D. Candidate 2020 | Posted: February 12th, 2019 | Download PDF
After the midterm election, Marc Benioff, the co-CEO of Salesforce, celebrated the passage of San Francisco’s Proposition C on Twitter: “Prop C’s victory means the homeless will have a home & the help they truly need! Let the city come together in Love for those who need it most! . . .”[1] Proposition C, which passed with approximately 60% of the vote, will provide the city with up to $300 million in additional funds to fight the city’s homelessness crisis by raising the gross receipts tax by an average of 0.5 percent for San Francisco companies that earn more than $50 million in revenue a year.[2] As a result, Salesforce, which is headquartered in San Francisco, will pay approximately $10-11 million more in taxes annually.[3]
From the lens of Friedman’s shareholder theory, which envisions a company’s sole purpose as increasing profits for shareholders, it is perplexing why Salesforce’s co-CEO would celebrate a multimillion-dollar tax increase for his company. However, Benioff doesn’t see things from Friedman’s point of view. Benioff is a champion of Freeman’s stakeholder theory, which focuses on delivering long-term value to a company’s multiple stakeholders, including shareholders, employees, the environment, and the community.
Benioff’s public support for Proposition C reflects a desire to serve one stakeholder in particular – the community of San Francisco – where Salesforce is headquartered and where 7,500 homeless persons reside.[4] On this point, Benioff tweeted on November 6: “Unfortunately, some CEOs are myopic and believe that they have a fiduciary duty to shareholders alone, with little responsibility to the communities in which they do business. Business is the Greatest Platform For Change. Homelessness is Everyone’s Business! Vote Yes on C!”[5] On October 29, Salesforce also tweeted support for its San Francisco community: “As the largest private employer in our hometown of San Francisco, Salesforce cares about creating equal opportunities for all. That is why we support #YESonC and help address the homelessness crisis.”[6]
However, Salesforce’s support for Proposition C is focused not only on the proposition’s purported benefits for its community, but for its shareholders too. In an interview with journalist Heather Knight, Benioff explained that the city’s “‘extremely embarrassing’” homelessness problem negatively impacts Salesforce’s business: “‘The homelessness problem is becoming bad for our business, and that is why we are getting involved and taking action.’”[7] For example, attendees of Salesforce’s Dreamforce conference held this September in San Francisco, emailed Benioff “to complain about the homeless problem and filthy streets.”[8] Thus, Salesforce’s support for Prop. C is grounded in a multi-stakeholder approach to serve not only the community, but shareholders too, despite the anticipated $10-11 million tax increase. Benioff and Salesforce provided significant support to the successful Proposition C campaign. Benioff donated $2 million, while Salesforce donated $5 million.[9]
Yet, many tech leaders in San Francisco who also want to help improve the city’s homelessness problem, oppose Proposition C. Jack Dorsey, the CEO of both Twitter and Square, and Marc Pincus, the founder of Zynga, shared reasons why in Twitter debates with Benioff.[10] For example, Dorsey opposes Prop. C because it requires companies working in the financial transactions space, such as Square, to pay more taxes than other companies like Salesforce.[11] Dorsey explained that Proposition C would force Square to pay an estimated $20 million more in taxes than Square will pay in 2019.[12] This steep tax increase could have a significant impact on Square’s business, and its shareholder profits in particular. In a statement opposing Prop. C, San Francisco Mayor London Breed indirectly addressed this point. She described “the risk that concerns me most: the inevitable flight of headquarter companies – and jobs – from San Francisco to other cities in the Bay Area, or other states.”[13] Mayor Breed also opposes the proposition due to insufficient auditing of the city’s current funding to fight homelessness.[14]
Will companies pack up and leave singing “I Left My Heart in San Francisco”? Or will they stay and pay the tax? Or will a lawsuit filed by opponents halt the proposition’s implementation?[15] In the Proposition C debate, politicians and tech leaders alike are considering what normative role tech companies should play in addressing homelessness in their local communities, while also balancing a duty to shareholders, and what it means, more broadly, to be a sustainable company.
[1] Marc Benioff, @Benioff Twitter account (November 6, 2018), available at https://twitter.com/Benioff.
[2] Jillian D’Onfro, The San Francisco Homeless Tax That Pitted Tech Billionaires Against Each Other Passes, NBC (November 7, 2018), available at https://www.cnbc.com/2018/11/07/san-francisco-proposition-c-homeless-tax-passes.html.
[3] Nick Bastone, Salesforce CEO Marc Benioff Got Into a Twitter Beef with Another Exec Over a Controversial Measure Tackling San Francisco’s Homelessness Crisis, Business Insider (November 5, 2018), available at https://www.businessinsider.com/salesforce-ceo-marc-benioff-zynga-mark-pincus-san-francisco-proposition-c-2018-11?r=UK&IR=T.
[4] Patricia Yacob, San Francisco’s Homeless Proposition Divides Leaders, The Atlantic (November 5, 2018), available at https://www.theatlantic.com/politics/archive/2018/11/san-franciscos-homeless-proposition-divides-leaders/574861/.
[5] Benioff, supra note 1.
[6] Salesforce, @salesforce Twitter account (November 6, 2018), available at https://twitter.com/salesforce.
[7] Heather Knight, Benioff Says SF’s ‘Extremely Embarrassing’ Homeless Problem Demands Business Aid, SF Chronicle (November 2, 2018), available at https://www.sfchronicle.com/bayarea/heatherknight/article/Benioff-says-SF-s-extremely-embarrassing-13356567.php.
[8] Id.
[9] Kate Conger, San Francisco Approves Business Tax to Fund Homeless Services, New York Times (November 7, 2018), available at https://www.nytimes.com/2018/11/07/technology/san-francisco-business-tax-homeless.html.
[10] D’Onfro, supra note 2.
[11] Yacob, supra note 4.
[12] Id.
[13] London Breed, Statement from Mayor London Breed Opposing Proposition, Medium, October 5, 2018, available at https://medium.com/@LondonBreed/statement-from-mayor-london-breed-opposing-proposition-c-cb0d17cbb730.
[14] Id.
[15] Conger, supra note 9.