Being the Chairman of one of the world’s most famous and largest companies, and one that most of us use every day quite evidently has it perks. But the Executive Chairman of Google Inc (NASDAQ:GOOG), Eric Schmidt, had 100 million more reasons to be quite pleased with his existence after the corporation announced a deal which will certainly aid Schmidt’s financial position.
Most of us can only dream of being handed $100 million of stock, but that’s exactly what will occur to Schmidt in the coming months. Not a bad deal in itself to say the least for anyone, but this was by no means the first time that Schmidt has been handed such a payout. This is the second time in less than three years that Schmidt has been handed such a deal.
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Schmidt’s massive pay packet
Just in case you’re feeling that your own pay packet is a bit trivial by comparison, you might want to consider the full range of compensation that Schmidt receives before deciding on your full level of jealousy. In a filing with the Securities and Exchange Commission, Google Inc (NASDAQ:GOOG) also confirmed that Schmidt will receive $6 million next week as part of an annual cash bonus, which he recently received a 25 percent pay increase to $1.25 million annually. Google have stated that his package is related to “market benchmarks” for his current position, and reflects the work he did as CEO previously.
Certainly, Google Inc (NASDAQ:GOOG) is in an extremely strong position to make such decisions. With a market value of nearly $300 billion, only exceeded by Apple Inc. (NASDAQ:AAPL) and Exxon Mobil Corporation (NYSE:XOM), and a stock price which rose nearly 60 percent in 2013 alone, the company is in extremely good health. During the last calendar year, Google’s stock price broke through the $1,000 price point for the first time, while its revenue increased by nearly a quarter to reach $55.5 billion. This looks set to increase further still in 2014, with its sales for the fourth quarter of 2013 being reported as $16.9 billion. Even with no additional growth in 2014, four quarters of this sort of performance would lead to a $67 billion year for the corporation.
Google Inc (NASDAQ:GOOG) has every right to pay its executive phalanx whatever it chooses, and it will undoubtedly argue that positions such as these are extremely pressured and contribute massively to the overall profitability of the company. These are both valid arguments, and it would be extremely difficult to refute either point completely. But the sort of remuneration being received by Schmidt will again intensify the debate about executive pay, which has surged across most of the Western world during this era of austerity.
CEO / worker pay gap
In 2012, the average CEO of an S&P 500 Index company made 354 times the wage of the average worker in the United States. Note: not the poorest people, not the service level employees, not the Wal-Mart and McDonald’s workers…the average. While no-one would reasonably argue that a shop worker and the CEO of one of the world’s most significant companies should be paid at the same level, it does seem that 35,000% more pay for the CEO can be considered a somewhat skewed recognition of their importance.
In the case of Google Inc (NASDAQ:GOOG), those involved at the top level of the company may very well believe that their success entirely justifies whatever policies they follow. And they might have a point. Evidently its business is growing rapidly, exponentially during periods of last year, and there is plenty of potential for expansion. People are using the Google search engine as much as ever, while Google+ is becoming more significant and the tech side of its business is steadily growing too.
Controversial 24 hours for Google
However, one has to question whether or not this is a particularly timely piece of news for Google Inc (NASDAQ:GOOG) to release given what else was in the news today. Firstly, Google was due to pay an EU fine equivalent to billions of dollars, due to giving favorable treatment to its own products in search results. Naturally this was an anti-competitive measure which was viewed as completely unreasonable. Google has responded, not by paying the fine, but by promising to make changes.
Additionally, Google Inc (NASDAQ:GOOG) has also been hit by claims of tax evasion in France. The French authorities have today ordered the corporation to to pay a 1 billion euro tax bill ($1.35 billion) owing to its activities within the nation. Google has allegedly lowered its French tax liability by channeling its revenue through a Dutch-registered intermediary, and then to a Bermuda-registered holding, before eventually reporting its revenue in Ireland.
It’s hard not to see all three of these pieces of news as being indicative of a two-tier society. One wonders how the authorities would respond if an everyday person attempted to funnel their earnings through numerous nations in order to avoid paying tax. One might expect a prison sentence to be basically inevitable.
While such activity is yet to hurt Google Inc (NASDAQ:GOOG), in common with their previous controversies, and one must praise some of their technological innovations, the company still ought to be careful regarding its public perception. Certainly its image is not whiter than white, and even for a monster like Google such a public image must be borne in mind.