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>Divide $14Bn net income by 53,600 employees gives about $260k. So GOOG could roughly double their salaries and remain profitable. That doesn't make any sense.

by jasode 12y ago

>Divide $14Bn net income by 53,600 employees gives about $260k. So GOOG could roughly double their salaries and remain profitable. That doesn't make any sense. If Google disburses that $14B Net Income as salary/bonus to the employees, the Net Income would be $0. One can't have it both ways, unless you illogically count that money twice. Besides the issue of recategorizing "net income" as "employee expense", Google wouldn't have new money to invest in the business as an ongoing concern. That $14B can be used in future years to invest in driverless cars, satellites, global internet hot air balloons, acquisitions of other companies, or whatever ambitious plans they have. Disbursing the Net Income to their employees means Google would cease to exist as a viable ongoing business. One can also look backward and see why and how companies get formed in the first place. If angel investors and venture capitalists knew from the beginning that Google was going to disburse all Net Income to employees, they would have never invested $$$ in 1998 to let them grow. Angels and VC's are not charities and they want ROI -- because things like pension funds that utilize VC's want an ROI. From that birth of the company, the chain of events continued: a big reason why Google has $14B of net income in 2014 is that they did not disburse the net incomes to employees in previous years 2013, 2012, 2011...2000. They were able to spend previous profits to build new datacenters, offer 1 gigabyte GMail accounts, acquire Keyhole maps, etc.

pjc50 12y ago
So why are Google disbursing $124m in executive compensation that could be used to build the business? http://ibnlive.in.com/news/google-ceo-larry-page-paid-1-salary-4-other-executives-get-124-mn/387731-11.html http://ibnlive.in.com/news/google-ceo-larry-page-paid-1-sala... Rhetorical question, of course. Yes, there should have been an "up to" in my previous comment. Obviously there is a tradeoff between investing retained profits, returning money to investors, and increasing staff compensation; that's what Ford v Dodge was all about.
- jasode 12y ago
  >So why are Google disbursing $124m in executive compensation that could be used to build the business? I understand that you said it was a rhetorical question but I'll attempt to answer anyway. To the mindset of Larry Page and the board, they are building the business by paying the $124m to those executives. They may be proven wrong but that is how they think. Those payments are not gifts. They are not a free ride to let the executives slack off. The compensation is to prevent key people from leaving and incentivize them to create additional value. This is another component of "building the business" and they would hope that $124m will multiply itself if the managers execute the business plans in a competent manner. (Btw, I didn't downvote your posts.)
  - rayiner 12y ago
    > To the mindset of Larry Page and the board, they are building the business by paying the $124m to those executives And they wouldn't be building the business by paying more for engineers instead of whining about H1-B restrictions?
    - jasode 12y ago
      >And they wouldn't be building the business by paying more for engineers Sure, they would be but like any business with a finite amount of money, they apparently feel they get more bang-for-the-buck by paying $124m to executives rather than divide that $124m as a +$3100 pay raise to all non-management employees. They also feel that paying $124m to key people is smarter than reducing Net Income by billions to afford paying $300k/year salaries to all non-management programmers. Google may be wrong with the above analysis but based on their actions, that's what they think. Like many other companies, it is implicit in their thinking that there is a law of diminishing returns if they pay much more in programmer salaries than they're already paying now. (Therefore, they think the bigger levers of growth is paying the management team to execute their business goals.) Since we don't have multiple alternate universes to experiment which scenario would be the best, we can only approximate which profits-vs-compensation structure would be the most effective by looking at different existing companies. Gravity Payments has a lot of recent press for setting $70k minimum wage. If they can compete and grow to be on par with, or beat other companies like PayPal, Apple Pay, Stripe, etc AND their unconventional salary structure is credited with making it happen, you'd have some evidence that Google Inc's compensation system is wrong. On the other side of the coin, when some observers see that founder David Price is giving up money to pay employees more, they would assume he does not have new business ideas that could use that money. It may be unfair to view it that way but it's a market signal nevertheless especially since another CEO like Jeff Bezos is reinvesting virtually all profits back into Amazon. The market thinks "Jeff has new ideas for putting capital to work; David does not."
      - rayiner 12y ago
        Earlier in the thread you said that if Google paid out more money in employee compensation, it'd have less money to invest in the business. But then you tried to categorize executive compensation as investing in the business. My point is that both should be in the same bucket,[1] instead of thinking of employee compensation as an expense while executive compensation is an investment. [1] Though IMHO both belong in the "expenses" bucket, not the "investment" bucket.

by jasode 12y ago

pjc50 12y ago

So why are Google disbursing $124m in executive compensation that could be used to build the business? http://ibnlive.in.com/news/google-ceo-larry-page-paid-1-salary-4-other-executives-get-124-mn/387731-11.html http://ibnlive.in.com/news/google-ceo-larry-page-paid-1-sala... Rhetorical question, of course. Yes, there should have been an "up to" in my previous comment. Obviously there is a tradeoff between investing retained profits, returning money to investors, and increasing staff compensation; that's what Ford v Dodge was all about.

jasode 12y ago
>So why are Google disbursing $124m in executive compensation that could be used to build the business? I understand that you said it was a rhetorical question but I'll attempt to answer anyway. To the mindset of Larry Page and the board, they are building the business by paying the $124m to those executives. They may be proven wrong but that is how they think. Those payments are not gifts. They are not a free ride to let the executives slack off. The compensation is to prevent key people from leaving and incentivize them to create additional value. This is another component of "building the business" and they would hope that $124m will multiply itself if the managers execute the business plans in a competent manner. (Btw, I didn't downvote your posts.)
- rayiner 12y ago
  > To the mindset of Larry Page and the board, they are building the business by paying the $124m to those executives And they wouldn't be building the business by paying more for engineers instead of whining about H1-B restrictions?
  - jasode 12y ago
    >And they wouldn't be building the business by paying more for engineers Sure, they would be but like any business with a finite amount of money, they apparently feel they get more bang-for-the-buck by paying $124m to executives rather than divide that $124m as a +$3100 pay raise to all non-management employees. They also feel that paying $124m to key people is smarter than reducing Net Income by billions to afford paying $300k/year salaries to all non-management programmers. Google may be wrong with the above analysis but based on their actions, that's what they think. Like many other companies, it is implicit in their thinking that there is a law of diminishing returns if they pay much more in programmer salaries than they're already paying now. (Therefore, they think the bigger levers of growth is paying the management team to execute their business goals.) Since we don't have multiple alternate universes to experiment which scenario would be the best, we can only approximate which profits-vs-compensation structure would be the most effective by looking at different existing companies. Gravity Payments has a lot of recent press for setting $70k minimum wage. If they can compete and grow to be on par with, or beat other companies like PayPal, Apple Pay, Stripe, etc AND their unconventional salary structure is credited with making it happen, you'd have some evidence that Google Inc's compensation system is wrong. On the other side of the coin, when some observers see that founder David Price is giving up money to pay employees more, they would assume he does not have new business ideas that could use that money. It may be unfair to view it that way but it's a market signal nevertheless especially since another CEO like Jeff Bezos is reinvesting virtually all profits back into Amazon. The market thinks "Jeff has new ideas for putting capital to work; David does not."
    - rayiner 12y ago
      Earlier in the thread you said that if Google paid out more money in employee compensation, it'd have less money to invest in the business. But then you tried to categorize executive compensation as investing in the business. My point is that both should be in the same bucket,[1] instead of thinking of employee compensation as an expense while executive compensation is an investment. [1] Though IMHO both belong in the "expenses" bucket, not the "investment" bucket.