8 ms·
If anyone at Gooogle is wondering why they are going through this pain or might have been fired it is because TCI, which is an activist hedge fund, decided the
by AndrewKemendo 4y ago
If anyone at Gooogle is wondering why they are going through this pain or might have been fired it is because TCI, which is an activist hedge fund, decided they want to make more money and they have a giant share of ownership of Alphabet stock.
TCI sent Google a letter [1] telling them they need to cut people to get higher margins (>40%) as well as pay the investors more (stock buybacks).
Google is choosing to do what this group of investors says instead of supporting it's employees.
Just so you know.
[1] https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...
Edit: This data came from me asking myself of the headline "ok who is it that is putting "Pressure to Cut Costs" on Google." Luckily TCI made it really clear
- edwnj 4y ago[flagged]
- noncoml 4y ago
- astrange 4y agoGoogle and newer tech companies have dual-class share structures so the board's boss is Sergey Brin, not "the shareholders".
- devalidating 4y agoGoogle actually has three classes of shares. Class A common stock with normal voting rights, listed as GOOGL, Class B common stock which has 10x voting rights and over 90% of which is owned by Larry Page Sergey Brin or Eric Schmidt, and Class C capital stock with no voting rights traded under GOOG.
- edwnj 4y agoYes dual class shares means most modern tech companies are de facto dictatorships but that doesnt change the point. Sergey's boss is the shareholders. This is not theoretical. The most infamous example of one sided dual class shares is Meta. Zuckerberg decided to throw the middle finger to the board and share holders, highest employee growth in FAANG.. He ignored activist shareholder letters like the one from Brad Gerstner and now the stock is collapsing, way beyond the corrections the rest of big tech faced. He has already began course correction but lets say he instead Zuck decided to double down. You can easily see more rounds of shareholder rout.
- edwnj 4y agoBeyond investor routs and its massive downstream consequences.. The are legal ramifications. The board and Zuck as fiduciary responsibility to the majority of shareholders. There is a reason why ever board member gets directors insurance. If Zuck doesn't do the right thing and continues to make irresponsible gambles, the shareholders can sue him. This is also not theoretical either, there are already suits (unrelated): https://www.politico.com/news/2021/09/21/facebook-paid-billions-extra-to-the-ftc-to-spare-zuckerberg-in-data-suit-shareholders-allege-513456 https://www.politico.com/news/2021/09/21/facebook-paid-billi...
- astrange 4y agoYou can sue anyone for anything but company directors can more or less do anything they want. Are they winning?
- bla3 4y agoAnother explanation might be that tech companies are doing poorly in general at the moment, and Google is one of the few companies that hasn't done mass layoffs yet.
- emodendroket 4y agoProbably a bit of both but yes the rate hikes have been especially hard on tech. I think it is also a reasonable question why Google needs to have two competing products that do the exact same thing.
- ghaff 4y agoThey're two products that ostensibly do the same thing. And, if your answer is WELL, having a separate product like Waze lets us do slightly (arguably) sketchy things like route people through residential neighborhood streets with pedestrians to save 30 seconds or flag police speed traps, I'm not sympathetic. Do or not do but own it in either case. It's the same company.
- AndrewKemendo 4y agoThat's not "another explanation" that's the exact dynamic: TCI, who do not actually run the business, are threatening the CEO (addressed to Sundar) that they will move their money if Google doesn't do what they say - namely cut costs etc... Is it more likely that TCI investors know how better to run Google than Google does or that they don't care and are blindly seeking alpha with no care for the people that run it?
- michaelt 4y agoTo be fair, every single person on HN thinks they know how to run Google better than Google does.
- AndrewKemendo 4y agoYes, well luckily nobody on HN can compel Google to do anything differently. This group of investors however can compel Google to do things differently and as George Carlin once said: "It's a big club, and you ain't in it"
- mrep 4y ago> giant share of ownership of Alphabet stock 6 billion dollars worth or 0.5% of the market cap. Not so big
- deleted 4y ago[deleted]
- makestuff 4y agoAlso the CEO of that fund is the highest paid employee in the UK. IMO he should cut his salary to improve returns for his investors.
- pifm_guy 4y ago'highest paid employee' usually means 'has arranged ones personal financial affairs badly'. In the UK, being a salaried employee means you pay a rather high rate of tax, compared to other schemes used by rich people - like for example having some of the work done as charitable work, having mostly stock, getting paid via a company, etc.
- jjulius 4y agoNormally, I'd read your comment, grab my pitchfork and join you. This time, I disagree. Here's what TCI wrote in their letter: >The company has too many employees and the cost per employee is too high. >Headcount is too high. >... the business could be operated more effectively with significantly fewer employees. Yeah, cash-hungry hedge fund calling for layoffs. Got it. Yet here's an excerpt from the WSJ article on this restructuring: >Google said it planned to maintain Waze as a stand-alone service and didn’t plan to conduct any layoffs as part of the reorganization.
- AndrewKemendo 4y agoI'm open to changing my mind here so which are you suggesting: 1. Google did the Waze Maps/Maps merger to appease TCI so they could prevent layoffs 2. The Waze Maps/Maps merger is unrelated to the TCI memo
- jjulius 4y agoI am saying that this move is largely unrelated to the TCI memo. The WSJ article goes further: >In September, Mr. Pichai said he wanted Google to become 20% more productive and indicated the company could merge teams working on overlapping products. TCI's memo highlights five areas they think need to be adjusted, none of which Alphabet acquiesced to with this restructuring.
- AndrewKemendo 4y agoOk, so then who is pressuring google to take these actions?
- ryanwaggoner 4y agoWho is pressuring you to leave these comments?
- jjulius 4y agoTo be frank: don't know, don't care, and I don't need to have an answer to that question in order to be able to disagree with your original point. You came to this thread telling Googlers that the blame for this lies with TCI. I was curious, so I read TCI's memo and the WSJ piece. Now that I've done so, I simply find your assertion far-fetched, for these differences: TCI - Sent letter to Alphabet in mid-November - Holds a mere .5% of Alphabet's market cap - Asked for headcount reduction - Asked Alphabet to pay employees less Alphabet - Publicly commented in September that they intended to combine overlapping groups - Combined overlapping groups - Didn't lay anyone off That's it. At this point, given your slightly elevated tone in your most recent responses, it's starting to feel as though you began commenting with an axe to grind, and are now left holding an axe but are unsure what you should do with it. Maybe just put it down?
- bitL 4y agoThe usual short-term thinking. Get more money quickly at the cost of the first major layoffs that demoralizes the company leading to nasty internal politics, gradually destroying the company from within.
- edwnj 4y ago[flagged]
- dang 4y agoWe've banned this account for breaking the site guidelines and ignoring our request to stop. If you don't want to be banned, you're welcome to email hn@ycombinator.com and give us reason to believe that you'll follow the rules in the future. They're here: https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html.
- edwnj 4y ago
- deleted 4y ago[deleted]
- mjfl 4y agoWow, I seriously never thought Google would be vulnerable to activist investor actions because it's market cap is too big and its shareholders too idealistic. I'm still not sure that's not the case? Activist investors are sending letters all the time, and it's not a given that they are taken seriously, only if a shareholder vote would approve of their company policy goals. How do you know that TCI has a serious chance of that happening? If not then it's likely that Google's leadership just ignores it.
- AndrewKemendo 4y agoFrom the headline and article respectively: "Google Combines Maps and Waze Teams Amid Pressure to Cut Costs" "...as the search giant faces pressure to streamline operations and cut costs." "The activist hedge fund TCI Fund Management called on Alphabet to aggressively cut costs last month, writing in a letter to management that it thought the company’s head count was too high." Are you suggesting that the WSJ is totally off base by drawing the conclusion that pressure from TCI, via this letter, is not the cause of the restructuring?
- jjulius 4y ago>Are you suggesting that the WSJ is totally off base by drawing the conclusion that pressure from TCI, via this letter, is not the cause of the restructuring? That's a misrepresentation of what the WSJ piece says. All the article is doing there is highlighting that there has been external pressure on Google to cut costs. The excerpt you highlighted points out TCI's request for reduced headcount, while a few paragraphs earlier, the article says that there is no plan to reduce headcount.
- joshuamorton 4y ago> Are you suggesting that the WSJ is totally off base by drawing the conclusion that pressure from TCI, via this letter, is not the cause of the restructuring? Yes. In fact its off base enough that I don't think they actually make that claim in the article. TCI holds something like .5% of alphabet market cap, that's less than is held by multiple individual human investors in Google, and likely less than rank-and-file employees hold collectively. It'd be weird to pay any attention to such a group.
- unicornmama 4y agoWhat is wrong with that exactly? Investors risk their own money to expect a return. Large investors have a say in the management. Google’s leadership has no obligation to support it’s employees at the expense of its shareholders.
- AndrewKemendo 4y ago>Google’s leadership has no obligation to support it’s employees at the expense of its shareholders. Because that is unethical
- bolt7469 4y agoConsider the following: Google has a fiduciary duty to its shareholders. Google has no duty to retain an employee hired at-will. Is it more ethical to reject a duty by favoring the employees? Deontological ethics suggests otherwise.
- AndrewKemendo 4y ago>Google has a fiduciary duty to its shareholders. "Shareholder Primacy" is the biggest most unethical scam that continues to go unchecked as though it were law, which it is most certainly not. It is an unethical and outdated relic of rapacious greed "On August 19, 2019, 181 CEOs of America’s largest corporations overturned a 22-year-old policy statement that defined a corporation’s principal purpose as maximizing shareholder return" [1] [1] https://purpose.businessroundtable.org/ https://purpose.businessroundtable.org/
- HDThoreaun 4y agoA corporations primary goal is enacting shareholders wishes. You can talk about stakeholders all you want. It’s bullshit. Companies exist to do what shareholders want, and 9 times out of ten that is make as much money as possible.
- 4y ago
- BurningFrog 4y agoAs a former Google employee, I don't think TCI is wrong.
- dzikimarian 4y agoThat's pretty normal communication from investors. Everyone cuts costs, so some of yours will see a chance to make you do the same. I would be very surprised if Sundar loses sleep over this pdf. Source: been on receiving end of such messages (bit smaller endeavor than Google though :-)).
- lobochrome 4y agoGoogle is doing what its owners want it to do and not what its highly-paid employees in cash-losing divisions would prefer. Are "Property rights just for losers"?!
- AndrewKemendo 4y agoWhose property? https://www.gutenberg.org/cache/epub/360/pg360-images.html https://www.gutenberg.org/cache/epub/360/pg360-images.html
- jupp0r 4y agoNobody is arguing that Google is not legally allowed to do this. People here merely argue that it's not a smart business move to make employees unhappy when the company has spent (and wants to spend in the future) lots of money to make and keep employees happy. Google is not a shoe producer or Cobalt mine in case you haven't noticed.
- Khaine 4y agoShock! Horror! People who own shares in the company, have a view on what management should be doing and expressed it to them! How dare they. :rollseyes:
- AlbertCory 4y agoTCI's letter says they own $6 billion worth of shares. According to [1], Alphabet's market cap is $1.216 trillion as of today. Now, if Blackrock, Vanguard, Fidelity, Schwab, and all the pension funds got together, that might add up to something. [1] https://ycharts.com/companies/GOOG/market_cap https://ycharts.com/companies/GOOG/market_cap
- trident5000 4y agoIts a big problem these funds that are essentially custodians are taking their customers voting power to break corporations to their will. Needs to be legislation that curbs this as many others have been saying.
- AlbertCory 4y agoI'm tempted to say "they're the owners, that means they have the votes." Which is true. And "many others" is a vapid, meaningless phrase. However, proxies are voted in accordance with the "recommendations" of a very few advisory firms. That means that if you buy 10 million dollars worth of ETFs, all of those many, many shares are voted without your input. I'd certainly support legislation to give the "final" owners of those shares the right to vote the proxies themselves. Maybe that's what you meant.
- matwood 4y agoTBH, Googles plethora of chat apps shows TCI is not wrong. Yet another chat app is bored people looking for something to do.
- ThrustVectoring 4y agoThey're careerist, not bored. The promotion process at Google is how you advance your career, and shipping new applications and features is how you get promoted.
- amvlsdsmv 4y agoThe stock is down over 30% YTD. One of the biggest investor is asking for cutting costs. I understand how this is hard for an employee, but I do not see what's wrong here. If it was your company or you were one of the biggest investor in the company, would be asking to cut costs and focus on efficiency, specially with the last 12 months of hiring and a likely recession to look forward to next year?
- melony 4y agoFound the MBA.
- thehappypm 4y agoIf I was a sheep, sure. Google is still growing revenue YoY despite 2021 being a huge year for online services due to pandemic shifts. They’re making hundreds of thousands in net profit per full-time employee. A dumb CEO would do layoffs at this moment. They don’t need to financially, and the morale hit (and lost productivity) could be disastrous for the company. But yeah, since other companies are doing layoffs, Google should too.
- compiler-guy 4y ago"One of the biggest investors" Not really. TCI doesn't even appear in the top 10 [1], and even if they were, the Founders still hold controlling interest. [1] https://money.cnn.com/quote/shareholders/shareholders.html?symb=GOOG&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s...
- no_wizard 4y agoThey can send all the letters they want. Larry & Sergey have controlling interest[0] in Alphabet and can very much decide to ignore any of this if they want. In effect, TCI can't compel them to do anything they don't want to do. I think merging Waze and Google Maps teams is actually smart, whether it cuts cost or not seems like they have similar goals as a product. That said, doesn't mean Alphabet won't head some investors letters or something, so its always possible [0]: https://capital.com/alphabet-shareholder-who-owns-most-googl https://capital.com/alphabet-shareholder-who-owns-most-googl
- ramesh31 4y ago> In effect, TCI can't compel them to do anything they don't want to do. Yes, they can. It’s called fiduciary responsibility, and shareholders sue for it all the time.
- brewdad 4y agoIn the US you can sue anyone for anything. It doesn't mean you'll win a damn cent though.
- UncleMeat 4y ago"We took a 50 billion dollars and lit it on fire" is meaningfully different from "we structured our teams in a way that you think is inefficient."
- gumby 4y agoTheir fiduciary responsibility is not to defraud the shareholders. Milton Friedman’s idea that management’s only constituency is the shareholders is not actually a matter of law. Management can just say “in our judgement X is the right thing to do, not Y”. Google is too big for TCI to try to gain control over.
- baryphonic 4y agoCourts of law would beg to differ https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what-happened-and-why/ https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what...
- spoonjim 4y agoGoogle has no expectation to “support its employees” by employing them unnecessarily. It’s not a jobs program. Frankly the fact that Waze is a separate org NINE YEARS after acquisition is astonishing and would only be justified if there were strategic reasons for doing so.
- deleted 4y ago[deleted]
- opportune 4y agoTCI owns much less Google stock than employees do. Larry, Sergey, and Eric still have most of the voting rights. TCI is making the news for being an activist investor calling for layoffs because 1) the media is frothing at the opportunity to announce Google layoffs, even though none have been announced 2) the goal of an activist investor is to drum up support to make their activist wish happen.
- etempleton 4y agoHow much pressure can activist investors really exert over a company the size and influence of Google? If I was Google I would tell them to take a walk if they want to.
- gumby 4y agoOr else what? There is nothing TCI can do to force Google to do anything.
- gumby 4y agoIf TCI had a legit gripe it would be that too much revenue comes from one source (advertising, which at over 80% is indeed dangerously high). Google is lazily doing things to address that, but not trying that hard. But TCI didn’t do that.
- epigramx 4y ago"We are rich. Please make other people more poor, so we are more rich."
- adam_arthur 4y agoA lot of people have said the same thing. And they happen to be right, too. Business isn’t charity. Misallocation of resources is bad for broader society. Great for those who benefit from the misallocation though
- bmitc 4y agoWhat are they activists for? Also, are letters like this normal? I have never seen a letter like this, but you always hear that all shareholders care about is money. And yet, here we are with a letter that brazenly says something just below “fuck all employees, we want more money just because we have you some money”. I mean, part of their argument is some random person’s quote that companies could be smaller. For one, that’s a weak and amateur argument for an investor to make. And sure, that’s probably true, but the tone of this email is extremely flippant towards anyone that isn’t themselves.
- dotBen 4y agoI'd like to introduce you to Carl Icahn...
- selimthegrim 4y agoThis isn’t 1987 anymore
- JustLurking2022 4y agoCounterpoint - Google employees get a large portion of their compensation in stock, particularly in upper management, and consequently have incentive enough to keep the share price high on their own.
- nateburke 4y agoThey own less than 1%. I doubt S&L will care.
- johntiger1 4y agoThey own $6 billion in stock. Against a market cap of $1.2 trillion.
- aroman 4y agoNo, you are very incorrect here. I am sorry to say that you fell for some spicy headlines, and there is no evidence to suggest TCI's letter had anything to do with this restructing. TCI has a trivial stake in Google — at most, less than half of one percent of the company[0]. By voting shares, Larry and Sergey alone control >50% voting power[1]. TCI has nowhere near enough influence to move the needle in any appreciable way here. [0] $6B / $1200B market cap (edit: to clarify, this is an upper limit, in practice it's even less because of super-voting shares owned by the founders) [1] https://capital.com/alphabet-shareholder-who-owns-most-googl https://capital.com/alphabet-shareholder-who-owns-most-googl
- johntiger1 4y agoYou're mixing up voting shares and Class A common stock
- Retric 4y agoIt’s two different measurements. TCI owns 0.5% of the company but gets less than 0.5% of voting power. Ownership percentage is only important because of how it lets them impact the stock price.
- aroman 4y agoNo, I don't believe I am. Can you clarify what you think I've mixed up? Class A shares (such as TCI have) have regular voting rights. Class B shares (such as Larry and Sergey have) have 10x voting rights. Thus, as I understand it, TCI's voting voting power is at most roughly ~0.5. In practice, it's way less than that due to all the class B shares[0], reinforcing my point. [0] https://capital.com/alphabet-shareholder-who-owns-most-googl https://capital.com/alphabet-shareholder-who-owns-most-googl >GuruFocus data, as of 29 November 2022, revealed that 59.13% of Alphabet’s stock was owned by insiders, including the two founders, while 22.21% of common shares were owned by institutions including brokerage firms, hedge funds, pension funds and asset management companies.
- deleted 4y ago[deleted]
- draw_down 4y ago[dead]
- mathattack 4y agoTo be clear: 1) All shareholders will benefit including the employees who were well paid in stock. 2) When you sell an ownership stake you have to listen to owners. You might as well blame whoever decided to go public or sell the activist a stake. 3) Larry and Sergei have super voting shares and can block it if they want. But they probably want their shares to increase too.
- HDThoreaun 4y agoLarry and Sergei do not have to listen to owners. They can do whatever they want as long as they can credibly claim they believed it was good for the company in some sense.
- dangus 4y agoI think I might agree with TCI. Case in point: Why has Google had two navigation apps with entirely separate redundant teams for almost ten years?