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This November '22 letter [1] from TCI has even more details. Their argument sounds quite compelling, to be honest: As detailed in Alphabet's Schedule 14A fi

This November '22 letter [1] from TCI has even more details. Their argument sounds quite compelling, to be honest: As detailed in Alphabet's Schedule 14A filing, median compensation totaled $295,884 in 2021. An analysis by S&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity. We acknowledge that Alphabet employs some of the most talented and brightest computer scientists and engineers, but these represent only a fraction of the employee base. Many employees are performing general sales, marketing and administrative jobs, who should be compensated in-line with other technology companies. [1] https://www.tcifund.com/files/corporateengageement/alphabet/15th%20November%202022.pdf https://www.tcifund.com/files/corporateengageement/alphabet/...

Overtonwindow 4y ago
If I'm reading this correctly, it seems they are saying Google has overpaid its employees, particularly those whose market competitiveness does not match their salary. I find it hard to feel sad about anyone working in Silicon Valley, not after two decades of Silicon Valley decadence.
- deleted 4y ago
  [deleted]
sudosysgen 4y ago
Of course there is a justification for the disparity. Google has a higher standard for the talent of it's engineers than MS and definitely over the rest of the industry. This gives Google a large competitive advantage as they can respond better to threats and because they can deny some top talent to competitors. You can make a good argument that Google isn't making good use of this talent, which is a result of management problems with Google we all know about. And as it is, Google is as profitable as it ever was, so there is no urgency in firing people, either. The obvious good long term play is to fix the organizational issues to be able to make better use of existing talent. Chris Hohn knows this, of course. He just wants Google to buy back more stocks so he can sell his Google position. His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns and it's how they can make any argument to their investors that they are at all better than a leveraged long position in the general market.
- GalenErso 4y ago
  I don't know. The quality and reliability of Google's products have been on a steady decline for years. One of the largest HN threads of all time is about the decline of Google's search product. Stadia failed because of mismanagement. Google doesn't appear to innovate a lot these days.
  - sudosysgen 4y ago
    This is mostly due to incentive and mismanagement issues at the Senior level at Google, instead of engineering deficiencies in the median Googler. Google's search is getting worse for users because it's getting better at making profit, and Stadia is failing because of mismanagement as you say, not engineering quality which was by all accounts excellent.
- credit_guy 4y ago
  > His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns That's a plausible theory. Except the letter I linked to starts like this: TCI has been a significant shareholder of Alphabet since 2017. We currently own shares valued at more than $6 billion, reflecting our strong conviction in Alphabet's future. Five years does not sound that short-term to me.
  - polygamous_bat 4y ago
    For most of the five year period, Alphabet has been giving them magnificent returns, peaking at 200% gross. Only now it has been hit with the economic downturn, so it makes sense that all of a sudden they are trying to sell and get out.
  - sudosysgen 4y ago
    I'm sure that's the way they want to spin it. However, TCI is down around 20%, and it's pretty clear that they intend to juice Google in the short term to make good on their recent losses. I'm sure they have had a significant share in Google, but this share is a much bigger proportion in recent times of their portfolio. By any common wisdom they should be diversifying anyways.
belval 4y ago
You have to love the cold calculating thought process of fund managers. That statement basically translates to "Your engineers are better than everyone else and can keep their salary, but your other employees are grossly overpaid". Past the shock of the statement though, that's likely true. Recruiters at Google aren't 63% better than recruiters elsewhere, if anything their job is easier because engineers want to work at Google so they always drown in resume.
- blululu 4y ago
  A company like Google with a strong reputation and generous compensation can attract the best sales/recruiting/marketing professionals. There is no reason to think that these people are not at the top of their fields. Even within a company having your top sales people make 63% above the average is common. There is no reason to think that this trend should not hold across firms.
  - belval 4y ago
    > There is no reason to think that these people are not at the top of their fields. I'd flip that statement around though, people are at the top of their fields when they outperform competitors. If Google's sales team is paid 63% more than Microsoft's (and likely 100% more than Amazon's) then their sales numbers should justify that. Yet GCP is behind Azure and AWS. Your employees aren't great because they have a great salary. They have a great salary because they are great. If the financials don't confirm that idea (i.e. your sales numbers are not higher than your competitors) then your team is not great. Pretending otherwise means you are just drinking the kool-aid of "everyone working here is nice, good and competent" and that just opens the door to a lot of abuse. To be clear I'm not arguing against high wages, justifying layoffs or anything like that, but I take issue with the idea of that recruiters at Google are making 63% above Microsoft and 150% against other tech companies because they recruit really well.
    - deelowe 4y ago
      > Yet GCP is behind Azure and AWS. This isn't because of the sales team. It's because of the flawed leadership strategy that was App Engine. They squandered precious years attempting to build a walled garden for cloud and GCP has been having to play catch up ever since.
lvspiff 4y ago
Either you are the company at the top of the range hiring the best talent possible across the board or you settle for the median and continue on with ~5% growth per year. Mediocrity works well for large corps like UnitedHealthcare, Walmart, and even Microsoft. Hedge Funds seem to want to move Alphabet to that more predictable pattern which makes sense for stability but is disappointing technologically.
- cobertos 4y ago
  Does it make sense if your business is technology? Feels like Google apps are more and more buggy, they'll stagnate if they can't make quality software people want to use.
- mkipper 4y ago
  > Hedge Funds seem to want to move Alphabet to that more predictable pattern Or the hedge funds feel like this has already happened due to their massive size and bloated management. Maybe they think that Google is beyond the point of meaningful growth in new areas (relative to their ad revenue), so they should start operating like a boring corporation instead of throwing insane salaries at everyone like magic beans that will sprout into new areas of growth. This isn't necessarily hedge funds pushing for Google to change into something they aren't. Maybe they're just pushing for Google to accept the reality of the situation they put themselves in. I don't necessarily agree with that perspective, but I don't think it's totally unreasonable.
causi 4y ago
As detailed in Alphabet's Schedule 14A filing, median compensation totaled $295,884 in 2021. An analysis by S&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity. Is that a super accurate description, though? Out of all the people whose pay could be described as "coming from Alphabet", only a fraction are actually Alphabet employees. Most are third-class citizen contractors who certainly do not get paid 300K a year.
ljw1001 4y ago
What is the average salary at TCI?
jefftk 4y ago
> median compensation totaled $295,884 in 2021 Is this counting stock vesting? Because that's what's expected if you compensate people partly in 4y stock grants and they go up a bunch before vesting.
- bionsystem 4y ago
  I think google can pay your stock in cash each year if you ask them.
  - jefftk 4y ago
    How much compensation their workers received in 2021 depended heavily on what had recently happened to Google's stock, which was up ~2x. It could easily have not done that, in which case compensation would be lower. This makes 2021 a weird year, and comp was already going to be much lower in 2022 and 2023.
ljw1001 4y ago
Given that the mean salary at google is probably driven by people making 7 or 8 figures, I’m going to suggest that laying off 10,000 people will not change that one bit
tqi 4y ago
I wonder if laws requiring salary ranges on job listings will inadvertently depress wage growth, since companies will be more able to aim for the middle. I know large companies already have some of this data, but having it out in the open might enable it more.
abeppu 4y ago
> There is no justification for this enormous disparity. I dunno that the Google vs Microsoft comparison _is_ compelling. Isn't the question not "how much do the employees cost" but "are they worth what they cost"? This is not my area, but it seems like measuring _profit_ per employee gets a crude measurement of whether in aggregate those employees are generating more value than their comp. Grabbing stale numbers from yahoo finance, MSFT: 221,000 employees, Net Income to common $69.79B => $3,157,918.55 / person GOOG: 186,779 employees, Net Income to common $66.99B => $3,586,591.64 / person I.e. even with their higher comp, google employees as a group are generating similar but higher profit per person. And if the median compensation is ~$300k, then on most of them it seems like Alphabet is still doing extremely well? Is this not the right way to look at this?
- rfwhyte 4y ago
  What this pretty clearly demonstrates to me at least, is that executives and shareholders are stealing 90% of the value each employee creates, as both companies median per employee compensation is around $300k, yet they each produce 10X that amount in profit. Sounds like the employees are actually criminally underpaid. But of course the hedge fund billionaire will say they're getting too much, as heaven forbid some people enjoying comfortable middle class lives prevent a billionaire from getting that third mega-yacht.
  - knewter 4y ago
    Did you just assume Google's infrastructure costs are $0?
    - sudosysgen 4y ago
      That's net income, not revenue. All other costs are substracted.
  - RestlessMind 4y ago
    > shareholders are stealing 90% of the value I think you are very close to the central point of this debate. Whose value is it to begin with? Current cultural norms point to 100% of the value belonging to shareholders and them deciding how much of that to share with employees and execs in form of salaries, bonuses and stocks. If the employees are not happy with a proposal, then they are happy to go find more generous shareholders. In that light, I don't think it is stealing.
bmitc 4y ago
I thought that it has been pointed out that TCI has less than a percent of ownership in Google.
- 0xBDB 4y ago
  Yeah, that's an important point. Anyone who doesn't like this can write to Sundar and he will probably pay no attention, which is a bit less attention than he pays to TCI, but not much.
scotty79 4y ago
I think Google might have to pay more due to all additional hoop jumping it instigates in order to hire an employee. Why would anyone bother to apply to Google if they can earn exactly as much in a company with more relaxed recruitment.
- bfrog 4y ago
  Why indeed!
CottonMcKnight 4y ago
I'm sure he believes his multi-million-dollar income is perfectly justified.
dehrmann 4y ago
Google's in California, so it doesn't have non-competes like Microsoft or NY hedge funds. The question for Google isn't "what are they worth to us," it's "what is it worth to keep them from going to Microsoft."
woobar 4y ago
Shouldn't Google response be something like: "If you feel that you know better than the company management how to compensate our employees, we are wrong choice for your investment. You should invest in the other 20 largest listed tech companies instead."

Overtonwindow 4y ago

If I'm reading this correctly, it seems they are saying Google has overpaid its employees, particularly those whose market competitiveness does not match their salary. I find it hard to feel sad about anyone working in Silicon Valley, not after two decades of Silicon Valley decadence.

deleted 4y ago
[deleted]

sudosysgen 4y ago

Of course there is a justification for the disparity. Google has a higher standard for the talent of it's engineers than MS and definitely over the rest of the industry. This gives Google a large competitive advantage as they can respond better to threats and because they can deny some top talent to competitors. You can make a good argument that Google isn't making good use of this talent, which is a result of management problems with Google we all know about. And as it is, Google is as profitable as it ever was, so there is no urgency in firing people, either. The obvious good long term play is to fix the organizational issues to be able to make better use of existing talent. Chris Hohn knows this, of course. He just wants Google to buy back more stocks so he can sell his Google position. His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns and it's how they can make any argument to their investors that they are at all better than a leveraged long position in the general market.

GalenErso 4y ago
I don't know. The quality and reliability of Google's products have been on a steady decline for years. One of the largest HN threads of all time is about the decline of Google's search product. Stadia failed because of mismanagement. Google doesn't appear to innovate a lot these days.
- sudosysgen 4y ago
  This is mostly due to incentive and mismanagement issues at the Senior level at Google, instead of engineering deficiencies in the median Googler. Google's search is getting worse for users because it's getting better at making profit, and Stadia is failing because of mismanagement as you say, not engineering quality which was by all accounts excellent.
credit_guy 4y ago
> His interest isn't the long term well-being of the company, his interest is a predictable short term peak in valuation. Chaining short term profits is how these funds get outsized returns That's a plausible theory. Except the letter I linked to starts like this: TCI has been a significant shareholder of Alphabet since 2017. We currently own shares valued at more than $6 billion, reflecting our strong conviction in Alphabet's future. Five years does not sound that short-term to me.
- polygamous_bat 4y ago
  For most of the five year period, Alphabet has been giving them magnificent returns, peaking at 200% gross. Only now it has been hit with the economic downturn, so it makes sense that all of a sudden they are trying to sell and get out.
- sudosysgen 4y ago
  I'm sure that's the way they want to spin it. However, TCI is down around 20%, and it's pretty clear that they intend to juice Google in the short term to make good on their recent losses. I'm sure they have had a significant share in Google, but this share is a much bigger proportion in recent times of their portfolio. By any common wisdom they should be diversifying anyways.

belval 4y ago

You have to love the cold calculating thought process of fund managers. That statement basically translates to "Your engineers are better than everyone else and can keep their salary, but your other employees are grossly overpaid". Past the shock of the statement though, that's likely true. Recruiters at Google aren't 63% better than recruiters elsewhere, if anything their job is easier because engineers want to work at Google so they always drown in resume.

blululu 4y ago
A company like Google with a strong reputation and generous compensation can attract the best sales/recruiting/marketing professionals. There is no reason to think that these people are not at the top of their fields. Even within a company having your top sales people make 63% above the average is common. There is no reason to think that this trend should not hold across firms.
- belval 4y ago
  > There is no reason to think that these people are not at the top of their fields. I'd flip that statement around though, people are at the top of their fields when they outperform competitors. If Google's sales team is paid 63% more than Microsoft's (and likely 100% more than Amazon's) then their sales numbers should justify that. Yet GCP is behind Azure and AWS. Your employees aren't great because they have a great salary. They have a great salary because they are great. If the financials don't confirm that idea (i.e. your sales numbers are not higher than your competitors) then your team is not great. Pretending otherwise means you are just drinking the kool-aid of "everyone working here is nice, good and competent" and that just opens the door to a lot of abuse. To be clear I'm not arguing against high wages, justifying layoffs or anything like that, but I take issue with the idea of that recruiters at Google are making 63% above Microsoft and 150% against other tech companies because they recruit really well.
  - deelowe 4y ago
    > Yet GCP is behind Azure and AWS. This isn't because of the sales team. It's because of the flawed leadership strategy that was App Engine. They squandered precious years attempting to build a walled garden for cloud and GCP has been having to play catch up ever since.

lvspiff 4y ago

Either you are the company at the top of the range hiring the best talent possible across the board or you settle for the median and continue on with ~5% growth per year. Mediocrity works well for large corps like UnitedHealthcare, Walmart, and even Microsoft. Hedge Funds seem to want to move Alphabet to that more predictable pattern which makes sense for stability but is disappointing technologically.

cobertos 4y ago
Does it make sense if your business is technology? Feels like Google apps are more and more buggy, they'll stagnate if they can't make quality software people want to use.
mkipper 4y ago
> Hedge Funds seem to want to move Alphabet to that more predictable pattern Or the hedge funds feel like this has already happened due to their massive size and bloated management. Maybe they think that Google is beyond the point of meaningful growth in new areas (relative to their ad revenue), so they should start operating like a boring corporation instead of throwing insane salaries at everyone like magic beans that will sprout into new areas of growth. This isn't necessarily hedge funds pushing for Google to change into something they aren't. Maybe they're just pushing for Google to accept the reality of the situation they put themselves in. I don't necessarily agree with that perspective, but I don't think it's totally unreasonable.

causi 4y ago

As detailed in Alphabet's Schedule 14A filing, median compensation totaled $295,884 in 2021. An analysis by S&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity. Is that a super accurate description, though? Out of all the people whose pay could be described as "coming from Alphabet", only a fraction are actually Alphabet employees. Most are third-class citizen contractors who certainly do not get paid 300K a year.

ljw1001 4y ago

What is the average salary at TCI?

jefftk 4y ago

> median compensation totaled $295,884 in 2021 Is this counting stock vesting? Because that's what's expected if you compensate people partly in 4y stock grants and they go up a bunch before vesting.

bionsystem 4y ago
I think google can pay your stock in cash each year if you ask them.
- jefftk 4y ago
  How much compensation their workers received in 2021 depended heavily on what had recently happened to Google's stock, which was up ~2x. It could easily have not done that, in which case compensation would be lower. This makes 2021 a weird year, and comp was already going to be much lower in 2022 and 2023.

ljw1001 4y ago

Given that the mean salary at google is probably driven by people making 7 or 8 figures, I’m going to suggest that laying off 10,000 people will not change that one bit

tqi 4y ago

I wonder if laws requiring salary ranges on job listings will inadvertently depress wage growth, since companies will be more able to aim for the middle. I know large companies already have some of this data, but having it out in the open might enable it more.

abeppu 4y ago

> There is no justification for this enormous disparity. I dunno that the Google vs Microsoft comparison _is_ compelling. Isn't the question not "how much do the employees cost" but "are they worth what they cost"? This is not my area, but it seems like measuring _profit_ per employee gets a crude measurement of whether in aggregate those employees are generating more value than their comp. Grabbing stale numbers from yahoo finance, MSFT: 221,000 employees, Net Income to common $69.79B => $3,157,918.55 / person GOOG: 186,779 employees, Net Income to common $66.99B => $3,586,591.64 / person I.e. even with their higher comp, google employees as a group are generating similar but higher profit per person. And if the median compensation is ~$300k, then on most of them it seems like Alphabet is still doing extremely well? Is this not the right way to look at this?

rfwhyte 4y ago
What this pretty clearly demonstrates to me at least, is that executives and shareholders are stealing 90% of the value each employee creates, as both companies median per employee compensation is around $300k, yet they each produce 10X that amount in profit. Sounds like the employees are actually criminally underpaid. But of course the hedge fund billionaire will say they're getting too much, as heaven forbid some people enjoying comfortable middle class lives prevent a billionaire from getting that third mega-yacht.
- knewter 4y ago
  Did you just assume Google's infrastructure costs are $0?
  - sudosysgen 4y ago
    That's net income, not revenue. All other costs are substracted.
- RestlessMind 4y ago
  > shareholders are stealing 90% of the value I think you are very close to the central point of this debate. Whose value is it to begin with? Current cultural norms point to 100% of the value belonging to shareholders and them deciding how much of that to share with employees and execs in form of salaries, bonuses and stocks. If the employees are not happy with a proposal, then they are happy to go find more generous shareholders. In that light, I don't think it is stealing.

bmitc 4y ago

I thought that it has been pointed out that TCI has less than a percent of ownership in Google.

0xBDB 4y ago
Yeah, that's an important point. Anyone who doesn't like this can write to Sundar and he will probably pay no attention, which is a bit less attention than he pays to TCI, but not much.

scotty79 4y ago

I think Google might have to pay more due to all additional hoop jumping it instigates in order to hire an employee. Why would anyone bother to apply to Google if they can earn exactly as much in a company with more relaxed recruitment.

bfrog 4y ago
Why indeed!

CottonMcKnight 4y ago

I'm sure he believes his multi-million-dollar income is perfectly justified.

dehrmann 4y ago

Google's in California, so it doesn't have non-competes like Microsoft or NY hedge funds. The question for Google isn't "what are they worth to us," it's "what is it worth to keep them from going to Microsoft."

woobar 4y ago

Shouldn't Google response be something like: "If you feel that you know better than the company management how to compensate our employees, we are wrong choice for your investment. You should invest in the other 20 largest listed tech companies instead."