Google (GOOG)

Equity Compensation

We use equity compensation to align our named executive officers’ interests with those of our stockholders and to attract and retain high-caliber executives through recognition of anticipated future performance. We determine appropriate grant amounts, if any, by reviewing competitive market data, individual performance assessments and business objectives with the LDC Committee at least annually. Under our 2004 Stock Plan, we can grant stock options, GSUs, restricted stock, and other equity awards to employees, including our named executive officers.

From our initial public offering through the beginning of 2007, we granted no equity awards to our named executive officers. In 2007, the majority of the named executive officers’ previous equity grants became fully vested. Therefore, to meet our retention and business objectives discussed in the Overview section above, we made supplemental equity grants to these executives, excluding Eric, Larry and Sergey. In 2008, we reviewed our named executive officers’ equity and determined that the magnitude of the 2007 supplemental grants was sufficient to help us meet our retention and business objectives through 2008. Therefore, in 2008, no equity awards were made to our named executive officers, other than Patrick’s new hire awards.

On August 6, 2008, Patrick received four new hire equity awards. He received two initial equity awards, which consisted of 11,112 stock options and 5,556 GSUs. These equity awards were intended to provide him with an initial equity stake in Google and to align his interests with those of our stockholders. In addition, Patrick received two supplemental GSU awards, each consisting of 910 shares. The first award vested in full six months after the date of grant, and the second award will vest in full twelve months after the date of grant. These supplemental GSU awards were intended to help provide Patrick with a stable amount of cash flow opportunity prior to the vesting of his initial equity awards. Patrick’s new hire equity awards are shown in further detail in the Grant of Plan-Based Awards table.

As part of our annual equity review in 2009, we formalized our equity granting practice to our named executive officers. Going forward, we intend to grant stock options and GSUs in the ratio of two stock options for each GSU biennially, providing our named executive officers with larger grants every other year as opposed to smaller annual grants. We believe the ratio of these awards offers an appropriate balance between a leveraged upside opportunity and a reliable level of income.

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On March 4, 2009, we made equity awards to our named executive officers, with the exception of Eric, Larry, Sergey and George. We awarded the same number of options and GSUs to Jonathan, Alan and David because we view the scope of their leadership in and their contribution to the organization as equal. We also offered the same number of options and GSUs to Omid Kordestani, who was a named executive officer in 2007. However, Omid declined the offer and therefore did not receive these options or GSUs. To increase Patrick’s ownership in Google and to recognize the immediate contribution he has made upon joining as our CFO, we granted him equity awards equal to two times that of our other named executive officers. All equity grants were reviewed and approved by the LDC Committee within the context of our market 90^th percentile equity target.

As described previously in the Overview section, we seek to pay all of our employees in a way that supports our business objectives. Generally, this has resulted in all employees, including our named executive officers, participating in the same compensation programs. In keeping with this philosophy and to increase the retentive value of our equity programs for our named executive officers in 2009, we recommended and the LDC Committee approved the participation by our named executive officers, excluding Eric, Larry and Sergey, in our Exchange Offer.

On March 9, 2009, we completed our Exchange Offer. This program allowed our employees, including our named executive officers, other than Eric, Larry and Sergey, to exchange eligible options with an exercise price greater than $308.57 per share, on a one-for-one basis for replacement options. The exercise price per share of each replacement option was equal to $308.57, the closing price of our stock on March 6, 2009. Replacement options have a new vesting schedule determined by adding 12 months to each vesting date under the eligible options’ current vesting schedule. In addition, replacement options will vest no sooner than six months after the Exchange Offer closed. This program was designed:

Further details about our Exchange Offer are included in the Schedule TO-I we filed with the SEC on February 3, 2009, as amended.

Eric, Larry and Sergey do not currently hold any stock options, and all of their stock holdings are fully vested. They requested not to be considered for additional equity grants in 2007 and 2009. The LDC Committee will continue to review their compensation opportunities on an ongoing basis and recommend changes, if needed, to maintain alignment with business objectives.

Equity Compensation

We use equity compensation to align our named executive officers’ interests with those of our stockholders and to attract and retain high-caliber executives through recognition of anticipated future performance. Under our 2004 Stock Plan, we can grant stock options, GSUs, restricted stock, and other equity awards to employees, including our named executive officers.

From our initial public offering through the beginning of 2007, we granted no equity awards to our named executive officers. However, since the majority of the named executive officers’ previous equity grants became fully vested in 2007, we made supplemental equity grants to these executives, other than Eric, Larry and Sergey, in early 2007 to meet our retention and business objectives discussed in the Overview and the Elements of Compensation sections above. We

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granted each named executive officer stock options and GSUs in the ratio of two stock options for each GSU. We believe this ratio offers an appropriate balance between a leveraged upside opportunity and a reliable level of income for this type of award. We determine grant amounts by reviewing competitive market data, individual performance assessments and business objectives with the LDC Committee at least annually. In the future, we may consider making ongoing equity grants annually to our named executive officers with the magnitude of those grants calibrated to meet our business objectives.

Eric, Larry and Sergey do not currently hold any stock options, and all of their stock holdings are fully vested. They requested not to be considered for additional equity grants in 2007. The LDC Committee will continue to review their compensation opportunities on an ongoing basis and recommend changes, if needed, to maintain alignment with business objectives.