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Salesforce.com (NYSE:CRM) operates an online customer and business collaboration technology platform. It may be one of the stock market's most interesting companies but it is also one of the most divisive stocks among market watchers. Stock market bulls focus on the secular growth potential as well as their solid growth. Bears focus on the pricey valuations. The stock trades at a trailing P/E of 302.2, a forward P/E of 75.9 and a price/sales of 11.5 despite skimpy profit margins of 3.89%.

Despite these concerns of bulls and bears, there is one factor that they can both agree on. Salesforce.com's directors and executives have large stock ownership that should ensure their interests are aligned with those of shareholders.

IMPRESSIVE MANAGEMENT STOCK OWNERSHIP

As of December 31, 2010, current directors and executive officers beneficially owned 9.5% of the company's total common shares. Shareholder ownership is one of the most important ways to ensure that management interests are aligned with those of shareholders. But it is insufficient to say that management owns shares. The actual size of the management stock ownership is also important because it allows investors to understand management's relative incentive structure. If a manager owns $1,000,000 of stock, but earns $10,000,000 in salary, the manager's stock ownership is meaningful in absolute terms, but relative to the salary, the manager is more motivated to keep its job rather than increase stock price. While job security and stock price performance are positively related, it is an imperfect relationship. As such, the 9.5% ownership stake among directors and officers is a great catalyst.

STRONG INCENTIVE TO SUCCEED

Salesforce.com's upper level managers have a strong incentive to succeed because of their large potential change of control payments. These terms are vital because they inspire management to aggressively grow the company and possibly attract the attention of other industry players. While this may already seem implicit to their jobs, it's an important incentive to properly align managerial interests with those of shareholders. Without meaningful change of control payments, management may consciously or subconsciously hinder sales.

2010 Compensation Change in Control Payment
Marc Benioff $20,815,290 $45,542,084
Graham Smith $4,812,264 $15,180,648
Parker Harris $4,759,764 $11,661,018
George Hu $4,759,764 $10,993,068
Frank van Veenendaal $4,760,264 $11,209,161

SUMMARY

There are a lot of different factors that go into determining whether a stock is a good value, but lost in the debate over Salesforce.com's prospects is the fact that CRM's management is motivated to benefit shareholders. While this incentive is not enough to ensure strong corporate prospects, it is a catalyst that investors should consider. Management's shareholder friendly incentives are a good thing and represent a positive potential catalyst that bulls and bears can agree about.

Source: Salesforce.com Bulls and Bears Can Agree About This Catalyst