Google Board Approves Hefty Executive Compensation Raises

The world’s largest online search company, Google, significantly increased employee payouts effective January 1, 2011, according to a public 8-K securities and exchange (SEC) filing published late last week by the company.

The Google Board of Directors approved the hefty increase in base salaries with added stock options for top-level executives at the company.

Four executives, including Patrick Pichette (Senior VP, CFO), Nikesh Arora (President, Sales & Business Development), Alan Eustace (Senior VP, Engineering, and Jonathan Rosenberg (Senior VP, Product Management), will all receive a significant 30-percent increase in their respective base salaries, bringing their new annual base salaries to $650,000.

 Both Patrick Pichette and Nikesh Arora will each receive an additional $20-million in options, Alan Eustace will receive $10-million, and Jonathan Rosenberg will receive $5-million.

The three Google co-founders: Eric Schmidt, Sergey Brin, and Larry Page will each continue to receive their traditional $1 annual salary and were not awarded additional stock options.

Two of the three Google co-founders, Larry Page and Sergey Brin, entered into an agreement on November 30, 2009 (SEC filing), that would see them slowly selling off their Common B shares in the company, that could lead to losing their controlling voting power.

The agreement comes as a result of their personal preferences to ensuring adequate diversification and liquidity of their personal portfolios.

During Google’s initial public offering (IPO), the company set up two classes of Common stock, Class A and Class B common shares.

The differences between the two are solely in voting power: Class A shares have one vote per share, while Class B common shares have 10 votes per single share.

The combined total Class B shares between the two co-founders alone represent about 59-percent of the voting power, and about 18-percent of total capital, as at January 22, 2010.

Although not nearly as hefty as the top management payouts, Google is also giving all of its employees worldwide a 10-percent base salary increase, with a $1,000 Christmas bonus, according to an internal e-mail sent by the company chief executive Eric Schmidt.

A copy of the original e-mail was obtained from a Google employee who wanted to remain anonymous, Dr. Schmidt wrote in the email, “We want to make sure that you feel rewarded for your hard work, and we want to continue to attract the best people to Google,”

The company says bonuses would be determined by equally weighting individual and company-wide performance on an annual basis, also effective at the beginning of 2011.

Google currently employees about 25,000 people worldwide.

Competition by tech firms in California to have the most knowledgeable managers and executives working at their firms have caused companies to provide significant monetary incentives in a bid to retain employees and avoid defections to competitive firms.

The Google stock (NASDAQ:GOOG) has gained about 40-percent since the beginning of last September, and is now trading up to about $605 per share, about the same level seen at the beginning of 2010.