@jacknicas: More Equal Than Others: Google Insiders Control the Company

Every Google stockholder meeting is like Groundhog Day–shareholders complain about executive compensation and try to elect their own board, then they are told that the board under the control of Eric Schmidt, Sergey Brin and Larry Page wins.  That’s because Google is a banana republic.  Schmidt, Brin and Page hold shares that give them 10 votes per share while all other stockholders get the traditional one share one vote.  The insiders always win.

Chris Castle posted last year about the 2015 Google shareholder meeting:

The futility of stockholder votes at Google became obvious at the Google stockholder meeting last week where ordinary stockholders were decimated by the 10:1 voting power of the co-emperors.  (The transcript is available on Seeking Alpha.)  The emperors’ slate of candidates for board of directors were elected, banana republic style.  Five shareholder resolutions were presented by the disenfranchised stockholders and all five were voted down, a foregone conclusion before the resolutions were even presented to the emperors’ hand picked and compliant board of directors.

So why would Google’s emperors create this rubber stamp culture for what is likely the most powerful media multinational in the history of commerce?  One reason is because the law allows them to do so–they do it because they can.  If our elected officials cannot summon the courage to break up Google, they might be able to find the fortitude necessary to change the corporate law to ban the ability of insiders to decimate shareholders.  If you’re looking for a silver bullet worthy of Eugene O’Neill, that might be pretty close.

Another reason is because they want all of the benefits of being a public corporation with few of the responsibilities and none of the obligations of governance.

But perhaps there is a simpler explanation.

Perhaps they have something to hide.  Like paying $500,000,000 of the stockholders’ money to keep the emperors from being indicted and perhaps doing time for violating the Controlled Substances Act after a multi-year federal sting operation and grand jury hearing at which Google was forced to disclose 4,000,000 documents.

Or more likely, perhaps the emperors and elected officials need to hide the same thing–particularly at the state level where corporate laws are made in the U.S.

The transparency of Google’s lobbying disclosures was raised by Danielle Ginach, representing a holder of 115,000 shares of Google stock worth roughly $60 million.  A modest proposal in a shareholder resolution from Ms. Ginach’s group of stockholders that would require greater transparency by the emperors in how they are spending the stockholders’ money on lobbying was promptly shot down by the insiders.  In fact, it was likely dead before it was introduced.

If this all feels familiar to those of you who negotiate with Google, now you know where it comes from.

This year’s shareholder meeting is no different according to the Wall Street Journal:

Wednesday’s shareholder meeting proceeded as expected. Alphabet’s 11 directors retained their seats, and six shareholder proposals, including measures to require an independent chairman and disclose more information about Alphabet’s lobbying, were voted down. Mr. Schmidt and Google co-founders Mr. Page and Sergey Brin control a majority of Alphabet’s voting shares, making it impossible for shareholder proposals to succeed without their support….

Michael Passoff, the CEO of Proxy Impact, a shareholder-advocacy group, said Google “lags its peers in addressing gender-pay disparity” and pushed Mr. Schmidt to release more complete data on pay for men and women at Google. In a tense exchange, Mr. Schmidt said he wouldn’t commit to releasing a report on the issue—a proposal voted down earlier—but “would work to convince you this is true.”

The Google insiders never adopt any shareholder proposals, and essentially rub everyones noses in the fact that Google controls the entire company and everything it does.

Which means when you read stories about Google’s lobbying power, that’s really the lobbying power of Schmidt, Brin and Page.  Over time, as all bullies know, the victim will stop struggling if they internalize the fact that resistance is futile.

Wednesday’s meeting was the first opportunity for shareholders to question executives since the company reorganized into Alphabet, a holding company for its core business of Google and several other projects, such as home-automation firm Nest, research lab X and Google Fiber. But few shareholders asked tough questions. The first to speak asked executives why they no longer gave out coffee mugs at shareholder meetings; an executive later announced 100 free hats would be delivered.

Read about the 2016 meeting at the Wall Street Journal

Read about how Eric Schmidt got his board to approve $100 million bonus for himself in 2015 in USA Today.

Funny how Google never gets mentioned in discussions of income inequality by the candidates–but then Eric Schmidt provides campaign services to Hilary Clinton and Google is the largest contributors to Bernie Sanders.

Bernie April 2016

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