5 ms·

The CEO is not a founder. He's beholden to the shareholders without any leverage for pushback.

simion314 8y ago
I am not familiar how this things work, is there some kind of a vote where shareholders debate if this(censorship) is a good idea or not? Or there are only a few people that can decide it.
- sleepychu 8y ago
  It's implicit, the CEO must deliver value to the shareholders or be replaced. Capitalism doesn't leave a lot of room for moral standing.
  - C1sc0cat 8y ago
    Rather difficult with Googles dual class share structure
  - robin_reala 8y ago
    That’s totally arguable though. For example: ‘By actively not engaging with the Chinese market we retain our core client base in the US, which would leak away in the event of persistant negative media coverage’. It doesn’t have to be a straight up monetary calculation.
  - sveme 8y ago
    Shareholders have and should have moral positions as well. Capitalism can and should be tamed, otherwise there is no difference between Mexican cartels and American corporations.
  - tikkabhuna 8y ago
    Large shareholders have corporate values (ethical, etc) that they will push onto companies they own shares in. Blackrock[1] has said social responsibility is important to them. Companies looking for investment need to operate with principles aligned with investors or investors will look for alternatives. [1] - https://www.cnbc.com/2018/01/23/blackrocks-push-for-social-responsibility-shows-shift-in-companies.html https://www.cnbc.com/2018/01/23/blackrocks-push-for-social-r...
  - lallysingh 8y ago
    That's what I get for a quick post on my commute. I meant that Sundar Pichai, CEO of Google, isn't a founder of Google. So he doesn't have any leverage over the board for moral stances, and is instead stuck doing their bidding. Of course, I'm also a bit wrong w.r.t. the structure of Alphabet. Where's Alphabet's leadership on this?
- qubax 8y ago
  Shareholders > Board of Directors > C-Suite ( CEO, CTO, CFO, etc ) Shareholders select the board members. The board members determine the overall plan and direction of the company. The C-Suite ( CEO, CTO, CFO, etc ) execute the plan of and follow the directions of the board. If the board members want to make drastic changes, they can ask the shareholders to vote on it. If the shareholders don't like certain board members or the changes or direction of the company, then can vote to remove board members and put in members they want. https://www.investopedia.com/ask/answers/040315/what-can-shareholders-vote.asp https://www.investopedia.com/ask/answers/040315/what-can-sha... Normally, the CEOs do what the board wants and the board have a fiduciary duty to make money for the shareholders. So unless we have a rogue CEO going against the wishes of the board or shareholders, it's highly likely that most of the shareholders will support google's ambitions in china. Do you think shareholders would have voted for Apple to leave china and leave tens of billions in revenue and profits on the table? If anything, shareholders are probably asking google's board why google isn't doing business in china already.
  - _nalply 8y ago
    Adding to this marvelous answer: Shareholders > Board of Directors > C-Suite ( CEO, CTO, CFO, etc ) > Management > Employees
    - adtac 8y ago
      ... and of course, at the very end, users :)
  - simion314 8y ago
    Are google actions transparent to the Shareholders? As you explained they elect the board they do not vote on do we do this imoral thing or not. I imagine some could consider that the short profits will not be good enough if the downside is the Google image getting even worse and long terms profits will fall.
  - kryptiskt 8y ago
    Alphabet has different share classes, and Page, Brin and Schmidt can outvote the rest of the shareholders. That has been motivated by the need to avoid this kind of thing. Also, fiduciary duty doesn't mean that the CEO has a duty to bring in the profits. It means that he shouldn't dip in the till.
seanhunter 8y ago
This is not necessarily how things work (source: am a C-suite exec now and was in my previous role too, although not any company nearly as big or important as Google/Alphabet obviously). Think of shareholders like voters in a not-very-well-functioning democracy. They hold ultimate power, but don't get to vote on things that often and certainly not on every decision. So their power gets exercised on big lumpy things like restructuring the cap table or executive appointments. Big shareholders may well be informed or even consulted about big decisions though, and have informal opportunities to make their general feelings known by meeting senior management. If the shareholders are unhappy they might orchestrate a rebellion and block executive comp or vote on some independent board members or whatever. The board is like the legislature in a parliamentary democracy. They are accountable to the shareholders because they are appointees, so if the shareholders don't like what they do they can give them the boot and appoint someone else. Likewise they can fire the executives if they need to, and also get a vote about a wider range of issues than the shareholders. They therefore have more direct control than the shareholders, but its still not at a very granular level of detail typically. Or if they are going super granular on one topic they are really zoomed out from everything else (and giving the executives more latitude in those areas). So I have been at board meetings where there is a 100 page board pack and the entire conversation has revolved around a microscopic discussion of one page, with everything else being skipped over. Then the c-suite are like the executive branch. They deal with the day to day and actually have to get things done. On a daily basis shareholders and the board will generally leave them alone unless things are going poorly (in which case the eye of sauron is on you). So hopefully it follows from that model that you actually have a lot of leverage as an executive and a lot of latitude to make decisions within a general strategic direction that has been agreed by board and shareholders. Secondly, shareholders are not a uniform blob of faceless avaricious beasts who care only about profit - institutional shareholders will have their respective shareholders and issues like reputational risk etc to consider. As an exec, you can often use credibility you have built up to persuade them of a particular strategic direction and they may or may not give you leeway depending on how much you have delivered in the past etc.
kryptiskt 8y ago
All the voting power rests with Page, Brin and Schmidt. The CEO just have to convince those three people.
bigbluedots 8y ago
That doesn't mean that the CEO is compelled to choose profit regardless of other considerations.

I am not familiar how this things work, is there some kind of a vote where shareholders debate if this(censorship) is a good idea or not? Or there are only a few people that can decide it.

sleepychu 8y ago
It's implicit, the CEO must deliver value to the shareholders or be replaced. Capitalism doesn't leave a lot of room for moral standing.
- C1sc0cat 8y ago
  Rather difficult with Googles dual class share structure
- robin_reala 8y ago
  That’s totally arguable though. For example: ‘By actively not engaging with the Chinese market we retain our core client base in the US, which would leak away in the event of persistant negative media coverage’. It doesn’t have to be a straight up monetary calculation.
- sveme 8y ago
  Shareholders have and should have moral positions as well. Capitalism can and should be tamed, otherwise there is no difference between Mexican cartels and American corporations.
- tikkabhuna 8y ago
  Large shareholders have corporate values (ethical, etc) that they will push onto companies they own shares in. Blackrock[1] has said social responsibility is important to them. Companies looking for investment need to operate with principles aligned with investors or investors will look for alternatives. [1] - https://www.cnbc.com/2018/01/23/blackrocks-push-for-social-responsibility-shows-shift-in-companies.html https://www.cnbc.com/2018/01/23/blackrocks-push-for-social-r...
- lallysingh 8y ago
  That's what I get for a quick post on my commute. I meant that Sundar Pichai, CEO of Google, isn't a founder of Google. So he doesn't have any leverage over the board for moral stances, and is instead stuck doing their bidding. Of course, I'm also a bit wrong w.r.t. the structure of Alphabet. Where's Alphabet's leadership on this?
qubax 8y ago
Shareholders > Board of Directors > C-Suite ( CEO, CTO, CFO, etc ) Shareholders select the board members. The board members determine the overall plan and direction of the company. The C-Suite ( CEO, CTO, CFO, etc ) execute the plan of and follow the directions of the board. If the board members want to make drastic changes, they can ask the shareholders to vote on it. If the shareholders don't like certain board members or the changes or direction of the company, then can vote to remove board members and put in members they want. https://www.investopedia.com/ask/answers/040315/what-can-shareholders-vote.asp https://www.investopedia.com/ask/answers/040315/what-can-sha... Normally, the CEOs do what the board wants and the board have a fiduciary duty to make money for the shareholders. So unless we have a rogue CEO going against the wishes of the board or shareholders, it's highly likely that most of the shareholders will support google's ambitions in china. Do you think shareholders would have voted for Apple to leave china and leave tens of billions in revenue and profits on the table? If anything, shareholders are probably asking google's board why google isn't doing business in china already.
- _nalply 8y ago
  Adding to this marvelous answer: Shareholders > Board of Directors > C-Suite ( CEO, CTO, CFO, etc ) > Management > Employees
  - adtac 8y ago
    ... and of course, at the very end, users :)
- simion314 8y ago
  Are google actions transparent to the Shareholders? As you explained they elect the board they do not vote on do we do this imoral thing or not. I imagine some could consider that the short profits will not be good enough if the downside is the Google image getting even worse and long terms profits will fall.
- kryptiskt 8y ago
  Alphabet has different share classes, and Page, Brin and Schmidt can outvote the rest of the shareholders. That has been motivated by the need to avoid this kind of thing. Also, fiduciary duty doesn't mean that the CEO has a duty to bring in the profits. It means that he shouldn't dip in the till.

seanhunter 8y ago

This is not necessarily how things work (source: am a C-suite exec now and was in my previous role too, although not any company nearly as big or important as Google/Alphabet obviously). Think of shareholders like voters in a not-very-well-functioning democracy. They hold ultimate power, but don't get to vote on things that often and certainly not on every decision. So their power gets exercised on big lumpy things like restructuring the cap table or executive appointments. Big shareholders may well be informed or even consulted about big decisions though, and have informal opportunities to make their general feelings known by meeting senior management. If the shareholders are unhappy they might orchestrate a rebellion and block executive comp or vote on some independent board members or whatever. The board is like the legislature in a parliamentary democracy. They are accountable to the shareholders because they are appointees, so if the shareholders don't like what they do they can give them the boot and appoint someone else. Likewise they can fire the executives if they need to, and also get a vote about a wider range of issues than the shareholders. They therefore have more direct control than the shareholders, but its still not at a very granular level of detail typically. Or if they are going super granular on one topic they are really zoomed out from everything else (and giving the executives more latitude in those areas). So I have been at board meetings where there is a 100 page board pack and the entire conversation has revolved around a microscopic discussion of one page, with everything else being skipped over. Then the c-suite are like the executive branch. They deal with the day to day and actually have to get things done. On a daily basis shareholders and the board will generally leave them alone unless things are going poorly (in which case the eye of sauron is on you). So hopefully it follows from that model that you actually have a lot of leverage as an executive and a lot of latitude to make decisions within a general strategic direction that has been agreed by board and shareholders. Secondly, shareholders are not a uniform blob of faceless avaricious beasts who care only about profit - institutional shareholders will have their respective shareholders and issues like reputational risk etc to consider. As an exec, you can often use credibility you have built up to persuade them of a particular strategic direction and they may or may not give you leeway depending on how much you have delivered in the past etc.

kryptiskt 8y ago

All the voting power rests with Page, Brin and Schmidt. The CEO just have to convince those three people.

bigbluedots 8y ago

That doesn't mean that the CEO is compelled to choose profit regardless of other considerations.