Business

Google Co-Founders, CEO Keep $1 Salaries

Google co-founders Sergey Brin and Larry Page and CEO Eric Schmidt aren’t getting a raise this year. Each is slated to make in 2006 exactly what they took home last year: US$1.

Google said in a filing with the Securities and Exchange Commission (SEC) that the three top executives would again forgo all but the token take-home salary. Instead, they will rely on the value of the piles of stock options they each hold to compensate them.

The decision to forsake take-home pay is seen as a largely symbolic move but comes at a time when executive compensation is in the spotlight.

The SEC recently backed a plan to require businesses to disclose more information about how they compensate CEOs and other top executives, giving investors and analysts more data on the total value of packages that often include thousands of dollars worth of non-cash perks.

The $1 salaries don’t make the three men paupers, however. In fact, all three were vaulted into the upper echelons of the wealthiest business figures in the U.S. when Google staged its initial public offering in August of 2004. According to the annual “world’s richest people” list compiled by Forbes magazine, Brin and Page were each worth around $7.2 billion in 2005, good for 55th place on its list, with Schmidt ranking at 210 with almost $2.8 billion in wealth.

Selling Steadily

In fact, some of the Google executives have been selling their accumulated stock for some time, apparently eager to take advantage of the stunning run-up in the share prices since Google went public in mid-2004.

Filings indicate that Brin, who now holds the title of president of technology, has sold some $1.6 billion worth of stock since the IPO, with Page, the president of products, dumping some 5.8 million shares, raising around $1.4 billion — pre-taxes, of course — in the process.

Schmidt, a former Sun Microsystems executive who was brought in to take over the reins at Google before it went public, has cashed in some $500 million worth of stock.

Those sales have stepped up in recent weeks, as Google’s stock has repeatedly tested new highs and as analysts try to outdo one another with ever-higher forecasts for where the stock, which has doubled in value in the past year, will go in the next 12 months.

Last month alone, for instance, Brin and Page each unloaded around $160 million worth of Google stock, following a long-range plan made when the company went public.

Thomson Financial recently reported that Google ranked as one of the most actively sold Internet stocks by insiders in 2005, though that may reflect the incredible run-up in the share prices more than any belief by executives that the stock is about to see a precipitous drop.

Timely Disclosure

In its filing, Google said it set the salaries “after a review of performance and competitive market data.”

Four senior vice presidents — David Drummond, general counsel and overseer of corporate development; Omid Kordestani, senior VP of worldwide sales and field operations; George Reyes, chief financial officer; and Shona Brown, senior VP of business operations — will all receive raises boosting their salaries from $175,000 to $250,000 this year, according to the 8-K form filed by Google.

Google disclosed its top salaries even as the business community continues to debate a plan by the SEC to require more complete disclosure of executive pay. The agency will vote later this year on rules that will lower the threshold for reporting non-cash benefits such as corporate planes or apartments, and require more information on stock options and executive pension plans.

“Stock and options is pay-for-performance, that’s why a lot of companies like to use those tools,” Joseph Rich, president of executive compensation consulting firm Pearl Meyer & Associates, told the E-Commerce Times.

While most public companies still pay CEOs and other executives a salary — the average is around the $250,000 to $500,000 range — the $1 approach has been used before. Steve Jobs took that amount of pay when he agreed to return to lead Apple again, for instance, a reunion that has paid amazing dividends for both sides, as Jobs has seen his own stock soar in value and Apple has turned the music industry on its head.

According to Rich, companies and shareholders alike agree on the need to pay executives, though the specifics of how to do that are often debated. “Stock options help tie pay to performance, but the timing becomes tricky,” he said. “When a stock goes way up in value, it can change what a pay plan looks like to investors and analysts.”

Technology companies in particular have long used stock options to lure the best talent, he noted.

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