12 ms·

Major investor calls on Google owner to ‘aggressively’ cut staff and pay

43 points by account-5 4y ago

newaccount2021 4y ago
lesuorac 4y ago
I might've missed it but I don't think the article actually links to the letter. I thought it was interesting that they called to reduce the pay of non-engineers rather explicitly. https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...
- sschueller 4y ago
  Well I for one call on Google to cut any stock buy backs and dividen payment.
  - lesuorac 4y ago
    GOOG and GOOGL don't have dividends. TCI actually calls on them to increase buy backs as "Alphabet's large cash balance is serving neither shareholders nor the company" and "share price is down 34% YTD ... The stock is very cheap ... Alphabet should ... significantly accelerate share repurchases". I personally disagree with some of this logic though. IMO, a large cash balance is serving the company as a hedge at going bankrupt and is less than a quarter's worth of expenses (~150B [1]). While companies aren't the same as individuals, I do think you can be justified in saying you're keeping 3 months worth of expenses in the bank. [1]: https://abc.xyz/investor/static/pdf/20221025_alphabet_10Q.pdf?cache=e4fe24f https://abc.xyz/investor/static/pdf/20221025_alphabet_10Q.pd...
    - PeterCorless 4y ago
      In a world of increased fiscal uncertainty having cash-on-hand makes a huge difference in being able to weather storms. We are literally weathering international warfare in Europe, a pandemic, and uncertainty whether we are heading to a period of inflation or recession [both?]. While minimizing your cash position is smart as a hedge against inflation — dollars will be worth less tomorrow so get rid of them now — it also helps weather a bad quarter or even a bad year or two. Being cash-strapped when a stochastic negative event hits means you are suddenly FORCED to take actions you would prefer not to. Like massive layoffs, scaling back on your core offerings, or cutting off your nose for future growth business.
    - Jabbles 4y ago
      > 3 months It's 9 months.
jmoak3 4y ago
They also unabashedly call to increase the buybacks in the face of imminent recession.
Jyaif 4y ago
News at 11, shareholder wants to: * reduce compensation * reduce R&D * increase share repurchase program
- adam_arthur 4y ago
  Well it’s a fair point to ask why Google’s median comp is far higher than Microsoft. Can it be justified with better results?
  - yakak 4y ago
    I'm not sure why that matters. For a very long time I was impressed with the low number of employees and the income per employee at Google. I think their raise in employees should ideally be because they finally have a new product with similar income per employee potential, less ideally they could be releasing a new product branching into Microsoft or IBMs territory and need many somewhat lower paid employees.
    - adam_arthur 4y ago
      It matters because inefficient business are bad for society. The reason economic prosperity has raised so many out of poverty is because systems and businesses get more efficient over time. Because when markets are competitive, cost to consumer declines to cost of production (with perfect competition) That’s the philosophical answer. If Google had more direct competition market forces would push wages down on their own. Make no mistake though, it’s not altruistic whatsoever to defend a system that functions inefficiently. It’s a value transfer from broader society to the above market wages of whichever company. Maybe that adheres to your priorities, maybe not, but broader society does best in aggregate when competition drives efficiencies
      - nemothekid 4y ago
        >It matters because inefficient business are bad for society. The implication that Google's employee wages are inefficient is hearsay; and it's the kind of MBA-babble that an hedgefund manager that is trying to increase short term profits would say. >If Google had more direct competition market forces would push wages down on their own. This makes no sense. If Google had more competition, wages would go up. The only incentive Google management has to keep wages high is to prevent employees from working for a competitor. I think people forget that in the early days of Google, Microsoft lost a lot of good engineers to Google because Google paid better.
lotsofpulp 4y ago
Who is the Google owner?
- adam_arthur 4y ago
  Alphabet. I guess they figure many don’t know that the company is technically called Alphabet
  - lesuorac 4y ago
    Don't agree. I think it's poor writing on the articles part. The letter is addressed explicitly to Sundar Pichai not Alphabet.
    - adam_arthur 4y ago
      The heading at the start of the letter says Alphabet
      - lesuorac 4y ago
        No the letter's heading says "TCI Fund Management Limited". Right under that says "Sundar Pichai". https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...
        adam_arthur 4y ago
        klyrs 4y ago
        That's the letterhead of the sender. Pichai is the recipient, under that is his affiliation: Alphabet. Edit: it's funny, I learned this in high school in a "keyboarding" class that was a complete waste of my time. At the time, I was annoyed: if I'm reading a letter, it's probably written to me; if I send a letter, the recipient will know that my name is not theirs. Where's the ambiguity? All these years later, it finally comes useful. I got an internet point.
PeterCorless 4y ago
While I can understand he wants compensation to be in in line with other peer tech companies in regard to non-technical roles at the same time Google isn't facing a fiscal cliff like the other companies were. After viewing what happened at Twitter, nobody should be taking any activist investor advice seriously any more. If he doesn't like how Google is run, guess what? He can SELL HIS SHARES. Google stock value is $1.28 TRILLION. This guy has a $6 billion investment. That's ~0.46% of the total value of the company. He's trying to pad his pocket by having the line workers empty theirs. He can kick rocks.
- Waterluvian 4y ago
  I can’t say I follow your logic at all. Companies exist to make money. Investors invest to make money. Investors have a desire (and sometimes a right) to be heard. But just because the investor has strong opinions and wants to be heard, it doesn’t mean Google has to listen or act. This is all operating precisely as it is meant to.
  - 627467 4y ago
    "companies exist to make money" and "investors Invest to make money" are very poor arguments. In what time horizon do companies/investors expect to make and how much money? This investor bought in since 2017. Has they sold at the last stock peak they would have made much money.
  - musicale 4y ago
    > Companies exist to make money Fiduciary duty isn't the same as company mission or purpose. If Google did not provide some sort of product or service it would not need to exist as a company. Even if Google were a pure research lab without obvious consumer or business products or services it would still be doing non-financial work that someone thought provided some kind of benefit. Investors are not Google's only stakeholders. Without customers or employees (for example) Google would cease to exist. Google may also discover that the general public is another stakeholder. Google's mission statement[1] isn't actually "to make as much money as possible" or even "to provide maximum value to shareholders" but rather "to organize the world’s information and make it universally accessible and useful." [1] https://about.google/intl/ALL_us/ https://about.google/intl/ALL_us/
usednet 4y ago
> Guy with an MBA tells company to do the only advice guys with MBAs know Its already been talked about endlessly here but time and time again we see that when MBAs come in, pay decreases but profits don't increase. https://www.nber.org/system/files/working_papers/w29874/w29874.pdf https://www.nber.org/system/files/working_papers/w29874/w298...
- cbzbc 4y ago
  There's also this research: https://hbr.org/2016/12/mbas-are-more-self-serving-than-other-ceos https://hbr.org/2016/12/mbas-are-more-self-serving-than-othe...
- MuffinFlavored 4y ago
  I sent this to my (very successful $100m-$300m net worth as far as I know) friend who has an MBA and used it to create his small businesses that he ended up profiting from/selling. He did not like/agree with the stats, lol.
  - wizzwizz4 4y ago
    Your friend isn't an MBA going in to existing organisations.
- refurb 4y ago
  I mean, that should be surprising? I imagine the MBA bean counter types are brought in when things are going badly?
clpm4j 4y ago
Ah of course, billionaire Sir Christopher Hohn wants hundreds of people/families to lose their incomes so that he can potentially juice a few more percentage points of fund returns.
_8j50 4y ago
Question, does anyone know if laying people off would save a huge amount of money? Just the guaranteed advertising revenue for twitter was almsost a billion dollars, with 7k workers salary cost seems to be about that much. So the layoffs maybe saved them 5-10% equivalent of annual revenue, is that roughly correct? You know what my theory is? This smells like what I was watching on cable news in '07, there are people in wallstreet that are trying to cause a recession so they can profit from shorts or something. You can cut on cloud infrastructure and other stuff in the rest 60-80% of operational cost centers but following the layoff trend only guarantees one thing: less economic/consumer activity which will cascade into the rest of the economy. Absolutley nothing of significance has changed between Q1 and Q4 nationwide that warrants the stock dives and demands of layoffs. Inflation was rising at about the same rate, people do spend less but from what I hear it is about the same as early 2020. So, strategic layoffs make sense but panic trend following smells like there is more happening behind the scenes. To this day, even after watching all the documentaties about the cause of the '08 crash I still believe the root cause was panic that cascaded to industries outside of housing and insurance. Smart enough investors would have counted and even promoted panic selling.
- chillacy 4y ago
  I'm not a finance guy, but from what I've heard, much of this is driven by the risk-free rate of return going up due to interest rate hikes. As the risk-free rate increases, business performance has to change on two fronts: 1. The value of dollars today / next year increase while the value of dollars in 5-10 years decreases, incentivizing less R&D and preferring short term operations (and cutting staff) 2. Profitability needs to increase overall in order to make sense owning stock vs a guaranteed return from the government, otherwise the risk of holding a stock doesn't make sense. Basically the opposite of what happened when interest rates dropped, where "cash is trash" became the mantra. So it is driven by investors, but it doesn't require any broad coordination, only shared beliefs and self interest.
object-a 4y ago
At a company like Google/Alphabet, what is the typical % ownership of shares that are held by employees?
otikik 4y ago
How about we tax the wealthy much more. Just saying.
stuaxo 4y ago
Is this a capital strike ? Everyone just itching to engineer a recession.
BMc2020 4y ago
I'm starting to think the giant corps are less trying to prepare for the recession and more trying to create it.

43 points by account-5 4y ago

newaccount2021 4y ago

I might've missed it but I don't think the article actually links to the letter. I thought it was interesting that they called to reduce the pay of non-engineers rather explicitly. https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...

sschueller 4y ago
Well I for one call on Google to cut any stock buy backs and dividen payment.
- lesuorac 4y ago
  GOOG and GOOGL don't have dividends. TCI actually calls on them to increase buy backs as "Alphabet's large cash balance is serving neither shareholders nor the company" and "share price is down 34% YTD ... The stock is very cheap ... Alphabet should ... significantly accelerate share repurchases". I personally disagree with some of this logic though. IMO, a large cash balance is serving the company as a hedge at going bankrupt and is less than a quarter's worth of expenses (~150B [1]). While companies aren't the same as individuals, I do think you can be justified in saying you're keeping 3 months worth of expenses in the bank. [1]: https://abc.xyz/investor/static/pdf/20221025_alphabet_10Q.pdf?cache=e4fe24f https://abc.xyz/investor/static/pdf/20221025_alphabet_10Q.pd...
  - PeterCorless 4y ago
    In a world of increased fiscal uncertainty having cash-on-hand makes a huge difference in being able to weather storms. We are literally weathering international warfare in Europe, a pandemic, and uncertainty whether we are heading to a period of inflation or recession [both?]. While minimizing your cash position is smart as a hedge against inflation — dollars will be worth less tomorrow so get rid of them now — it also helps weather a bad quarter or even a bad year or two. Being cash-strapped when a stochastic negative event hits means you are suddenly FORCED to take actions you would prefer not to. Like massive layoffs, scaling back on your core offerings, or cutting off your nose for future growth business.
  - Jabbles 4y ago
    > 3 months It's 9 months.

jmoak3 4y ago

They also unabashedly call to increase the buybacks in the face of imminent recession.

Jyaif 4y ago

News at 11, shareholder wants to: * reduce compensation * reduce R&D * increase share repurchase program

adam_arthur 4y ago
Well it’s a fair point to ask why Google’s median comp is far higher than Microsoft. Can it be justified with better results?
- yakak 4y ago
  I'm not sure why that matters. For a very long time I was impressed with the low number of employees and the income per employee at Google. I think their raise in employees should ideally be because they finally have a new product with similar income per employee potential, less ideally they could be releasing a new product branching into Microsoft or IBMs territory and need many somewhat lower paid employees.
  - adam_arthur 4y ago
    It matters because inefficient business are bad for society. The reason economic prosperity has raised so many out of poverty is because systems and businesses get more efficient over time. Because when markets are competitive, cost to consumer declines to cost of production (with perfect competition) That’s the philosophical answer. If Google had more direct competition market forces would push wages down on their own. Make no mistake though, it’s not altruistic whatsoever to defend a system that functions inefficiently. It’s a value transfer from broader society to the above market wages of whichever company. Maybe that adheres to your priorities, maybe not, but broader society does best in aggregate when competition drives efficiencies
    - nemothekid 4y ago
      >It matters because inefficient business are bad for society. The implication that Google's employee wages are inefficient is hearsay; and it's the kind of MBA-babble that an hedgefund manager that is trying to increase short term profits would say. >If Google had more direct competition market forces would push wages down on their own. This makes no sense. If Google had more competition, wages would go up. The only incentive Google management has to keep wages high is to prevent employees from working for a competitor. I think people forget that in the early days of Google, Microsoft lost a lot of good engineers to Google because Google paid better.

lotsofpulp 4y ago

Who is the Google owner?

adam_arthur 4y ago
Alphabet. I guess they figure many don’t know that the company is technically called Alphabet
- lesuorac 4y ago
  Don't agree. I think it's poor writing on the articles part. The letter is addressed explicitly to Sundar Pichai not Alphabet.
  - adam_arthur 4y ago
    The heading at the start of the letter says Alphabet
    - lesuorac 4y ago
      No the letter's heading says "TCI Fund Management Limited". Right under that says "Sundar Pichai". https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...
      - adam_arthur 4y ago
      - klyrs 4y ago
        That's the letterhead of the sender. Pichai is the recipient, under that is his affiliation: Alphabet. Edit: it's funny, I learned this in high school in a "keyboarding" class that was a complete waste of my time. At the time, I was annoyed: if I'm reading a letter, it's probably written to me; if I send a letter, the recipient will know that my name is not theirs. Where's the ambiguity? All these years later, it finally comes useful. I got an internet point.

PeterCorless 4y ago

While I can understand he wants compensation to be in in line with other peer tech companies in regard to non-technical roles at the same time Google isn't facing a fiscal cliff like the other companies were. After viewing what happened at Twitter, nobody should be taking any activist investor advice seriously any more. If he doesn't like how Google is run, guess what? He can SELL HIS SHARES. Google stock value is $1.28 TRILLION. This guy has a $6 billion investment. That's ~0.46% of the total value of the company. He's trying to pad his pocket by having the line workers empty theirs. He can kick rocks.

Waterluvian 4y ago
I can’t say I follow your logic at all. Companies exist to make money. Investors invest to make money. Investors have a desire (and sometimes a right) to be heard. But just because the investor has strong opinions and wants to be heard, it doesn’t mean Google has to listen or act. This is all operating precisely as it is meant to.
- 627467 4y ago
  "companies exist to make money" and "investors Invest to make money" are very poor arguments. In what time horizon do companies/investors expect to make and how much money? This investor bought in since 2017. Has they sold at the last stock peak they would have made much money.
- musicale 4y ago
  > Companies exist to make money Fiduciary duty isn't the same as company mission or purpose. If Google did not provide some sort of product or service it would not need to exist as a company. Even if Google were a pure research lab without obvious consumer or business products or services it would still be doing non-financial work that someone thought provided some kind of benefit. Investors are not Google's only stakeholders. Without customers or employees (for example) Google would cease to exist. Google may also discover that the general public is another stakeholder. Google's mission statement[1] isn't actually "to make as much money as possible" or even "to provide maximum value to shareholders" but rather "to organize the world’s information and make it universally accessible and useful." [1] https://about.google/intl/ALL_us/ https://about.google/intl/ALL_us/

usednet 4y ago

> Guy with an MBA tells company to do the only advice guys with MBAs know Its already been talked about endlessly here but time and time again we see that when MBAs come in, pay decreases but profits don't increase. https://www.nber.org/system/files/working_papers/w29874/w29874.pdf https://www.nber.org/system/files/working_papers/w29874/w298...

cbzbc 4y ago
There's also this research: https://hbr.org/2016/12/mbas-are-more-self-serving-than-other-ceos https://hbr.org/2016/12/mbas-are-more-self-serving-than-othe...
MuffinFlavored 4y ago
I sent this to my (very successful $100m-$300m net worth as far as I know) friend who has an MBA and used it to create his small businesses that he ended up profiting from/selling. He did not like/agree with the stats, lol.
- wizzwizz4 4y ago
  Your friend isn't an MBA going in to existing organisations.
refurb 4y ago
I mean, that should be surprising? I imagine the MBA bean counter types are brought in when things are going badly?

clpm4j 4y ago

Ah of course, billionaire Sir Christopher Hohn wants hundreds of people/families to lose their incomes so that he can potentially juice a few more percentage points of fund returns.

_8j50 4y ago

Question, does anyone know if laying people off would save a huge amount of money? Just the guaranteed advertising revenue for twitter was almsost a billion dollars, with 7k workers salary cost seems to be about that much. So the layoffs maybe saved them 5-10% equivalent of annual revenue, is that roughly correct? You know what my theory is? This smells like what I was watching on cable news in '07, there are people in wallstreet that are trying to cause a recession so they can profit from shorts or something. You can cut on cloud infrastructure and other stuff in the rest 60-80% of operational cost centers but following the layoff trend only guarantees one thing: less economic/consumer activity which will cascade into the rest of the economy. Absolutley nothing of significance has changed between Q1 and Q4 nationwide that warrants the stock dives and demands of layoffs. Inflation was rising at about the same rate, people do spend less but from what I hear it is about the same as early 2020. So, strategic layoffs make sense but panic trend following smells like there is more happening behind the scenes. To this day, even after watching all the documentaties about the cause of the '08 crash I still believe the root cause was panic that cascaded to industries outside of housing and insurance. Smart enough investors would have counted and even promoted panic selling.

chillacy 4y ago
I'm not a finance guy, but from what I've heard, much of this is driven by the risk-free rate of return going up due to interest rate hikes. As the risk-free rate increases, business performance has to change on two fronts: 1. The value of dollars today / next year increase while the value of dollars in 5-10 years decreases, incentivizing less R&D and preferring short term operations (and cutting staff) 2. Profitability needs to increase overall in order to make sense owning stock vs a guaranteed return from the government, otherwise the risk of holding a stock doesn't make sense. Basically the opposite of what happened when interest rates dropped, where "cash is trash" became the mantra. So it is driven by investors, but it doesn't require any broad coordination, only shared beliefs and self interest.

object-a 4y ago

At a company like Google/Alphabet, what is the typical % ownership of shares that are held by employees?

otikik 4y ago

How about we tax the wealthy much more. Just saying.

stuaxo 4y ago

Is this a capital strike ? Everyone just itching to engineer a recession.

BMc2020 4y ago

I'm starting to think the giant corps are less trying to prepare for the recession and more trying to create it.