Google (GOOG)

Cash Incentives

Executive Bonus Plan. Our executive bonus plan provided an annual variable cash incentive designed to motivate participants to achieve our financial and other performance objectives and reward executives for their achievements when those objectives are met. All of our named executive officers, other than Eric, Larry and Sergey, participated in the executive bonus plan. Since 2004, the LDC Committee has offered Eric, Larry and Sergey the opportunity to participate in each year’s executive bonus plan, but they have declined to participate.

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We calculate bonuses using the following formula:

In 2008, the Annual Salary for each participating named executive officer was $450,000 and the Target Bonus Percentage was 150%. The Individual and Company Multipliers are each derived based on performance and are equally weighted. The Individual Multiplier reflects each executive’s individual performance and is determined at the LDC Committee’s discretion based on the Individual Performance Measurement process described above. Individual performance that meets expectations yields a 100% multiplier. The Company Multiplier was determined based on pre-established non-GAAP operating income objectives as described in the Company Performance Measurement process above. The Company Multiplier is typically the same for all the named executive officers. Company performance that meets expectations yields a 100% multiplier.

If both individual and company performance had met expectations, then the bonus for our named executive officers would have been 150% of salary. Actual bonuses can range from zero to a maximum of ten times salary under the executive bonus plan, based on performance. Over the past four years, actual payouts to named executive officers, excluding George’s 2008 on-target bonus payout, have ranged from 300% to 450% of salary based on Google’s strong performance against our financial goals and our executives’ strong performance meeting their individual goals.

While performance targets are established at levels that are intended to be achievable for both the Company Multiplier and the Individual Multiplier, a maximum bonus payout would require very high levels of both individual and company performance which we believe are possible, but highly unlikely to be achieved. In the four years of operating the executive bonus plan, we have not paid the maximum amount to an executive. Generally, the LDC Committee sets the target and maximum performance requirements such that relative difficulty of achievement is consistent from year to year.

Once the LDC Committee finalizes the performance goals, it has no discretion to modify them; however, the board of directors does retain authority to pay additional discretionary bonuses outside the executive bonus plan if warranted by performance not measured under the plan. In 2008, our board of directors did not authorize any such discretionary bonus payments outside of the executive bonus plan to our executive officers.

The bonuses paid to our named executive officers under the 2008 executive bonus plan appear in the table below as well as the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column. All named executive officer bonus payouts were determined based on the process described above with the exception of George, who retired on December 31, 2008, prior to the LDC Committee approval of the 2008 Individual and Company Multipliers. To recognize George’s contribution to Google in 2008, the LDC Committee approved a 2008 bonus payout equal to his 2008 target bonus. Further detail on George’s retirement is discussed in the Post-Employment and Change of Control Payments section.

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Patrick joined Google on August 1, 2008. As an inducement to become our Chief Financial Officer and to offset accrued compensation he would have received with his former employer, we paid him a sign-on bonus of $1,000,000 in two installments. The first installment of $500,000 was paid upon hire and is shown in the table below as well as the Summary Compensation Table under the “Bonus” column. Following the completion of six months of employment with Google on February 1, 2009, Patrick received his second sign-on bonus installment of $500,000. This second installment is not included in the table below; it will be reflected in next year’s proxy in the Summary Compensation Table under the “Bonus” column.

Cash Incentives

Executive Bonus Plan. Our executive bonus plan provided an annual variable cash incentive designed to motivate participants to achieve our financial and other performance objectives and reward executives for their achievements when those objectives are met. All of our named executive officers, other than Eric, Larry and Sergey, participated in the executive bonus plan. Since 2004, the LDC Committee has offered Eric, Larry and Sergey the opportunity to participate in each year’s executive bonus plan, but they have declined to participate. The bonuses paid for 2007 to our named executive officers under the 2007 executive bonus plan appear in the table below as well as the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.

We calculate bonuses using the following formula:

In 2007, the Annual Salary for each participating named executive officer was $450,000 and the Target Bonus Percentage was 150%. The Individual and Company Multipliers are each derived based on performance and are equally weighted. The Individual Multiplier reflects each executive’s individual performance and is determined at the LDC Committee’s discretion based on the Individual Performance Measurement process described above. Individual performance that meets expectations yields a 100% multiplier. The Company Multiplier was determined based on pre-established non-GAAP operating income objectives as described in the Company Performance Measurement process

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above. The Company Multiplier is the same for all participants. Company performance that meets expectations yields a 100% multiplier.

If both individual and company performance had met expectations, then the bonus for our named executive officers would have been 150% of salary. Actual bonuses can range from zero to a maximum of ten times salary under the executive bonus plan, based on performance. Over the past four years, actual payouts to named executive officers have ranged from 300% to 450% of salary based on Google’s strong performance against our financial goals and our executives’ strong performance meeting their individual goals.

While performance targets are established at levels that are intended to be achievable for both the Company Multiplier and the Individual Multiplier, a maximum bonus payout would require very high levels of both individual and company performance which we believe are possible, but highly unlikely to be achieved. In the four years of operating the executive bonus plan, we have not paid the maximum amount to an executive. Generally, the LDC Committee sets the target and maximum performance requirements such that relative difficulty of achievement is consistent from year to year.

Once the LDC Committee finalizes the performance goals, it has no discretion to modify them; however, the board of directors does retain authority to pay additional discretionary bonuses outside the executive bonus plan if warranted by performance not measured under the plan. In 2007, our board of directors did not authorize any such discretionary bonus payments outside of the executive bonus plan to our executive officers.

All Google employees, including our named executive officers, participate in certain company-wide bonus programs. In 2007, these company-wide programs included a holiday bonus awarded to all named executive officers and a peer bonus awarded to Eric. In 2007, Google paid each of its employees, including Eric, Larry, Sergey and the other named executives, a holiday bonus, which generally represented $1,000 net of tax withholding for each United States based employee. Each Google employee is eligible to nominate another Google employee (as long as that employee is not his or her direct supervisor) for a peer bonus to recognize outstanding contributions within Google. In 2007, Eric was nominated for such an award in the amount of $175, which is the standard United States award amount for this program.