Edgar Filing: SALESFORCE COM INC

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Definitive Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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Securities Exchange Act of 1934

(Amendment No. )

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salesforce.com, inc.

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LOGO

salesforce.com, inc.

The Landmark @ One Market

Suite 300

San Francisco, California 94105

May 4, 2011

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of salesforce.com, inc. on Thursday, June 9, 2011 at 2:00 p.m., local time, at the St. Regis Hotel, 125 3rd Street, San Francisco, California 94103.

Details regarding admission to the Annual Meeting and the business to be conducted are described in the accompanying Notice of Annual Meeting and Proxy Statement. Included with the Proxy Statement is a copy of our 2011 Annual Report.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. You may vote by mailing a completed proxy card, by telephone, or over the Internet. Your vote by proxy will ensure your representation at the Annual Meeting regardless of whether or not you attend in person.

Thank you for your ongoing support of salesforce.com. We look forward to seeing you at our Annual Meeting.

Aloha,

LOGO

Marc Benioff

Chairman of the Board of Directors and

Chief Executive Officer

LOGO

salesforce.com, inc.

The Landmark @ One Market

Suite 300

San Francisco, California 94105

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS To be Held Thursday, June 9, 2011

TO THE STOCKHOLDERS OF SALESFORCE.COM, INC.:

NOTICE IS HEREBY GIVEN that the 2011 Annual Meeting of Stockholders of salesforce.com, inc., a Delaware corporation, will be held on Thursday, June 9, 2011 at 2:00 p.m., local time, at the St. Regis Hotel, 125 3rd Street, San Francisco, California 94103, for the following purposes:

To elect three Class I directors, Marc Benioff, Craig Conway and Alan Hassenfeld, to serve for a term of three years and until their successors are duly elected and qualified, subject to earlier resignation or removal;

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2012;

To hold an advisory vote on executive compensation;

To hold an advisory vote on the frequency of future advisory votes on executive compensation;

To consider one stockholder proposal, if properly presented at the Annual Meeting; and

To transact such other business as may properly come before the Annual Meeting or at any and all adjournments, continuations or postponements thereof.

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 meeting.

Only stockholders of record at the close of business on April 19, 2011 and their proxies are entitled to attend and vote at the meeting and any and all adjournments, continuations or postponements thereof.

All stockholders are invited to attend the meeting in person. Any stockholder attending the meeting may vote in person even if such stockholder returned a proxy. You will need to bring the enclosed Admission Ticket or proof of ownership of salesforce.com stock as of the record date to enter the meeting.

This Notice, the Proxy Statement and the 2011 Annual Report are first being mailed to stockholders on or about May 4, 2011.

By Order of the Board of Directors

LOGO

David Schellhase

Executive Vice President, Legal and Secretary

San Francisco, California

May 4, 2011

ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THE PURPOSE OF RETURNING YOUR PROXY CARD. YOU MAY ALSO VOTE BY TELEPHONE OR OVER THE INTERNET. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE 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 MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.

ABOUT THE ANNUAL MEETING

Who is soliciting my vote?

The Board of Directors of salesforce.com is soliciting your vote at the 2011 Annual Meeting (the “Annual Meeting”) of salesforce.com stockholders.

When and where will the Annual Meeting take place?

The annual meeting will take place on Thursday, June 9, 2011 at 2:00 p.m., local time, at the St. Regis Hotel, 125 3rd Street, San Francisco, California 94103.

What will I be voting on?

You will be voting on:

•

the election of three Class I directors, Marc Benioff, Craig Conway and Alan Hassenfeld, to serve for a term of three years and until their successors are duly elected and qualified, subject to earlier resignation or removal;

•

the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2012;

•

an advisory vote on executive compensation;

•

an advisory vote on the frequency of the advisory vote on executive compensation;

•

a stockholder proposal entitled “Proposal to Repeal Classified Board,” if properly presented at the Annual Meeting; and

•

any such other business as may properly come before the meeting or at any and all adjournments, continuations or postponements thereof.

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, Craig Conway and Alan Hassenfeld;

•

“FOR” ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2012;

•

“FOR” the proposal regarding an advisory vote on executive compensation;

•

“ONE YEAR” on the proposal regarding an advisory vote on the frequency of the advisory vote on executive compensation; and

•

“AGAINST” the stockholder proposal entitled “Proposal to Repeal Classified Board,” if properly presented at the Annual Meeting.

How many votes do I have?

You will have one vote for every share of salesforce.com common stock you owned as of April 19, 2011, our record date.

How do I vote?

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

To vote by proxy, you must either:

•

fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage-paid envelope;

•

vote by telephone (instructions are on the proxy card); or

•

vote by Internet (instructions are on the proxy card).

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

Do I need a ticket to attend the Annual Meeting?

Yes, a stockholder planning to attend the Annual Meeting must bring the enclosed Admission Ticket and proof of identity for entrance to the Annual Meeting. When you arrive at the Annual Meeting, you may be asked to present photo identification, such as a driver’s license or passport.

LOGO

salesforce.com, inc.

The Landmark @ One Market

Suite 300

San Francisco, California 94105

PROXY STATEMENT FOR 2011 ANNUAL MEETING OF STOCKHOLDERS

PROCEDURAL MATTERS

General

The Board of Directors of salesforce.com, inc., a Delaware corporation (“salesforce.com,” the “Company,” “we,” “us,” or “our”), is soliciting this Proxy Statement and the enclosed proxy card for use at our 2011 Annual Meeting of Stockholders (the “Annual Meeting”), to be held on Thursday, June 9, 2011 at 2:00 p.m., local time, and for any adjournment or postponement of the meeting. Our Annual Meeting will be held at the St. Regis Hotel, 125 3rd Street, San Francisco, California 94103. You will need to bring the enclosed Admission Ticket or proof of ownership of salesforce.com stock as of the record date to enter the meeting. Our Annual Report for the fiscal year ended January 31, 2011, or “fiscal 2011,” including our financial statements for fiscal 2011, is also enclosed. These proxy materials are first being mailed to stockholders on or about May 4, 2011.

Stockholders Entitled to Vote; Record Date

As of the close of business on April 19, 2011, the record date for determination of stockholders entitled to vote at the Annual Meeting, there were outstanding 133,881,690 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 of record is entitled to one vote for each share of common stock held by such stockholder. No shares of preferred stock of the Company were outstanding as of April 19, 2011.

All valid proxies received before the Annual Meeting will be voted according to the instructions thereon. Stockholders entitled to vote at the Annual Meeting may vote by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage-prepaid envelope, or vote by telephone or by Internet by following the instructions on the enclosed proxy card.

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.

Under applicable law and regulations, shares that are voted “abstain” or “withheld” and broker “non-votes” 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; however, broker “non-votes” are not deemed to be “votes cast.” As a result, unlike abstentions or withheld votes, broker “non-votes” are not included in the tabulation of the voting results on proposals requiring the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal and, therefore, do not have the effect of votes in opposition of such proposals. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.

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 be voted 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. A stockholder planning to attend the Annual Meeting must bring the enclosed Admission Ticket and proof of identity for entrance to 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.

Voting of proxies; Discretionary Voting. Stockholders may vote (1) by returning a proxy card, (2) by telephone or (3) over the Internet. If you wish to vote by mail, please complete, sign and return the proxy card in the self-addressed, postage paid envelope provided. 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. If you wish to vote by telephone or over the Internet, please follow the specific instructions set forth on the enclosed proxy card. The telephone and Internet voting procedures are designed to authenticate the stockholder’s identity and to allow the 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 over the phone or Internet, your shares will be voted as recommended by the Board of Directors.

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 enclosed 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 advisory vote on executive compensation, the advisory vote on the frequency of the advisory vote on executive compensation and the stockholder proposal (Proposals 1, 3, 4 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 2 of this Proxy Statement). If you are a stockholder of record and 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) 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, (2) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself revoke a proxy), or (3) entering a new vote by telephone or over the Internet. 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, including the preparation, assembly, printing and mailing of this Proxy Statement, the proxy and any additional solicitation materials furnished to stockholders. 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 and others to solicit proxies, personally or by telephone, without additional compensation. The Company has retained Georgeson Inc. and Alliance Advisors, proxy solicitation firms, for assistance in connection with the Annual Meeting at a cost of approximately $2,000 and $10,000 respectively, plus reasonable out-of-pocket expenses.

Procedure for Submitting Stockholder Proposals

All proposals of stockholders intended to be presented at the next annual meeting of stockholders of the Company, regardless of whether such proposals are intended to be included in the Company’s proxy statement for the next annual meeting of the stockholders of the Company, 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.

To be timely, a stockholder proposal must be received at the Company’s 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 not 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 the Company’s principal executive offices not earlier than February 19, 2012 nor later than March 20, 2012.

To be in proper written form, a stockholder’s notice to the Secretary of the Company shall 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 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 Securities and Exchange Commission, or SEC,

regulations under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, and be received not later than January 5, 2012. 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 print and send its proxy materials. 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 Securities and Exchange Commission.

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 to 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 January 14, 2011 as Exhibit 3.1 to a Current Report on Form 8-K, available at http://www.sec.gov.

Delivery of Proxy Materials

To receive current and future proxy materials, such as annual reports, proxy statements and proxy cards, in either paper or electronic form, please contact Investor Relations at (415) 536-6250, investor@salesforce.com, or www.salesforce.com/investor.

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. 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 proxy. 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, investor@salesforce.com, or www.salesforce.com/investor.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 9, 2011

The Notice and Proxy Statement and Annual Report are available at www.edocumentview.com/CRM.

DIRECTORS AND CORPORATE GOVERNANCE

The Company’s Board of Directors currently consists of nine directors and is divided into three classes, with the nominees for one class to be elected at each annual meeting of stockholders, to hold office for a three-year term and until successors of such class have been elected and qualified, subject to earlier resignation or removal. Please see Proposal 1 below for more information about the election of our Class I directors.

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

Name

Positions and Offices Held with the Company

Director
Since

Class and Year
in Which Term
Will Expire

Age

Marc Benioff

Chairman of the Board and Chief Executive Officer

1999

Class I, 2011

Craig Conway

Director

2005

Class I, 2011

Alan Hassenfeld

Director

2003

Class I, 2011

Craig Ramsey

Director

2003

Class II, 2012

Sanford R. Robertson

Director

2003

Class II, 2012

Stratton Sclavos

Director

2000

Class III, 2013

Lawrence Tomlinson

Director

2003

Class III, 2013

Maynard Webb

Director

2006

Class II, 2012

Shirley Young

Director

2005

Class III, 2013

Marc Benioff co-founded salesforce.com in February 1999 and has served as Chairman of the Board of Directors since inception. He has served as Chief Executive Officer since November 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 Directors of the salesforce.com/foundation and as a Director of the Committee Encouraging Corporate Philanthropy. Mr. Benioff received a Bachelor of Science in Business Administration (B.S.B.A.) from the University of Southern California, where he recently joined 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 of Directors, brings unique and invaluable experience to the Board of Directors. 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 of Directors.

Craig Conway has served as a Director since October 2005. From April 1999 to October 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 November 1996 to February 1999 and TGV Software from September 1993 to March 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 of Advanced Micro Devices, Inc., a publicly-traded company. He also currently serves as a director of two privately-held companies, eMeter Corporation and Guidewire Software, Inc. During the past five years, Mr. Conway also served as a director of Pegasystems Inc., Unisys Corporation and Kazeon Systems. Mr. Conway received a B.S. 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 of Directors.

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 1989. He served as its Chairman

from 1989 to February 2008, and also served as its Chairman and Chief Executive Officer from 1989 to May 2003. Mr. Hassenfeld is a trustee of the Hasbro Charitable Trust and Hasbro Children’s Foundation. Mr. Hassenfeld also serves as a director of Global Cornerstone Holdings Limited, a publicly-traded company. 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. 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 of Directors.

Craig Ramsey has served as a Director since April 2003. From July 2003 to September 2004, Mr. Ramsey served as CEO of Solidus Networks, Inc., a biometrics payments company. From March 1996 to April 2000, Mr. Ramsey served as Senior Vice President, Worldwide Sales, of Siebel Systems, Inc., a provider of eBusiness applications. From March 1994 to March 1996, Mr. Ramsey served as Senior Vice President, Worldwide Sales, Marketing and Support for nCube, a maker of massively parallel computers. From 1968 to 1994, Mr. Ramsey held various positions with Oracle Corporation, Amdahl and IBM. Mr. Ramsey currently serves as a member of the Board of Directors of Arcsight, Inc., a publicly-traded company. He also serves as a director of two privately-held companies, Guidewire Software, Inc. and Fan Appz. In addition, he also serves as a board member of the Glide Memorial Foundation. During the past five years, Mr. Ramsey has also served as a director of Solidus Networks Inc., M-Factor, Inc. and Verticals onDemand. He received a B.A. in Economics from Denison University.

Mr. Ramsey’s tenure at various technology companies has provided him with a meaningful background in management, including experience as a chief executive officer, and leadership experience in sales and marketing. This critical experience, along with his service on the boards of other publicly held companies, supports our conclusion that Mr. Ramsey has the necessary and desired skills, experience and perspective to serve on our Board of Directors.

Sanford R. 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 January 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 three publicly-traded companies, Dolby Laboratories, Inc., Pain Therapeutics, Inc. and RPX Corporation. He also serves as a director of the Schwab Charitable Fund. Mr. Robertson received a B.B.A. and 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 of Directors.

Stratton Sclavos has served as a Director since February 2000. Since November 2007, Mr. Sclavos has served as Partner at Radar Partners, an investment firm. From July 1995 to May 2007, Mr. Sclavos served as President and Chief Executive Officer of VeriSign, Inc., a provider of infrastructure services to websites, enterprises, electronic service providers and individuals. Mr. Sclavos also served as Chairman of the Board of Directors of VeriSign, Inc. from December 2001 to May 2007. Prior to that time, he served in various sales and marketing capacities for Taligent, Inc., Go, Inc., MIPS Computer Systems, Inc. and Megatest Corporation. Mr. Sclavos currently serves as a director of Juniper Networks, Inc., a publicly-traded company. He also serves as a director of two privately-held companies, Dasient, Inc. and Sencha, Inc. During the past five years, Mr. Sclavos has also served as a director of VeriSign, Inc. and Intuit, Inc. Mr. Sclavos received a B.S. from the University of California at Davis.

Mr. Sclavos’s tenure at various technology companies has provided him with extensive experience in management, including experience as a chief executive officer, and in sales and marketing. This experience, along with his service on the boards of other publicly held companies, supports our conclusion that Mr. Sclavos has the necessary and desired skills, experience and perspective to serve on our Board of Directors.

Lawrence Tomlinson has served as a Director since May 2003. Mr. Tomlinson retired from Hewlett-Packard Co. in June 2003. Prior to retiring from Hewlett-Packard, from 1993 to June 2003 Mr. Tomlinson served as its Treasurer, from 1996 to 2002 he was also a Vice President and from 2002 to June 2003 he was also a Senior Vice President. Mr. Tomlinson currently serves as a director of Coherent, Inc., a publicly-held company. During the past five years, Mr. Tomlinson has also served as a director of Therma-Wave, 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 of Directors’ 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 of Directors.

Maynard Webb has served as a Director since September 2006. Since December 2006, Mr. Webb has served as Chief Executive Officer of LiveOps, Inc., a provider of on-demand call center solutions. From June 2002 to August 2004, Mr. Webb served as Chief Operating Officer of eBay Inc., an online global marketplace. From August 1999 to June 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 Directors of LiveOps, Inc., a privately-held company. During the past five years, Mr. Webb has also served as a director of Gartner, Inc., Hyperion Solutions Corporation, AdMob, Inc. and Baynote, Inc. Mr. Webb holds a B.A.A. degree 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 of Directors.

Shirley Young has served as a Director since October 2005. Since 2000, Ms. Young has served as President of Shirley Young Associates, LLC, a business advisory company. She also serves as a senior advisor to General Motors-Asia Pacific. Previously, Ms. Young served as corporate Vice President of General Motors responsible for China Strategic Development and as Executive Vice President of Grey Advertising and President of Grey Strategic Marketing. Ms. Young currently serves as a director of Teletech, Inc., a publicly-traded company. She also served on the Board of Directors of Verizon, Bank of America, Bombay Company, Harrah’s and Dayton Hudson-Target. She is a member of the Worldwide Board of Directors of The Nature Conservancy and current governor and former chairman of the Committee of 100, a national Chinese-American leadership organization and current Chair of its cultural associate, US-China Cultural Institute. Ms. Young received a B.A. from Wellesley College.

Ms. Young brings diverse international business experience to our Board of Directors. Her tenure at various companies with global brands has provided her with extensive executive and advertising expertise. This in-depth experience, together with her leadership roles on philanthropic organizations and her service on the boards of other publicly held companies, supports our conclusion that Ms. Young has the necessary and desired skills, experience and perspective to serve on our Board of Directors.

Board Independence

The Board of Directors has determined that, except for Mr. Benioff as Chief Executive Officer, 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 of Directors considered all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships. The Board of Directors also adopted and applied the following standards, 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 serve on the other company’s compensation committee during the past three years; or

•

has been employed as an executive officer or employee, or has an immediate family member who has been 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.

Board Leadership Structure

Currently, the Company’s Chief Executive Officer, Marc Benioff, also serves as Chairman of the Board. The Board of Directors 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 crucial 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. Independent directors and management sometimes have different perspectives and roles in strategy development. The Company’s independent directors bring experience, oversight and expertise from outside the Company, while the Chief Executive Officer brings company-specific experience and expertise. The Board of Directors 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 of Directors approved the creation of the position of Lead Independent Director and appointed Sanford R. Robertson to serve as its Lead Independent Director for a two-year term. The Board of Directors re-appointed Mr. Robertson to serve for another two-year term in June 2009. 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 of Directors and Chief Executive Officer, and has such other authority as generally held by a lead independent director and as the independent directors shall determine from time to time.

Board Meetings and Director Communications

During fiscal 2011, the Board of Directors held eight meetings. During fiscal 2011, each director attended at least 75% of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by any of the committees of the Board of Directors 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 but two of the directors attended the Company’s 2010 Annual Meeting of Stockholders.

The non-management members of the Board of Directors also meet in regularly scheduled 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 Committee will serve 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 of Directors, by mail to the Company’s principal executive offices addressed to the intended recipient and care of our Corporate Secretary or by email to CorporateSecretary@salesforce.com. The Corporate Secretary will maintain a log of such communications and transmit them promptly to the identified recipient, unless there are safety or security concerns that mitigate against further transmission. The intended recipient shall be advised of any communication withheld for safety or security reasons as soon as practicable.

Corporate Governance and Board Committees

Salesforce.com and its Board of Directors regularly review and evaluate the Company’s corporate governance practices. The Board of Directors has adopted corporate governance principles that address the composition of and policies applicable to the Board of Directors as well as a Corporate 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 Corporate Code of Conduct are available in the Corporate Governance section of the Company’s website at http://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 Corporate Code of Conduct relating to the executive officers or directors of the Company will be disclosed promptly on our website.

The Board of Directors has also adopted a written charter for each of the three standing committees of the Board of Directors: 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 http://www.salesforce.com/company/investor/governance/, or in print by contacting Investor Relations at our principal executive offices.

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 accountants; approves the retention of the independent accountants to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent accountants on the salesforce.com engagement team as required by law; 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; annually reviews the audit committee charter and the committee’s 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 accountants the results of the annual audit and the review of our quarterly financial statements. The Audit Committee held nine meetings in fiscal 2011. 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. The Board of Directors 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 of Directors 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 officers and employees, including: reviewing and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior 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 subcommittees or to one member of the Compensation Committee. The Compensation Committee also administers the issuance of stock options and other awards under our stock plans. Although the Compensation Committee does not at present do so, it may delegate its authority to members of management to determine awards under the Company’s incentive-based or equity-based compensation plans for non-executive officer employees of the Company. 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 five meetings in fiscal 2011. 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 at present engages an outside consultant on a regular basis to advise the Compensation Committee on the Company’s compensation practices.

The current members of the Compensation Committee are Mr. Ramsey, who is the committee chair, Mr. Conway and Ms. Young. The Board of Directors 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 of Directors; recommending to the Board of Directors director nominees for each election of directors; developing and recommending to the Board of Directors 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 of Directors and each committee. The Nominating and Corporate Governance Committee held five meetings in fiscal 2011.

The current members of the Nominating and Corporate Governance Committee are Messrs. Robertson, who is the committee chair, Hassenfeld and Tomlinson. The Board of Directors 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 of Directors 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 of Directors 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.

The Nominating and Corporate Governance Committee will evaluate and recommend candidates for membership on the Board of Directors 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 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 of Directors and committee responsibilities. Members of the Board of Directors are expected to prepare for, attend, and participate in all Board of Directors 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 of Directors 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.

Other Committees. Pursuant to the Company’s Bylaws, the Board of Directors may designate other standing or ad hoc committees to serve at the pleasure of the Board of Directors from time to time.

Board’s Role in Risk Oversight. The Board of Directors 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 of Directors has retained responsibility for general oversight of risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions. The Board Committees receive regular reports directly 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 at the Company’s 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 not 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 not earlier than February 19, 2012 nor later than March 20, 2012.

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 at the Company’s 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 shall 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 of Directors, 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 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 shall 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 that 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 Compensation Committee and the chair of the Nominating and Corporate Governance Committee each receive an additional $5,000 per quarter, and the chair of the Audit Committee receives an additional $10,000 per quarter. Each non-employee director also receives $1,250 for attendance at each special Board meeting and each regular or special committee meeting. The Lead Independent Director also receives a fee of $15,000 per year.

During fiscal 2011, each non-employee director received a grant of 1,500 fully-vested shares of Common Stock for service during each preceding fiscal quarter. All equity awards were made pursuant to our 2004 Outside Directors Stock Plan. On March 8, 2011, the Nominating and Corporate Governance Committee recommended and the Board of Directors approved a reduction of the quarterly equity award amount to 800 fully-vested shares of Common Stock, effective the second fiscal quarter of fiscal 2012.

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

The Board of Directors has approved a stock ownership policy for our non-employee directors. 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) 5,000 shares of Common Stock or (ii) such number of shares of Common Stock having an aggregate value of $200,000. At present, our Chief Executive Officer currently maintains this minimum share ownership position.

The following table sets forth information concerning the compensation earned during fiscal 2011 by our Board of Directors:

DIRECTOR COMPENSATION FOR FISCAL 2011


Name	Fees Earned or Paid in Cash ($)		Stock Awards ($) (1)			Option Awards ($)			Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Marc Benioff (2)		—		—			—			—		—		—		—
Craig Conway		61,250		609,240	(3)		—	(4)		—		—		—		670,490
Alan Hassenfeld		72,500		609,240	(3)		—	(5)		—		—		—		681,740
Craig Ramsey		80,000		609,240	(3)		—	(4)		—		—		—		689,240
Sanford Robertson		106,250		609,240	(3)		—	(6)		—		—		—		715,490
Stratton Sclavos		52,500		609,240	(3)		—	(4)		—		—		—		661,740
Lawrence Tomlinson		112,500		609,240	(3)		—	(7)		—		—		—		721,740
Maynard Webb		63,750		609,240	(3)		—	(4)		—		—		—		672,990
Shirley Young		61,250		609,240	(3)		—	(4)		—		—		—		670,490

(1)

Stock awards consist solely of stock grants of fully-vested shares of Common Stock. The amounts reported do not reflect the compensation actually received by the director. Instead, the amounts reported are the aggregate grant date fair value as determined pursuant to FASB ASC Topic 718, excluding estimated forfeitures. The assumptions used to calculate the value of stock 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 2011 filed with the SEC on March 23, 2011.

(2)

Mr. Benioff’s compensation as our Chief Executive Officer is reflected under “Executive Compensation and Other Matters—Summary Compensation Table” elsewhere in this proxy statement, and he receives no separate compensation as a director. At the end of fiscal 2011, Mr. Benioff held outstanding stock options to purchase 1,250,000 shares of Common Stock and did not hold any outstanding unvested stock awards.

(3)

During fiscal 2011, each director (except Mr. Benioff) received a stock award of 1,500 fully-vested shares of Common Stock on February 23, 2010, May 25, 2010, August 24, 2010 and November 23, 2010, with grant date fair values of $102,360, $123,195, $169,935 and $213,750, respectively. At the end of fiscal 2011, no director held any outstanding unvested stock awards.

(4)	At the end of fiscal 2011, this director held no outstanding stock options.

(5)	At the end of fiscal 2011, Mr. Hassenfeld held outstanding stock options to purchase 37,500 shares of Common Stock.

(6)	At the end of fiscal 2011, Mr. Robertson held outstanding stock options to purchase 80,000 shares of Common Stock.

(7)	At the end of fiscal 2011, Mr. Tomlinson held outstanding stock options to purchase 21,000 shares of Common Stock.

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 25, 2011 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 133,444,344 shares of common stock outstanding as of March 25, 2011:


Name and Address of Beneficial Owner	Number of Shares Beneficially Owned		Percent of Class
Five Percent Stockholders
FMR LLC (1)		19,216,737		14.4	%
82 Devonshire Street, Boston, Massachusetts 02109
BlackRock, Inc. (2)		7,391,228		5.5	%
40 East 52^nd Street, New York, New York 10022
Prudential Financial, Inc. (3)		6,674,432		5.0	%
751 Broad Street, Newark, New Jersey 07102

Directors and Named Executive Officers
Marc Benioff (4)		10,468,750		7.8	%
Craig Conway		19,164		*
Parker Harris (5)		686,421		*
Alan Hassenfeld (6)		57,000		*
George Hu (7)		11,290		*
Craig Ramsey (8)		927,965		*
Sanford R. Robertson (9)		84,500		*
Stratton Sclavos		7,500		*
Graham Smith (10)		171,924		*
Larry Tomlinson (11)		24,000		*
Frank van Veenendaal (12)		191,433		*
Maynard Webb (13)		40,500		*
Shirley Young		31,110		*
All current directors and executive officers as a group (14 persons) (14)		12,771,204		9.5	%

*	Less than 1%.

(1)

Based solely upon a Schedule 13G/A filed with the SEC on February 14, 2011, by FMR LLC, on behalf of itself, Fidelity Management & Research Company (a wholly-owned subsidiary of FMR LLC), Fidelity Growth Company Fund (one of the investment companies to which Fidelity Management & Research Company acts as investment advisor), and Pyramis Global Advisors Trust Company (an indirect wholly-owned subsidiary of FMR LLC). According to the Schedule 13G/A, of 19,216,737 shares, as of December 31, 2010, 19,047,966 shares were held by Fidelity Management & Research Company (of which, 11,725,594 shares were held by Fidelity Growth Company Fund), 121,466 shares were held by Strategic Advisers, Inc., and 47,275 shares were held by Pyramis Global Advisors Trust Company. Edward C. Johnson 3d and FMR LLC, through its control of Fidelity Management & Research Company, Pyramis

Global Advisors Trust Company, each has sole power to dispose of the 19,047,966 shares owned by Fidelity Management & Research Company and the 47,275 shares owned by Pyramis Global Advisors Trust Company, respectively.

(2)	Based solely upon a Schedule 13G/A filed with the SEC on February 8, 2011 by BlackRock, Inc., reporting beneficial ownership as of December 31, 2010.

(3)	Based solely upon a Schedule 13G filed with the SEC on February 8, 2011 by Prudential Financial, Inc., reporting beneficial ownership as of December 31, 2010.

(4)	Includes 468,750 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested. All other shares held in the Marc R. Benioff Revocable Trust.

(5)	Includes 215,749 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(6)	Includes 37,500 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(7)	Includes 9,165 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(8)	Includes 125,705 shares held by a family member.

(9)	Includes 80,000 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(10)	Includes 159,916 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(11)	Includes 21,000 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

(12)	Includes 182,833 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested. Also includes 4,000 shares held in trusts.

(13)	All shares held in a trust.

(14)	Includes 1,218,990 shares issuable upon the exercise of options that are exercisable within 60 days of March 25, 2011, all of which will be vested.

EQUITY COMPENSATION PLAN INFORMATION

We currently maintain four 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 Equity Incentive Plan, as amended (the “2004 Equity Plan”), the 2004 Outside Directors Stock Plan, as amended (the “2004 Outside Directors Stock Plan”) and the 2004 Employee Stock Purchase Plan, which have 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 maintain the 2006 Inducement Equity Incentive Plan, which has not been approved by stockholders. The following table sets forth information regarding outstanding stock options and shares reserved for future issuance under the foregoing plans as of January 31, 2011:


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		14,557,487	(2)	$	51.83		4,733,358	(3)
Equity compensation plans not approved by security holders		437,661	(4)	$	35.61		362,102	(4)

Total		14,995,148		$	51.36		5,095,460

(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 option grants granted under the 1999 Stock Option Plan and 2004 Outside Directors Stock Plan as well as option grants and restricted stock units granted under the 2004 Equity Plan.

(3)

Consists of the 2004 Equity Plan, the 2004 Outside Directors Stock Plan and the 2004 Employee Stock Purchase Plan. The 2004 Employee Stock Purchase Plan will not be implemented unless and until the Board of Directors authorizes the commencement of one or more offerings. Under the 2004 Equity Plan, the shares that are reserved for issuance are subject to automatic increase on February 1 in each year from 2009 through 2013 by the lesser of 3.5% of our then outstanding shares of common stock or 3,500,000 shares. The Board of Directors may elect to reduce, but not increase without also obtaining stockholder approval, the number of additional shares authorized in any year under the 2004 Equity Plan. On February 1, 2011, the number of additional shares reserved for issuance under this automatic increase feature of the 2004 Equity Plan was 3,500,000.

(4)	Consists of the 2006 Inducement Equity Incentive Plan. The material features of this plan are described below.

Material Features of the 2006 Inducement Equity Incentive Plan

In April 2006, the Board of Directors approved the 2006 Inducement Equity Incentive Plan (the “Inducement Plan”) and has granted awards under the Inducement Plan in accordance with New York Stock Exchange Rule 303A.08. A total of 400,000 shares of Common Stock were reserved solely for the granting of inducement stock options, restricted stock units and other awards. In each of March 2009 and January 2011, the Board of Directors approved an increase of 300,000 shares of Common Stock to the Inducement Plan. The 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. Options granted under the Inducement Plan generally have a five-year term 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. Restricted stock unit awards granted under the Inducement Plan 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. The Company has also granted restricted stock awards under the Inducement Plan. As of January 31, 2011, 362,102 shares of Common Stock remained available for issuance under the Inducement Plan.

EXECUTIVE COMPENSATION AND OTHER MATTERS

Compensation Discussion and Analysis

Executive Summary

This Compensation Discussion and Analysis provides information regarding the fiscal 2011 compensation program for our principal executive officer, our principal financial officer, and the three executive officers (other than our principal executive officer and principal financial officer) who were our next most highly-compensated executive officers as of the end of fiscal 2011. These individuals were:

•

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

•

Graham Smith, our Executive Vice President and Chief Financial Officer (our “CFO”);

•

Parker Harris, our Executive Vice President, Technology;

•

George Hu, our Executive Vice President, Platform and Marketing; and

•

Frank van Veenendaal, our President, Worldwide Sales and Services.

These executives were our named executive officers (the “Named Executive Officers”) for fiscal 2011. In this Compensation Discussion and Analysis, saleforce.com, inc. is referred to as “our,” “us,” “we,” or “the Company.”

This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal 2011. It also provides an overview of our executive compensation philosophy, as well as our principal compensation policies and practices. Finally, it analyzes how and why the Compensation Committee of the Board of Directors (the “Compensation Committee”) arrived at the specific compensation decisions for our executives, including the Named Executive Officers, in fiscal 2011, and discusses the key factors that the Compensation Committee considered in determining their compensation.

Fiscal 2011 Financial Highlights

We are a leading provider of enterprise cloud computing applications. We provide a comprehensive collaboration and customer relationship management service to businesses of all sizes and industries worldwide and we provide a technology platform for customers and developers to build and run business applications.

Although the volatility in the global economic environment over the past two fiscal years has presented several challenges for the Company, in fiscal 2011 we achieved several significant financial results:

•

Generated record full fiscal year revenues of approximately $1.66 billion, an increase of 27% on a year-over-year basis;

•

Generated cash from operations of approximately $459 million, a 69% increase on a year-over-year basis; and

•

Increased our net paying customers to finish fiscal 2011 with approximately 92,300 customers, an increase of 27% on a year-over-year basis.

Consequently, we believe that we are well-positioned to execute on our long-term strategic objectives over the next several years.

Fiscal 2011 Executive Compensation Actions

As reflected in our compensation philosophy, we set the compensation of our executives, including the Named Executive Officers, based on their ability to achieve annual operational objectives that further our long-term business objectives and to create sustainable long-term stockholder value in a cost-effective manner. Accordingly, our fiscal 2011 compensation actions and decisions were based on our executives’ accomplishments in these dual areas.

For fiscal 2011, the Compensation Committee took the following actions with respect to the compensation of our executives, including the Named Executive Officers:

•

increased base salaries by between 7.3% and 20.0% of their fiscal 2010 levels;

•

awarded actual annual cash bonus payments at 100% of each executive’s target bonus opportunity pursuant to the Company’s bonus plan; and

•

approved equity awards at levels that the Compensation Committee believes met competitive market concerns, satisfied our retention objectives and rewarded individual performance during fiscal 2011.

As more fully described below, the Compensation Committee determined that the fiscal 2011 annual cash bonuses for the Named Executive Officers should be paid at 100% of each executive’s target bonus opportunity in recognition of our strong revenue performance and success in securing a volume of non-contingent contracts that are expected to generate significant future revenues. In making these determinations, the Compensation Committee noted that the Named Executive Officers’ efforts had enabled us to drive the Company’s financial performance during a challenging economic period while, at the same time, positioning the Company for sustained growth in the future. In addition, the Compensation Committee determined that each Named Executive Officer had met or exceeded his individual performance objectives and was a significant contributor to our overall financial performance for the year. In fact, the strong Company performance and individual performance would have, but for the application of Compensation Committee discretion, resulted in actual bonuses to the Named Executive Officers in excess of 100% of each executive’s target bonus opportunity. As discussed further below, however, after consultation with our CEO, consideration of the equity awards currently held by the Named Executive Officers and the appropriateness of allocating additional funds to non-executive employees, the Compensation Committee decided to reduce the funding of the portion of the bonus pool applicable to the Named Executive Officers to a level less than that otherwise indicated by actual fiscal 2011 performance and to pay their bonuses at, rather than in excess of, target levels.

Further, the Compensation Committee determined that the fiscal 2011 equity awards for the Named Executive Officers should be sufficient to maintain market competitiveness with the executives in comparable positions at the companies in our peer group. In making these awards, the Compensation Committee also took into consideration the fact that, consistent with our compensation philosophy, they increased the Named Executive Officers’ stake in the Company, thereby reinforcing their incentive to manage our business as owners and subjecting a significant portion of their total compensation to fluctuations in the market price of our Common Stock.

Fiscal 2011 Corporate Governance Highlights

We endeavor to maintain good governance standards in our executive compensation policies and practices. The following policies and practices were in effect during fiscal 2011:

•

The Compensation Committee is comprised solely of independent directors who have established effective means for communicating with stockholders regarding their executive compensation ideas and concerns.

•

The Compensation Committee’s independent compensation consultant, Compensia, Inc., is retained directly by the Compensation Committee and performs no other consulting or other services for us.

•

The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation-related risk profile to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the Company.

•

Our compensation philosophy and related governance features are complemented by several specific elements that are designed to align our executive compensation with long-term stockholder interests, including:

•

No pension or nonqualified deferred compensation plans. We do not currently offer, nor do we have plans to provide, pension arrangements, retirement plans or nonqualified deferred compensation plans or arrangements to our executives, including the Named Executive Officers.

•

We do not provide perquisites or other personal benefits to our executives, including the Named Executive Officers, except, in the case of our CEO, security services beginning in fiscal 2012. Our executives participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.

Compensation Objectives and Challenges

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 industry. For our executives, including the Named Executive Officers, we align our executive compensation program with the interests of our stockholders by tying a significant portion of their compensation to the performance of our Common Stock.

We face challenges in hiring and retaining executives due to a number of factors that contribute to a relatively small pool of available executive talent. These challenges are similar to those faced by many high-growth companies. In our opinion, this makes recruiting and retaining key executives difficult, and our executive compensation program takes into account and seeks to address this difficulty. The challenges that we face include the following:

•

High Growth—We continue to be a high-growth company with rapid changes to our technology, personnel and business tactics. Our revenues have also grown rapidly, as has the geographic and technical scope of our operations. Not all executives desire or are suited to manage in a high-growth environment, making the services of our current executives more valuable and recruiting new executives more difficult.

•

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. In addition, our success has made our employees and executives more attractive as candidates for employment with other companies. We believe that our executives frequently receive communications offering employment with other companies in the technology industry, creating additional challenges for us to retain them.

•

Executive Background—Typically, we hire deeply-experienced managers with specific experience in key functional areas who have operated in a high-growth environment similar to the one in which we operate. Given our rapid growth rate, the number of executives with the most desirable experience is relatively low and these executives are more 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 our fast-moving, challenging culture is not always suited to the executives who comprise the talent pool from which we recruit. 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. We believe that we face the perception on the part of prospective executives that there is less opportunity to realize significant appreciation through equity compensation than there may be by joining a privately-held company. This perception means that often prospective executives are more focused on cash compensation, and the Compensation Committee has adjusted our compensation practices accordingly.

•

Replacement Cost—When determining the compensation for a current executive who has been with us for a substantial period of time, the Compensation Committee takes into consideration what it may cost to hire that executive’s replacement. The Compensation Committee believes that replacement cost is highly relevant to an executive’s compensation because it is what we would have to pay if the executive left given the factors described above and it likely approximates the executive’s own perceived value in the competitive environment for executive talent.

Compensation-Setting Process

Role of the Compensation Committee

The Compensation Committee oversees and administers our executive compensation program in accordance with its Charter, which can be viewed at http://www.salesforce.com/company/investor/governance/. Typically, the Compensation Committee meets near the beginning of each fiscal year to review the executive compensation program and establish Company-wide performance measures related to cash bonus opportunities for the commencing fiscal year. In setting target bonus opportunities, the Compensation Committee reviews the total compensation for our executives to ensure consistency with our compensation philosophy and considers developments in compensation practices outside of the Company.

In conjunction with this executive compensation review, the Compensation Committee is provided with specific analytic information, such as the competitive positioning data described below, to use in setting each individual compensation element and to make decisions on total executive compensation levels. During fiscal 2011, the Compensation Committee received a comprehensive competitive positioning analysis, as further described below. This analysis was prepared in connection with the annual compensation review, and consisted of current and historical pay data, including base salary and bonus payout history, equity holdings, current and future vested and unvested equity holdings and realized gains for each of our executives, including the Named Executive Officers.

Although the Compensation Committee typically receives and reviews competitive positioning data in the course of its annual compensation review, this data provides only a reference point for the Compensation Committee. Ultimately, the Compensation Committee applies its own business judgment and experience to determine the compensation elements and amounts for our executives, including the Named Executive Officers. Further, while the Compensation Committee may use this data to assess the competitiveness and appropriateness of our executive compensation program within our industry sector and the broader business community, it is not the Compensation Committee’s sole reference point and is not used to set the compensation of our executives at specific levels or within specified percentile ranges. Depending upon Company and individual performance, the total compensation of our executives, including the Named Executive Officers, 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. Since March 2005, the Compensation Committee has engaged the services of Compensia, Inc., a national compensation consulting firm (“Compensia”). Compensia provides the Compensation Committee and the Board of Directors with guidance regarding the amount and types of compensation that we provide to our executives, how these compare to other compensation practices and advice regarding other compensation-related matters. Compensia also provides our Board of Directors with data regarding the compensation of our directors.

Representatives of Compensia attend meetings of the Compensation Committee as requested and also communicate with the Compensation Committee outside of meetings. Compensia reports to the Compensation Committee rather than to management, although Compensia may meet with members of management, including our CEO and executives in our Employee Success department, for purposes of gathering information on proposals that management may make to the Compensation Committee. During fiscal 2011, Compensia met with various executives to collect data and obtain management’s perspective on the compensation for our executives, but did not meet or discuss compensation matters with our CEO.

The Compensation Committee may replace Compensia or hire additional advisors at any time. Compensia has not provided any other services to us and has received no compensation other than with respect to the services described above.

Competitive Positioning

To assess the competitiveness of our executive compensation, and as a resource to use in its deliberations, the Compensation Committee is provided with information analyzing the compensation of our executives compared to the compensation of executives holding comparable positions at companies in our industry sector and with whom we may compete for executive talent in the broader market. The Compensation Committee does not use this information, however, with the goal of setting specific target compensation levels based upon the percentiles derived from such other companies.

Executive Compensation Review

In connection with its executive compensation review for fiscal 2011 (which took place during October and November 2009), Compensia provided the Compensation Committee with a comparative analysis of the Company’s executive compensation program based on compensation information drawn from the pay practices of two groups of companies. The first group consisted of the following software and services companies which were selected on the basis of their similarity to the Company based on various financial metrics, including revenue, number of employees and market capitalization (the “Same Size Peer Group”):


Akamai Technologies, Inc.		Quest Software, Inc.
Autodesk, Inc.		Red Hat, Inc.
BMC Software, Inc.		Sybase, Inc.
Citrix Systems, Inc.		Synopsys, Inc.
Lawson Software, Inc.		TIBCO Software, Inc.
McAfee, Inc.		VeriSign, Inc.
Novell, Inc.		VMware, Inc.

The second group consisted of the following technology companies which were selected on the basis of their similarity to the Company based on their growth history and potential, and market leadership positions (the “Next Stage Peer Group”):


Adobe Systems, Inc.		Juniper Networks, Inc.
eBay, Inc.		NetApp, Inc.
Electronic Arts, Inc.		NVIDIA Corporation
Google, Inc.		Symantec, Inc.
Intuit, Inc.		Yahoo!, Inc.

At the time of the fiscal 2011 executive compensation review, the Compensation Committee determined that, due to our unique mix of business segments and because the companies comprising the two peer groups did not have executive positions that were exactly comparable to all of our executive positions, it was appropriate to supplement the compensation information data drawn from these two peer groups with aggregated survey data from other technology companies with similar revenue characteristics (that is, a blend of companies with revenues of $500 million to $1 billion and $1 billion to $3 billion for the Same Size Peer Group, and a blend of $1 billion to $3 billion and over $3 billion for the Next Stage Peer Group). This data was drawn from the Radford 2009 Executive Compensation Survey.

In connection with its executive compensation review for fiscal 2012 (which took place during October and November 2010), Compensia provided the Compensation Committee with an updated comparative analysis of the Company’s executive compensation program based on compensation information drawn from the pay practices of an updated group of peer companies. The Compensation Committee determined that, based on our continued growth and projected business objectives, it was appropriate to use just a single group of peer companies for analytical purposes. This peer group consisted of the following software and services companies

which were selected on the basis of their similarity to us based on various financial metrics, including revenue, number of employees and market capitalization and growth history and potential (the “2012 Peer Group”):


Adobe Systems, Inc.		First Solar, Inc.
Akami Technologies, Inc.		Intuit, Inc.
Altera Corporation		Jupiter Networks, Inc.
Autodesk, Inc.		NetApp, Inc.
BMC Software, Inc.		Netflix, Inc.
Citrix Systems, Inc.		Priceline.com, Inc.
Cree, Inc.		Red Hat, Inc.
Dolby Laboratories, Inc.		VeriSign, Inc.
Electronic Arts, Inc.		VMware, Inc.
F5 Networks, Inc.

As for fiscal 2011, the Compensation Committee decided to supplement the compensation information data drawn from the 2012 Peer Group with aggregated survey data from other technology companies with similar revenue characteristics (that is, a blend of companies with revenues of $500 million to $3 billion and over $3 billion). This data was drawn from the Radford 2010 Executive Compensation Survey.

The Compensation Committee reviews the compensation peer group and other compensation data annually to ensure that it continues to be appropriate to use for comparative purposes.

Role of Executive Officers

Our CEO provides general guidance to the Compensation Committee with respect to the compensation for the executives who report directly to him, including the other Named Executive Officers, and reviews their performance annually or more often. Our CEO considers all relevant factors in his review, including each Named Executive Officer’s performance and accomplishments during the year, areas of strength and areas for development. Over the past five years, our CEO had historically advocated minimal compensation differentiation among the executives who report to him in order to foster a spirit of teamwork and cooperation that he believes is a critical component of our success. He realizes that as our business evolves, executive roles and responsibilities have developed and become more differentiated among his direct reports. The Compensation Committee has taken his general guidance into consideration when setting executive compensation. Our CEO may meet with the Compensation Committee or its compensation consultant if he chooses to do so. He did not choose to do so during fiscal 2011.

Our Executive Vice President, Legal and our Senior Vice President of 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 they or their staff attend Compensation Committee meetings, as requested.

Compensation Elements

We use cash compensation in the form of base salaries and annual bonuses and equity compensation in the form of stock options and restricted stock unit (“RSU”) awards to compensate our executives, including the Named Executive Officers. We believe that each of these compensation elements is necessary to attract and retain individuals in a competitive market for executive talent. Like our other employees, our executives, including the Named Executive Officers, participate in our employee benefit and welfare plans, including medical and dental care plans and a Section 401(k) plan. We do not provide our executives, including the Named Executive Officers, with any additional retirement benefits, nor with any nonqualified deferred compensation plan, nor any perquisites or other personal benefits. In March 2011, the Compensation Committee approved a residential security program for our CEO, including security personnel, effective beginning in fiscal 2012. We believe these security measures are necessary due to the importance of Mr. Benioff to the Company and his

unique visibility as principal Company spokesperson, and believe these security costs and expenses are appropriate and necessary. The Compensation Committee intends to review and approve the security budget annually.

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 factors:

•

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

•

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

•

the base salaries of other executives who are peers in reporting structure and level of responsibility.

Typically, the Compensation Committee sets the base salaries of our executives to approximate the market for the executive talent for which we compete based on the competitive positioning information described above. Because the Company continues to grow rapidly, the market in which we compete for executive talent, as well as the compensation levels for executives, is constantly changing.

During fiscal 2011, the base salaries of the Named Executive Officers were as follows:


Named Executive Officer	Fiscal 2011 Base Salary
Mr. Benioff	$	900,000
Mr. Smith	$	480,000
Mr. Harris	$	450,000
Mr. Hu	$	450,000
Mr. van Veenendaal	$	394,000

In November 2010, the Compensation Committee conducted a review of our executive compensation program and compensation peer group data as described above for purposes of determining the base salaries of our executives for fiscal 2012. In conducting this review, the Compensation Committee also considered overall Company and individual performance and the roles and responsibilities of each of our executives. Based on that review, the Compensation Committee adjusted the base salaries of certain of the Named Executive Officers as follows, with such adjustments to be effective on February 1, 2011: Mr. Benioff will receive a base salary of $1,000,000 and Mr. van Veenendaal will receive a base salary of $420,000. The base salaries of Messrs. Smith, Harris and Hu are unchanged from fiscal 2011.

Cash Bonuses

During fiscal 2011, each of our executives, including the Named Executive Officers, was eligible to earn a cash bonus equal to a specified percentage of his base salary, as follows:


Named Executive Officer	Fiscal 2011 Target Cash Bonus Opportunity (as a Percentage of Base Salary)			Fiscal 2011 Target Cash Bonus Opportunity ($)
Mr. Benioff		100	%	$	900,000
Mr. Smith		75	%	$	360,000
Mr. Harris		75	%	$	337,500
Mr. Hu		75	%	$	337,500
Mr. van Veenendaal		100	%	$	394,000

Typically, the Compensation Committee obtains input from Compensia and then establishes the target cash bonus opportunity for each executive near the beginning of each fiscal year. These target bonus opportunities are

based upon the level and position of each executive, with consideration given to an executive’s business objectives, achievements and responsibilities. An executive’s actual cash bonus payment may be increased or decreased as compared to his target bonus opportunity in the discretion of our CEO (except with respect to his own bonus), based on his reasonable assessment of the executive’s performance, and subject to Compensation Committee approval. Our CEO’s actual bonus payment may be increased or decreased as compared to his target bonus opportunity in the discretion of the Compensation Committee, based on its reasonable assessment of our CEO’s performance.

The Compensation Committee also compares the size of each executive’s target bonus opportunity to the target bonus opportunities of our other executives, and also takes into account individual performance considerations. While cash bonuses allow us to incent certain behavior, the Compensation Committee considers this compensation element to be a less significant tool for incenting long-term company performance at the executive level. However, variable cash compensation does play an important role in improving or changing executive performance in the short-term and is a necessary component of cash compensation which helps attract, motivate and retain our executives.

Also near the beginning of each fiscal year, the Compensation Committee, in consultation with our CEO, establishes a target bonus pool that will be used to pay the bonuses of our executives, including the Named Executive Officers, and all other non-sales employees. In any given fiscal year, if the actual bonus pool exceeds or falls short of the target bonus pool, bonus amounts are increased or decreased accordingly, subject to a cap on the maximum amount that may be paid to an individual executive. The Compensation Committee also has the discretion to increase or decrease the bonus pool funding levels and/or the bonus amounts actually paid to individual executives. For fiscal 2011, as described below, the Compensation Committee exercised its discretion to lower the funding of the portion of the bonus pool allocated to the Named Executive Officers (thereby reducing the actual bonuses to the Named Executive Officers) from the levels that would otherwise have been funded and/or paid, as applicable, based on the Company’s performance.

For fiscal 2011, the amount of this bonus pool was based on the Company’s performance during the fiscal year compared to pre-established target levels for three equally-weighted measures: revenue, non-GAAP operating income and new business bookings. The Compensation Committee believes that basing the bonus pool on these measures aligns executive incentives with stockholder interests. In the case of the revenue and operating income measures, the target levels for fiscal 2011 were as follows:


Performance Measure (1)	Target Performance Level (in millions)
Revenue	$	1,591
Non-GAAP Operating Income	$	270.3

(1)

For these purposes, “Revenue” is our GAAP revenues and “Operating Income” is defined as our non-GAAP income from operations (revenues less cost of revenues and operating expenses, excluding the impact of stock compensation expense, amortization of purchased intangibles, amortization of debt discount offset by any interest capitalization and income tax effects).

The new business bookings measure tracks the annual contract value associated with incremental subscription and support business closed during the fiscal year (not including the professional services business). This is an internal measure that we use to monitor our business. We keep the target level for this measure confidential for operational and competitive reasons, but generally consider the bookings target to be challenging but achievable. In determining the target levels, the Compensation Committee considers historical performance and growth rates as well as market conditions.

Typically, cash bonuses are paid twice each fiscal year to our executives, including the Named Executive Officers, and all other employees who are not part of our sales organization. After the first half of the fiscal year, we generally pay approximately 25% of the full target bonus amount for which an executive is eligible. After the

end of the fiscal year, we pay the remaining amount, which is increased or decreased based on (i) the size of the actual bonus pool and (ii) our CEO’s assessment, or, with respect to our CEO, the Compensation Committee’s assessment, of the executive’s individual performance as described above.

For fiscal 2011, our revenue was approximately $1,657 million and our non-GAAP operating income was approximately $237.6 million. Based on its assessment of these combined results, as well as exceeding the new business bookings target for fiscal 2011, the Compensation Committee determined that overall the Company exceeded the pre-established target levels, which would have funded the bonus pool at levels in excess of the target funding level established by the Compensation Committee earlier in the year and would have resulted in the Named Executive Officers receiving fiscal 2011 bonuses in excess of their target bonus opportunities.

After consulting with our CEO, however, the Compensation Committee decided that business and market conditions generally warranted a reduction in the size of the overall bonus pool. Further, the Compensation Committee determined, based on the recommendation of our CEO, that, for fiscal 2011, the significant equity awards held by the Named Executive Officers already provided the reward, retention value and incentives that bonuses in excess of the targeted amounts otherwise would be intended to provide. For these reasons, our CEO recommended, and the Compensation Committee agreed, that a portion of the bonus pool that otherwise would have been allocated to the Named Executive Officers should instead be allocated to key non-executive employees with lesser or no equity holdings.

Accordingly, the Compensation Committee funded the portion of the bonus pool for the Named Executive Officers at 100% of the target level. Our CEO did not recommend that the Compensation Committee approve any further adjustments to the other Named Executive Officers’ fiscal 2011 bonus payments and the Compensation Committee did not make any further adjustments to our CEO’s fiscal 2011 bonus payment. Accordingly, the cash bonuses paid to the Named Executive Officers for fiscal 2011 were as follows:


Named Executive Officer	Fiscal 2011 Bonus Payment
Mr. Benioff	$	900,000
Mr. Smith	$	360,000
Mr. Harris	$	337,500
Mr. Hu	$	337,500
Mr. van Veenendaal	$	394,000

In November 2010, based on its review of our executive compensation program as described above, the Compensation Committee approved increases to the target bonus opportunities of the Named Executive Officers for fiscal 2012 to be effective on February 1, 2011. These target bonus opportunities, which are established as a percentage of each Named Executive Officer’s base salary, are as follows:


Named Executive Officer	Fiscal 2012 Target Cash Bonus Opportunity (as a Percentage of Base Salary)			Fiscal 2012 Target Cash Bonus Opportunity ($)
Mr. Benioff		150	%	$	1,500,000
Mr. Smith		75	%	$	360,000
Mr. Harris		75	%	$	337,500
Mr. Hu		75	%	$	337,500
Mr. van Veenendaal		100	%	$	420,000

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). In making equity awards to our executives, including the Named Executive Officers, the Compensation Committee considers the competitive positioning reports described above, as well as each executive’s individual performance.

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 the best tool to motivate executives to build stockholder value. Because these options are not transferable, they have no value unless the market price of our Common Stock increases during the period that the option is outstanding. Further, because these options typically vest over a four-year period, they incent our executives to build value that can be sustained over time.

Restricted Stock Units

We 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, we are able to retain and incent employees while granting fewer shares of Common Stock. To date, all RSU awards granted have been timed-vested. While our stock option plan permits us to grant performance-based RSU awards or other full-value awards, the Compensation Committee did not do so in fiscal 2011.

Fiscal 2011 Awards

In November 2010, based on the review described above, the Compensation Committee granted the following equity awards to the Named Executive Officers:


Named Executive Officer	Stock Options (1)		Restricted Stock Unit Awards (1)
Mr. Benioff		350,000		—
Mr. Smith		60,000		5,000
Mr. Harris		60,000		5,000
Mr. Hu		60,000		5,000
Mr. van Veenendaal		60,000		5,000

(1)	Each of the stock options to purchase shares of our Common Stock was granted with an exercise price of $142.50 per share, and all equity awards were subject to our standard four-year vesting schedule.

The Compensation Committee determined to grant these equity awards to the Named Executive Officers 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 competitive market. After determining which Named Executive Officers would receive equity awards, the Compensation Committee determined the size of each executive’s equity award by applying a ratio of stock options to RSU awards that it believed was appropriate for our executives. The more senior the executive, the larger the stock option award he was granted and the smaller the size of his RSU award. Generally, RSU awards comprised approximately 20% of a Named Executive Officer’s annual equity award (except with respect to our CEO, who received no RSU award). This weighting reflected the greater impact that the Compensation Committee believes our senior executives should have on the Company and the creation of long-term stockholder value. As noted above, stock options do not have value unless the market price of our Common Stock increases during the period that the options are outstanding and the options vest over four years and therefore the Compensation Committee believes that our executives have a greater incentive to increase the value of our Common Stock if their equity compensation awards are weighted more heavily towards option awards than RSU awards.

Equity Award Grant Policies

Generally, the Compensation Committee grants stock options on the fourth Tuesday of each month and RSU awards on the fourth Tuesday of the first month of each fiscal quarter. This has been our practice since our initial public offering. Stock option awards for new employees (including new executives) are granted on the fourth Tuesday of the month following their hire date and RSU awards are granted on the fourth Tuesday of the first month of each fiscal quarter following an employee’s hire date, provided the employee joins us by the deadline for soliciting approval from the Compensation Committee. If a new employee joins us after the deadline for soliciting the approval of the Compensation Committee, his or her awards are made in the following month or fiscal quarter, as applicable. Follow-on awards to our existing executives and other employees are made in accordance with these policies. The majority of such follow-on 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.

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 would likely result in our executives facing uncertainties and distractions from 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 the change of control might affect them adversely, we have entered into Change of Control and Retention Agreements with each of our executives, 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. The Compensation Committee and the Board of Directors 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.

These agreements provide each of the Named Executive Officers (other than, as described below, our CEO) with a lump-sum payment equal to 150% of his annual base salary and target cash bonus, the continuation of certain employee benefits 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.

The agreement with our CEO provides him with a lump-sum payment equal to 200% of his annual base salary and target cash bonus, the continuation of certain employee benefits 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, in the case of our CEO, the independent members of the Board of Directors, considered competitive market data and governance “best practices” guidelines as provided by Compensia. These bodies also determined that full and immediate vesting of all outstanding and unvested equity awards 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, as applicable, 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, the Compensation Committee and, in the case of our CEO, the independent members of the Board of Directors, 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 of Directors believes 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.

For a summary of the material terms and conditions of these agreements, see “Employment Contracts and Certain Transactions—Change of Control,” below.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code imposes limitations on the deductibility for federal income tax purposes of remuneration in excess of $1 million paid to its chief executive officer and each of its three next most highly-compensated executive officers (other than its chief financial officer). 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.

Compensation income realized upon the exercise of stock options granted under our stock option plans generally will be deductible so long as the options are granted by a committee whose members are non-employee directors and certain other conditions are satisfied. Compensation income realized upon the vesting of time-based restricted stock units and bonuses paid to our executives will not be deductible to the extent that they and the executive’s other compensation for the taxable year totals in excess of $1 million.

The Compensation Committee monitors the application of Section 162(m) and the associated Treasury regulations on an ongoing basis and the advisability of qualifying its executive compensation for deductibility of such compensation. The Compensation Committee’s policy is to qualify our executive compensation for deductibility under applicable tax laws to the extent practicable.

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 exceeds 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 tax liability that the executive might owe as a result of the application of Sections 280G or 4999 during fiscal 2011 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, however, 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 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. 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. 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 restricted stock units. As part of this consideration, the Compensation Committee takes into account the overall program costs, 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.

Summary Compensation Table

The following table sets forth the compensation earned during fiscal 2011, fiscal 2010 and fiscal 2009 for services rendered in all capacities by our chief executive officer and chief financial officer as of the end of fiscal 2011, and the three other most highly compensated executive officers as of the end of fiscal 2011. We refer to these executive officers as the Named Executive Officers. Like our other employees, the Named Executive Officers participate in our employee benefit and welfare plans, including medical and dental care plans and a Section 401(k) plan. We do not provide our executives, including the Named Executive Officers, with any additional retirement benefits, nor with any nonqualified deferred compensation plan, nor any perquisites or other personal benefits.

SUMMARY COMPENSATION TABLE FOR FISCAL 2011


Name and Principal Position	Fiscal Year		Salary ($)		Bonus ($)		Stock Awards ($) (1)		Option Awards ($) (2)		Non-Equity Incentive Plan Compens- ation ($)		Change in Pension Value and Nonqualified Deferred Compens- ation Earnings ($)		All Other Compens- ation ($)		Total ($)
Marc Benioff (3)		2011		900,000		—		—		19,015,290		900,000		—		—		20,815,290
Chief Executive Officer and Chairman of the Board		2010		750,000		—		—		7,752,420		600,000		—		—		9,102,420
Chief Executive Officer and Chairman of the Board		2009		10		—		—		7,479,840		—		—		—		7,479,850

Graham Smith		2011		480,000		—		712,500		3,259,764		360,000		—		—		4,812,264
Chief Financial Officer		2010		420,000		—		370,848		1,757,215		252,000		—		—		2,800,063
Chief Financial Officer		2009		400,000		—		1,228,342		997,312		220,000		—		—		2,845,654

Parker Harris		2011		450,000		—		712,500		3,259,764		337,500		—		—		4,759,764
Executive Vice President, Technology		2010		420,000		—		370,848		1,757,215		252,000		—		—		2,800,063
Executive Vice President, Technology		2009		400,000		—		524,893		2,647,768		220,000		—		—		3,792,661

George Hu		2011		450,000		—		712,500		3,259,764		337,500		—		—		4,759,764
Executive Vice President, Platform and Marketing		2010		420,000		—		327,200		1,550,484		252,000		—		—		2,549,684
Executive Vice President, Platform and Marketing		2009		400,000		—		348,991		1,822,540		220,000		—		—		2,791,531

Frank van Veenendaal		2011		394,000		—		712,500		3,259,764		394,000		—		—		4,760,264
President, Worldwide Sales and Services		2010		367,500		—		327,200		1,550,484		294,000		—		—		2,539,184
President, Worldwide Sales and Services		2009		300,000		—		524,893		2,647,759		330,000		—		—		3,802,652

(1)

Stock awards consist solely of restricted stock unit awards. Amounts reported do not reflect compensation actually received by the Named Executive Officer. Instead, the amounts reported are the grant date fair value in the period presented as determined pursuant to FASB ASC Topic 718, excluding estimated forfeitures. The assumptions used to calculate the value of stock 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 2011 filed with the SEC on March 23, 2011.

(2)

Option awards consist solely of stock option awards. Amounts reported do not reflect compensation actually received by the Named Executive Officer. Instead, the amounts reported are the grant date fair value in the period presented 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 2011 filed with the SEC on March 23, 2011.

(3)	At his request, Mr. Benioff received a nominal salary of $10 per year during fiscal 2009.

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 2011.

GRANTS OF PLAN-BASED AWARDS FOR FISCAL 2011


Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under 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 ($) (1)		Threshold ($)		Target ($)		Maximum ($)						Exercise or Base Price of Option Awards ($) (3)		Grant Date Fair Value of Stock and Option Awards ($) (4)
Marc Benioff	N/A		—		900,000		1,800,000		—		—		—		—		—		—		—
Marc Benioff	11/23/2010		—		—		—		—		—		—		—		350,000		142.50		19,015,290

Graham Smith	N/A		—		360,000		720,000		—		—		—		—		—		—		—
	11/23/2010		—		—		—		—		—		—		—		60,000		142.50		3,259,764
	11/23/2010		—		—		—		—		—		—		5,000		—		—		712,500

Parker Harris	N/A		—		337,500		675,000		—		—		—		—		—		—		—
	11/23/2010		—		—		—		—		—		—		—		60,000		142.50		3,259,764
	11/23/2010		—		—		—		—		—		—		5,000		—		—		712,500

George Hu	N/A		—		337,500		675,000		—		—		—		—		—		—		—
	11/23/2010		—		—		—		—		—		—		—		60,000		142.50		3,259,764
	11/23/2010		—		—		—		—		—		—		5,000		—		—		712,500

Frank van Veenendaal	N/A		—		394,000		788,000		—		—		—		—		—		—		—
	11/23/2010		—		—		—		—		—		—		—		60,000		142.50		3,259,764
	11/23/2010		—		—		—		—		—		—		5,000		—		—		712,500

(1)	The Company’s non-equity incentive plan awards, and how they were determined, are based upon a formula that includes some discretion as to amounts paid, as discussed under “Compensation Discussion and Analysis—Compensation Elements—Cash Bonuses” elsewhere in this proxy statement.

(2)	All restricted stock unit awards and stock option grants were granted pursuant to the 2004 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 market value of the Company’s Common Stock at such date in the future when the option is exercised. The proceeds to be paid to the Named Executive Officer following this exercise do not include the option exercise price.

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 2011.

OPTION EXERCISES AND STOCK VESTED FOR FISCAL 2011


Name	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		—		—		—		—
Graham Smith		95,500		6,405,426		8,083		884,633
Parker Harris		—		—		6,415		716,813
George Hu		110,525		6,255,843		6,146		663,084
Frank van Veenendaal		52,000		4,866,702		6,146		662,109

(1)	The value realized on exercise is calculated as the difference between the actual sales price of the shares of the Company’s Common Stock underlying the options exercised and the applicable exercise price of those options.

(2)	The value realized on vesting is calculated as the number of vested restricted stock units multiplied by the closing price of the Company’s Common Stock on the vesting date.

Outstanding Equity Awards

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 2011.

OUTSTANDING EQUITY AWARDS AT FISCAL 2011 YEAR-END


	OPTION AWARDS										STOCK AWARDS
Name	Number of Securities Underlying Unexercised Options (#) Exercisable (1)		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		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)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($)
Marc Benioff		325,000		275,000		—		25.97		11/25/2013		—		—		—		—
		87,500		212,500		—		65.44		11/24/2014		—		—		—		—
		—		350,000		—		142.50		11/23/2015		—		—		—		—

Graham Smith		112,000		60,000		—		52.28		1/22/2013		—		—		—		—
		15,833		36,667		—		25.97		11/25/2013		—		—		—		—
		19,833		48,167		—		65.44		11/24/2014		—		—		—		—
		—		60,000		—		142.50		11/23/2015		—		—		—		—
		—		—		—		—		—		6,250		807,125		—		—
		—		—		—		—		—		3,334		430,553		—		—
		—		—		—		—		—		4,251		548,974		—		—
		—		—		—		—		—		5,000		645,700		—		—

Parker Harris		80,000		—		—		36.34		12/26/2011		—		—		—		—
		58,333		21,667		—		52.76		2/26/2013		—		—		—		—
		43,333		36,667		—		25.97		11/25/2013		—		—		—		—
		19,833		48,167		—		65.44		11/24/2014		—		—		—		—
		—		60,000		—		142.50		11/23/2015		—		—		—		—
		—		—		—		—		—		417		53,851		—		—
		—		—		—		—		—		2,084		269,128		—		—
		—		—		—		—		—		3,334		430,553		—		—
		—		—		—		—		—		4,251		548,974
		—		—		—		—		—		5,000		645,700		—		—

George Hu		833		8,334		—		52.48		11/27/2012		—		—		—		—
		—		10,834		—		52.76		2/26/2013		—		—		—		—
		—		36,667		—		25.97		11/25/2013		—		—		—		—
		—		42,500		—		65.44		11/24/2014		—		—		—		—
		—		60,000		—		142.50		11/23/2015		—		—		—		—
		—		—		—		—		—		—		—		—		—
		—		—		—		—		—		209		26,990		—		—
		—		—		—		—		—		834		107,703		—		—
		—		—		—		—		—		1,042		134,564		—		—
		—		—		—		—		—		3,334		430,553		—		—
		—		—		—		—		—		3,750		484,275		—		—
		—		—		—		—		—		5,000		645,700		—		—

Frank van Veenendaal		30,417		—		—		14.39		4/26/2015		—		—		—		—
		29,000		—		—		36.34		12/26/2011
		58,333		21,667		—		52.76		2/26/2013		—		—		—		—
		40,833		36,667		—		25.97		11/25/2013		—		—		—		—
		17,500		42,500		—		65.44		11/24/2014		—		—		—		—
		—		60,000		—		142.50		11/23/2015		—		—		—		—
		—		—		—		—		—		209		26,990		—		—
		—		—		—		—		—		2,084		269,128		—		—
		—		—		—		—		—		3,334		430,553		—		—
		—		—		—		—		—		3,750		484,275		—		—
		—		—		—		—		—		5,000		645,700		—		—

(1)	Options granted under the 1999 Stock Option Plan and the 2004 Equity Plan 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 granted under the 2004 Equity Plan 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 the shares or units of stock that have not vested is based on the closing market price of the Company’s Common Stock on January 31, 2011 of $129.14.

Employment Contracts and Certain Transactions

Executive Officer Offer Letters and Agreements. Each of the Named Executive Officers has entered into an offer letter with the Company which provides that the officer is an at-will employee. The offer letters provide for salary, annual bonus based on Company and individual performance, stock options and participation in our Company-wide employee benefit plans.

Change-in-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 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 (less applicable withholding taxes) equal to 200% of the executive’s annual base salary and target bonus;

•

Continuation of certain of the executive’s employee benefits 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.

In January 2007, the Company entered into Change of Control and Retention Agreements with the following officers: Messrs. Harris, Hu and van Veenendaal. These agreements were amended in November 2008 to implement certain technical amendments to comply with informal IRS guidance on Section 409A of the Internal Revenue Code of 1986, as amended. Also in November 2008, the Company entered into a Change of Control and Retention Agreement with Mr. Smith. 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 (less applicable withholding taxes) equal to 150% of the executive’s annual base salary and target bonus;

•

Continuation of certain of the executive’s employee benefits 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, as well as continued compliance with confidentiality obligations by the executive.

Assuming the above conditions were met and the employment of these officers were to be terminated on January 31, 2011, the following individuals would be 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		3,600,000		34,084		41,908,000		45,542,084
Parker Harris		1,181,250		25,464		10,454,304		11,661,018
George Hu		1,181,250		25,464		9,786,354		10,993,068
Graham Smith		1,260,000		25,524		13,895,124		15,180,648
Frank van Veenendaal		1,182,000		25,405		10,001,756		11,209,161

(1)	Based on salary and bonus targets as of January 31, 2011. As described above in the Compensation Discussion and Analysis section, certain executive officers received salary and bonus target increases effective as of February 1, 2011.

(2)	Based on a common stock price of $129.14, the closing market price of the Company’s Common Stock on January 31, 2011, less the applicable exercise price for each option for which vesting as 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 officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

Policies and Procedures with Respect to Related Party Transactions. Our Board of Directors is committed to upholding the highest legal and ethical 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.

In July 2008, the Audit Committee approved the Company’s Related Party Transaction Policies and Procedures (the “Related Party Transaction Policies”). Under the Related Party Transaction Policies, the Audit Committee shall review and approve or ratify any related party transactions of the Company. Our directors and executive officers complete an annual questionnaire which requires them to identify any entities they are affiliated with which may enter into a transaction with us that would require disclosure as a related party transaction. In approving or rejecting the proposed transaction, our Audit Committee shall consider the relevant facts and circumstances available and deemed relevant to 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 2011 in which the Company was a party, the amount involved in the transaction exceeded $120,000 and in which any director, 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, commonly referred to as the Foundation, a non-profit public charity, was chartered to build philanthropic programs that are particularly focused on youth and technology. The Company’s chairman is the chairman of the Foundation. He, one of the Company’s executives and one of the Company’s board members hold three of the Foundation’s seven board seats. The Company is not the primary beneficiary of the Foundation’s activities, and accordingly, the Company does not consolidate the Foundation’s 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 totals approximately $90,000 per quarter. In addition to the resource sharing with the Foundation, the Company issued the Foundation warrants in August 2002 to purchase 500,000 shares of common stock. The Company also donates subscriptions of its service to the Foundation, and permits the Foundation to sell such subscriptions to qualified non-profit organizations. The fair value of these donated subscriptions is currently approximately $3.6 million per month.

Mr. Maynard Webb serves as a Director of the Company and also currently serves as the Chief Executive Officer of LiveOps, Inc. (“LiveOps”). During fiscal 2011, the Company paid LiveOps approximately $1.1 million for its call center solution and related services. Also during fiscal 2011, LiveOps paid the Company approximately $290,000 for its customer relationship management subscription service. In December 2010, pursuant to the Company’s Related Party Transaction Policies, the Audit Committee reviewed and considered the relevant facts and circumstances of the transactions and ratified the amounts spent in fiscal 2011 and pre-approved transactions during fiscal 2012. We believe that the services performed by LiveOps were provided on terms no more or less favorable than those with unrelated parties.

Compensation Committee Interlocks and Insider Participation

During fiscal 2011, 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.

10b5-1 Trading Plans

The following executive officers and directors currently have 10b5-1 trading plans in place: Craig Conway, George Hu, Graham Smith, Lawrence Tomlinson and Frank van Veenendaal. Certain other employees of the Company have also implemented 10b5-1 trading plans.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (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 during fiscal year ended January 31, 2011, the Company believes that all Reporting Persons complied with all applicable reporting requirements.

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 it 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.com, 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 of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in salesforce.com’s Annual Report on Form 10-K for the fiscal year ended January 31, 2011.

THE COMPENSATION COMMITTEE

Craig Ramsey (Chair)

Craig Conway

Shirley Young

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Role of the Audit Committee

The Audit Committee operates under a written charter adopted by the Board of Directors in April 2004 which provides that its functions include: the oversight of the quality of the Company’s financial reports and other financial information and its compliance with legal and regulatory requirements; the appointment, compensation and oversight of the Company’s independent registered public accounting firm, Ernst & Young LLP, including reviewing its independence, reviewing and approving the planned scope of the Company’s annual audit, reviewing and pre-approving any non-audit services that may be performed by Ernst & Young LLP; the oversight of the Company’s internal audit function; reviewing with management and the Company’s independent registered public accounting firm the adequacy of internal financial controls; and, reviewing the Company’s critical accounting policies and estimates, and the application of U.S. generally accepted accounting principles.

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. 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 management’s assessment of 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, 2011

The Audit Committee reviewed and discussed our audited financial statements for the fiscal year ended January 31, 2011 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 of Directors that our audited consolidated financial statements be included in our annual report on Form 10-K for the fiscal year ended January 31, 2011 for filing with the Securities and Exchange Commission.

In addition, the Audit Committee reviewed the Company’s efforts and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure. As part of this process, the Audit Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing staffing levels and steps taken to implement recommended improvements in internal procedures and controls.

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, the 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

Larry Tomlinson (Chair)

Alan Hassenfeld

Sanford R. Robertson

Maynard Webb

PROPOSAL 1

ELECTION OF DIRECTORS

The terms of the Class I directors are scheduled to expire on the date of the Annual Meeting. Based on the recommendation of the Nominating and Corporate Governance Committee of the Board of Directors, the Board of Directors’ nominees for election by the stockholders are the current Class I members of the Board of Directors: Marc Benioff, Craig Conway and Alan Hassenfeld. If elected, the nominees will serve as directors until the annual meeting of stockholders in 2014 and until their successors are elected and qualified, subject to earlier resignation or removal.

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 Class I directors to the Board of Directors. If any of the nominees should for any reason be unable or unwilling to serve at any time prior to the Annual Meeting, the proxies will be voted for the election of such other person as a substitute nominee as the Board of Directors may designate in place of such nominee.

Vote Required and Board of Directors’ Recommendation

The Company’s Bylaws require that each director be elected by the majority of votes cast with respect to such director in uncontested elections. The Board, after taking into consideration the recommendation of the Nominating and Governance Committee of the Board, 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.

PROPOSAL 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2012. The Board of Directors recommends that stockholders vote for ratification of such appointment. In the event of a negative vote on such ratification, the Board of Directors will reconsider its selection. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered accounting firm at any time during the year if the Audit Committee determines that such a change would be in our stockholders’ best interests.

We expect representatives of Ernst & Young LLP to be present at the Annual Meeting and available to respond to appropriate questions. They will also have the opportunity to make a statement if they desire to do so.

Engagement Letter and Fee Disclosure

In connection with the audit of the fiscal 2011 financial statements, our Audit Committee entered into an engagement agreement with Ernst & Young LLP which sets forth the terms of Ernst & Young’s audit engagement. Among other things, the agreement is subject to alternative dispute resolution procedures.

The following table sets forth fees billed for professional audit services and other services rendered to the Company by Ernst & Young LLP for the fiscal years ended January 31, 2011 and 2010.


	Fiscal 2011		Fiscal 2010
Audit Fees (1)	$	4,227,094	$	4,227,563
Audit-Related Fees (2)		890,636		912,984
Tax Fees (3)		664,675		634,962
All Other Fees		—		—

Total	$	5,782,405	$	5,775,509

(1)

Audit Fees consist of fees incurred for professional services rendered for the audit of our annual consolidated financial statements, review of the quarterly consolidated financial statements and foreign statutory audits and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings or engagements. Audit Fees also consist of fees for the attestation of internal control and management’s assessment of internal control as required by Section 404 of the Sarbanes-Oxley Act of 2002.

(2)

Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” These include fees for accounting advice and consultations regarding our compliance with Section 404 the Sarbanes-Oxley Act of 2002.

(3)	Tax Fees consist of fees billed for tax compliance, consultation and planning services.

Pre-Approval of Audit and Non-Audit Services

All audit and non-audit services provided by Ernst & Young LLP to the Company must be pre-approved by the Audit Committee. The Audit Committee uses the following procedures in pre-approving all audit and non-audit services provided by Ernst & Young LLP. At or before the first meeting of the Audit Committee each year, the Audit Committee is presented with a detailed listing of the individual audit and non-audit services and fees (separately describing audit-related services, tax services and other services) expected to be provided by Ernst & Young LLP during the year. Quarterly, the Audit Committee is presented with an update of any new audit and non-audit services to be provided by Ernst & Young LLP. The Audit Committee reviews the Company’s update and approves the services outlined therein if such services are acceptable to the Audit Committee.

To ensure prompt handling of unexpected matters, the Audit Committee delegates to the chair of the Audit Committee the authority to amend or modify the list of audit and non-audit services and fees. However, approval of such additional or amended services is not permitted if it would affect Ernst & Young LLP’s independence under applicable SEC rules. The chair of the Audit Committee reports any such action taken to the Audit Committee at the next Audit Committee meeting.

All Ernst & Young LLP services and fees in fiscal 2011 were approved in advance by the Audit Committee.

Vote Required and Board of Directors’ Recommendation

The affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm. 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” Ratification of the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm.

PROPOSAL 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

We are asking our stockholders to cast an advisory vote to approve the compensation of the Named Executive Officers during fiscal 2011 as disclosed in this proxy statement in accordance with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). This Proposal gives our stockholders the opportunity to express their views on the design and effectiveness of our executive compensation program.

As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation program is designed to attract, motivate and retain the Named Executive Officers, who are critical to our success. Under this program, the Named Executive Officers are rewarded for the achievement of both corporate and individual performance goals, which are expected to result in increased stockholder value. Please read the “Compensation Discussion and Analysis” and the compensation tables and narrative that follow for additional details about our executive compensation program, including information about the fiscal 2011 compensation of Named Executive Officers.

Fiscal Year 2011 Business Highlights

Although the recent volatility in the global economic environment has presented challenges for the Company, in fiscal 2011 we achieved several significant financial results and we believe the compensation program for the Named Executive Officers was instrumental in helping us achieve strong financial performance, including:

•

Record full fiscal year revenues of approximately $1.66 billion, an increase of 27% on a year-over-year basis;

•

Cash from operations of approximately $459 million, a 69% increase on a year-over-year basis; and

•

An increase in our net paying customers to finish fiscal 2011 with approximately 92,300 customers, an increase of 27% on a year-over-year basis.

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 a high-growth business operation in an innovative and competitive industry. For our executives, including the Named Executive Officers, we align our executive compensation program with the interests of our stockholders by tying a significant portion of their compensation to the performance of our Common Stock.

The Compensation Committee regularly reviews our executive compensation program to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. This includes establishing performance target levels based on financial measures we believe to be important to our stockholders. We closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity, so that we may ensure that our executive compensation program is competitive with market practices.

We believe that our executive compensation program has been effective at encouraging the achievement of positive results, appropriately aligning pay and performance and in enabling us to attract and retain very talented executives within our industry.

Advisory Vote and Board Recommendation

We request stockholder approval of our fiscal 2011 compensation of the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes

the “Compensation Discussion and Analysis,” the compensation tables and the narrative disclosures that accompany the compensation tables within the “Executive Compensation and Other Matters” section of this proxy statement). This vote is not intended to address any specific element of compensation, but rather the overall compensation of the Named Executive Officers and the compensation philosophy, policies and practices described in this proxy statement.

Accordingly, we ask that you vote “FOR” the following resolution:

“RESOLVED, that the stockholders of salesforce.com, inc. approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s proxy statement for the 2011 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Fiscal Year 2011 Summary Compensation Table and the other compensation tables and narrative disclosure within the Executive Compensation and Other Matters section of such proxy statement.”

Approval of the above resolution requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting. Abstentions and broker non-votes will have no effect on the outcome of this Proposal.

As an advisory vote, the outcome of the vote on this Proposal is not binding upon us. However, our Compensation Committee, which is responsible for designing and administering our executive compensation programs, values the opinions expressed by our stockholders in their vote on this Proposal and will consider the outcome of this vote when making future compensation decisions for the Named Executive Officers.

The Board of Directors Recommends a Vote “For” Approving on an Advisory Basis the Compensation of the Named Executive Officers.

PROPOSAL 4

ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION

We are asking our stockholders to cast an advisory vote on how often we should include an advisory vote on executive compensation in our proxy materials for future annual meetings of stockholders. Stockholders may vote to request the advisory vote on executive compensation every year, every two years or every three years, or may abstain from voting.

Advisory Vote and Board Recommendation

The Board of Directors believes that the advisory vote on executive compensation should be conducted every year so that our stockholders may provide us with their direct input on our compensation philosophy, policies and practices, as disclosed in our proxy statement, each year. The Board of Directors’ determination was based upon the premise that Named Executive Officer compensation is evaluated, adjusted and approved on an annual basis by the Compensation Committee and that the measures that are used in determining performance-based award achievements are annual measures. The Compensation Committee, which administers our executive compensation program, values the opinions expressed by our stockholders in these votes and will consider the outcome of these votes in making its decisions on executive compensation.

You may cast your vote on your preferred voting frequency by choosing one year, two years, three years or abstain from voting when you vote in response to the resolution set forth below.

“RESOLVED, that the option of once every one year, two years or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be determined to be the preferred frequency of the stockholders with which salesforce.com, inc. is to hold a stockholder vote to approve, on an advisory basis, the compensation of its Named Executive Officers, as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure shall include the Compensation Discussion and Analysis, the Summary Compensation Table, and the other compensation tables and narrative disclosure in this proxy statement).”

The option of one year, two years or three years that receives the affirmative vote of the holders of a majority of the votes cast in person or by proxy at this meeting will be the frequency for the advisory vote on executive compensation that has been recommended by stockholders. Abstentions and broker non-votes will have no effect on the outcome of this Proposal. However, because this vote is advisory and not binding on the Board of Directors or salesforce.com in any way, the Board of Directors may decide that it is in the best interests of our stockholders and salesforce.com to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.

The Board of Directors Recommends an Advisory Vote of every “One Year” on the Compensation of the Named Executive Officers.

PROPOSAL 5

STOCKHOLDER PROPOSAL ENTITLED “PROPOSAL TO REPEAL CLASSIFIED BOARD”

The Company has been advised that the Florida State Board of Administration, as the investment manager for the Florida Retirement System, 1801 Hermitage Boulevard, Tallahassee, Florida 32308, a beneficial owner of 290,158 shares of the Company’s common stock, intends to submit the proposal set forth below at the Annual Meeting:

RESOLVED, that shareholders of salesforce.com, inc. urge the Board of Directors to take all necessary steps (other than any steps that must be taken by shareholders) to eliminate the classification of the Board of Directors and to require that all directors elected at or after the annual meeting held in 2012 be elected on an annual basis. Implementation of the proposal should not prevent any director elected prior to the annual meeting held in 2012 from completing the term for which such director was elected.

SUPPORTING STATEMENT

This resolution, submitted by the Florida State Board of Administration with the assistance of the American Corporate Governance Institute, LLC, urges the board of directors to facilitate a declassification of the board. Such a change would enable shareholders to register their views on the performance of all directors at each annual meeting. Having directors stand for elections annually makes directors more accountable to shareholders, and could thereby contribute to improving performance and increasing firm value.

Over the past decade, many S&P 500 companies have declassified their board of directors. According to FactSet Research Systems, between 2000 and 2009, the number of S&P 500 companies with classified boards declined from 300 to 164. Furthermore, according to Georgeson reports, there were 187 shareholder proposals to declassify boards during the five proxy seasons of 2006 through 2010. The average percentage of votes cast in favor of proposals to declassify exceeded 65% in each of these five years.

The significant shareholder support for proposals to declassify boards is consistent with evidence in academic studies that classified boards could be associated with lower firm valuation and/or worse corporate decision-making. Studies report that:

•

takeover targets with classified boards are associated with lower gains to shareholders (Bebchuk, Coates, and Subramanian, 2002);

•

classified boards are associated with lower firm valuation (Bebchuk and Cohen, 2005);

•

firms with classified boards are more likely to be associated with value-decreasing acquisition decisions (Masulis, Wang, and Xie, 2007); and

•

classified boards are associated with lower sensitivity of compensation to performance and lower sensitivity of CEO turnover to firm performance (Faleye, 2007).

Although one study (Bates, Becher and Lemmon, 2008) reports that classified boards are associated with higher takeover premiums, this study also reports that classified boards are associated with a lower likelihood of an acquisition, and that classified boards are associated with lower firm valuation.

Please vote for this proposal to make directors more accountable to shareholders.

The Board of Directors unanimously recommends a vote AGAINST the stockholder proposal for the following reasons:

The Board is committed to strong corporate governance policies and regularly considers and evaluates a broad range of corporate governance issues affecting the Company, including whether to maintain a classified board structure. In accordance with the Company’s Amended and Restated Certificate of Incorporation, the Company’s directors are divided into three classes that serve staggered three-year terms, such that one-third of the directors

stand for election each year. This classified board structure has been in place continuously since the Company became a public company in 2004. After careful consideration of the foregoing proposal, the Board has concluded that its current classified board structure continues to be in the best interests of the Company and its stockholders and therefore opposes the proposal.

The Board believes that the classified board structure better serves the interests of the Company and its stockholders than a board elected annually for the following reasons:

•

Stability and Continuity. The classified board structure is designed to provide stability, enhance mid- and long-term planning and ensure that, at any given time, a majority of the directors serving on the Board have substantial knowledge of the Company, its business and its strategic goals. Directors who have experience with the Company and deep knowledge about its business and affairs are a valuable resource and are better positioned to make the fundamental decisions that are best for the Company and its stockholders, including decisions on strategic transactions, significant business commitments and use of financial and other resources. Without a classified board structure, the replacement of all directors in a single year is possible, which could lead to short-term disruption in the affairs of the Company. The Board also believes that the classified board structure assists in recruiting director candidates who are willing to make a long-term commitment of their time and energy to help the Company enhance stockholder value. It is important that the Company’s stockholders, employees, customers and other stakeholders are able to rely on the stability and continuity of the Company’s corporate policies and strategic goals.

•

Protection from Potentially Abusive and Unfair Takeover Tactics. The classified board structure is also designed to safeguard the Company against the efforts of a third party intent on quickly taking control of, and not paying fair value for, the business and assets of the Company. The classified board structure enhances the ability of the Board to negotiate the best results for all stockholders in any takeover proposal, negotiate with the third party on behalf of all stockholders and weigh alternatives to provide maximum value for all stockholders.

•

Independence. The Board believes that electing directors to three-year terms, rather than one-year terms, enhances the independence of non-management directors by providing them with a longer assured term of office, thereby insulating them from pressures from special interest groups that might have an agenda contrary to the long-term interests of all stockholders. The current classified board structure permits our directors to act independently and to focus on the long-term interests of the Company and its stockholders.

•

Accountability to the Company’s Stockholders. A classified board remains accountable to the Company’s stockholders. At each Annual Meeting, the Company’s stockholders have the opportunity to evaluate and elect one third of the Board of Directors. All directors are required by law to uphold their fiduciary duties to the Company and its stockholders, regardless of the length of their term of office. The Board believes that a classified board structure in no way diminishes directors’ responsibilities and accountability to the Company’s stockholders.

The Board notes that, in January 2011, concomitantly with the Board’s consideration of this proposal to repeal the classified board structure, the Board also considered a proposed shift from a plurality voting standard to a majority voting standard for the election of directors in uncontested elections. After careful consideration, and consistent with the Board’s commitment to good corporate governance, the Board approved amendments to the Company’s bylaws and corporate governance guidelines to implement majority voting in uncontested director elections.

Finally, stockholders should be aware that this stockholder proposal is simply a request that the Board consider the action stated in the proposal. Approval of this proposal by the Company’s stockholders may not result in the requested action being taken by the Board. The directors, in exercising their fiduciary duties, must still evaluate and consider the proposal, which, as stated above, they have already done. Approval of this precatory stockholder proposal would not, by itself, eliminate the classified board structure or provide for the annual election of directors.

The Board of Directors Recommends a Vote “Against” the Stockholder Proposal.

TRANSACTION OF OTHER BUSINESS

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

By Order of the Board of Directors

LOGO

David Schellhase

Executive Vice President, Legal and Secretary

May 4, 2011

LOGO

q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q


A		Proposals — TheBoard recommends a vote FOR all nominees, FOR Proposals 2 and 3, every ONE YEAR for Proposal 4, and AGAINST Proposal 5 .

1. Election of Directors:

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

01 - Marc Benioff

02 - Craig Conway

03 - Alan Hassenfeld

For

Against

Abstain

For

Against

Abstain

2. Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending on January 31, 2012.

3. Advisory vote to approve the resolution on the compensation of the named executive officers.

1 Yr

2 Yrs

3 Yrs

Abstain

4. Advisory vote on the frequency of future advisory votes to approve a resolution on the compensation of the named executive officers.

5. Stockholder proposal to Repeal Classified Board.


B		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

NOTE: Please mark the proxy, sign exactly as your name appears herein, and return it promptly in the enclosed, addressed envelope. When shares are held by joint tenants, both parties should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by the President or other authorized person. If a partnership, please sign in full partnership name by an authorized person

Date (mm/dd/yyyy) — Please print date below.

Signature 1 — Please keep signature within the box.

Signature 2 — Please keep signature within the box.

/ /

LOGO

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 9, 2011

The Notice and Proxy Statement and Annual Report are available at

www.envisionreports.com/CRM.

q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

Proxy — salesforce.com, inc.

Proxy for Annual Meeting of Stockholders Solicited by the Board of Directors

The undersigned hereby appoints Marc Benioff, Graham Smith and David Schellhase, or any of them, with full power of substitution, to represent the undersigned and to vote all the shares of common stock of salesforce.com, inc. (the “Company”) which the undersigned is entitled to vote at the Company’s Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 9, 2011, at 2:00 p.m., local time, at the St. Regis Hotel, 125 3rd Street, San Francisco, California 94103 and at any adjournments or postponements thereof, on all matters properly coming before the Annual Meeting, including but not limited to the matters set forth on the reverse side. For directions to attend the Annual Meeting, please contact Investor Relations by telephone at (415) 536-6250.

This Proxy when properly signed will be voted in the manner directed on this Proxy by the undersigned. If no direction is made, this Proxy will be voted “FOR” Proposals 1, 2 and 3, “ONE YEAR” for Proposal 4, and “AGAINST” Proposal 5.

The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting of Stockholders, Proxy Statement and the Company’s 2011 Annual Report.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, THE PROXY HOLDERS ARE AUTHORIZED TO VOTE AS RECOMMENDED BY THE BOARD OF DIRECTORS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY ON THE PROXY HOLDERS TO VOTE AS TO ANY OTHER MATTER THAT IS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING THAT THE BOARD OF DIRECTORS DID NOT HAVE NOTICE OF PRIOR TO THE DATE SPECIFIED IN THE PROXY.

(Continued and to be dated and signed on the reverse side.)