http://www.examiner.com/article/pressure-builds-for-ceos-at-highly-valued-companies

Pressure builds for CEOs at highly valued companies

Last week, the highly-regarded business software maker Anaplan held its annual conference in San Francisco, drawing an enthusiastic crowd of 1,500 analysts and customers. These events are normally an occasion for the company’s CEO to make new product announcements, chat with some big names in the tech industry, and otherwise highlight a bright future for the coming year. But this gathering was different in one key respect: Anaplan’s CEO had left the company barely three weeks before.

In a sign of the turmoil affecting many high-flying business enterprise technology companies these days, Anaplan’s CEO – Frederic Laluyaux – was not in attendance because he had departed Anaplan after three years. A volatile stock market and reduced venture funding are forcing many tech company board members and investors to become less fond of unfettered growth and more interested in profits, sharply increasing pressure on the executive at the top.

As Anaplan board member Ravi Mohan was quoted last month following Laluyaux’s departure, “Now, it’s profitable sustained growth, and we’re building a company that reflects that.”

In the wake of Laluyaux’s absence last week, a host of Anaplan executives, including CFO James Budge (who joined the company merely five months ago) presented an upbeat picture. Budge said the company had added more customers in the last four months than in any other cycle and that business had doubled year-over-year. And he pointedly told the audience, “We expect to be profitable in 2017.”

Anaplan’s robust spreadsheet technology for business received another boost when they announced last week that the company would add predictive analytics to their platform. This was greeted positively by Telus, the large Canadian national telecommunications company. “We’re trying to help anticipate the customer journey at Telus,” said Petto Chan, the company’s manager of business analysis. “So this is pretty exciting.”

A number of Anaplan’s other high profile customers were in attendance, including executives from Kellogg Company, Deloitte, Splunk, and DocuSign. The presence of DocuSign’s current CEO – Keith Krach – on the San Francisco stage with Anaplan last week added an ironic note. Last year, Krach announced his intention to step away from DocuSign but he still remains in the post after the company’s top choice for his successor abruptly pulled out.

Like Anaplan, DocuSign, the e-signing and document powerhouse, has a valuation well over a billion dollars and is also one of many technology companies rumored to be on track to go public. But the pressure to become a publicly-traded company (and thus reap a potentially enormous financial return for investors), could be leading many firms down an equally difficult path.

Just a few blocks from Anaplan’s conference in San Francisco last week, venture capitalists and entrepreneurs heard several panels of speakers describe the growing shareholder activist movement which has placed the tech company CEOs under even greater scrutiny. According to a recent Moody’s report, over a third of shareholder activism cases today involve tech firms, more than any other industry segment.

Since 2013, a host of big-name technology companies have been the target of shareholder actions, seeking greater distribution of profits from cash-rich firms (Apple) to a board seat (Yahoo). This is leading some tech companies to begin re-thinking their strategy to become public.

“There’s a little bit of fatigue you are starting to hear about technology companies thinking about going public,” said Bill Anderson, a senior managing director for Evercore, an investment banking advisory firm.

Anderson spoke at an event in San Francisco last week organized by The Mergermarket Group. According to Ed Mullane, sector editor for technology and media, he reached out to several companies who had been dealing with shareholder activists, but could not get any CEOs to participate.

“Some of these (activist) attacks are very personal,” said Anderson, highlighting the issues that CEOs of public companies face when presented with shareholder demands. But the reality is that many activists, such as the high-profile ValueAct Capital, have become increasingly savvy about leveraging institutional investors and what they might want.

“Activists are now very much in tune with how institutional investors think,” said Kenton King, a partner with the New York-based law firm of Skadden, Arps, Slate, Meagher & Flom.

Executive turnover in technology firms like Anaplan and more active shareholder involvement are trends that will likely remain in place for a while. “The activist movement is here to stay,” said King, even as tech companies grapple with the tough decision to remain private or not and the revolving CEO door continues to spin.

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