Alphabet Inc. DEF 14A 2011
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
1600 AMPHITHEATRE PARKWAY
MOUNTAIN VIEW, CA 94043
April 20, 2011
We are pleased to invite you to attend our 2011 Annual Meeting of Stockholders to be held on Thursday, June 2, 2011 at 2:00 p.m., local time, at our headquarters at 1600 Amphitheatre Parkway, Mountain View, California 94043. For your convenience, we are also pleased to offer a live webcast of our Annual Meeting on the Investor Relations section of our website at investor.google.com.
Details regarding admission to the meeting and the business to be conducted are described in the Notice of Internet Availability of Proxy Materials (Notice) you received in the mail and in this proxy statement. We have also made available a copy of our 2010 Annual Report to Stockholders with this proxy statement. We encourage you to read our Annual Report. It includes our audited financial statements and provides information about our business.
We have elected to provide access to our proxy materials over the internet under the Securities and Exchange Commissions notice and access rules. We are constantly focused on improving the ways people connect with information, and believe that providing our proxy materials over the internet increases the ability of our stockholders to connect with the information they need, while reducing the environmental impact of our Annual Meeting. If you want more information, please see the Questions and Answers section of this proxy statement or visit the Annual Stockholders Meeting section of our Investor Relations website.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Please review the instructions on each of your voting options described in this proxy statement, as well as in the Notice you received in the mail.
Also, please let us know if you plan to attend our Annual Meeting by marking the appropriate box on the enclosed proxy card, if you requested to receive printed proxy materials, or, if you vote by telephone or over the internet, by indicating your plans when prompted.
Thank you for your ongoing support of Google. We look forward to seeing you at our Annual Meeting.
2011 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
This notice of Annual Meeting and proxy statement and form of proxy are being distributed and made available on or about April 21, 2011.
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
A: Our board of directors has made these materials available to you on the internet, or, upon your request, has delivered printed proxy materials to you, in connection with the solicitation of proxies for use at Googles 2011 Annual Meeting of Stockholders, which will take place on Thursday, June 2, 2011 at 2:00 p.m. local time, at our headquarters located at 1600 Amphitheatre Parkway, Mountain View, California 94043. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this proxy statement.
A: The information in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our directors and most highly paid executive officers, corporate governance, and certain other required information.
A: In accordance with rules adopted by the Securities and Exchange Commission (SEC), we may furnish proxy materials, including this proxy statement and our 2010 Annual Report to Stockholders, to our stockholders by providing access to such documents on the internet instead of mailing printed copies. Most stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to most of our stockholders, will instruct you as to how you may access and review all of the proxy materials on the internet. The Notice also instructs you as to how you may submit your proxy on the internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.
A: We have adopted a procedure called householding, which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and, if applicable, the proxy materials and the 2010 Annual Report to Stockholders to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written request, we will deliver promptly a separate copy of the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice and, if applicable, the proxy materials, stockholders may write or email us at the following address and email address:
1600 Amphitheatre Parkway
Mountain View, CA 94043
Stockholders who hold shares in street name (as described below) may contact their brokerage firm, bank, broker-dealer, or other similar organization to request information about householding.
A: The Notice will provide you with instructions regarding how to:
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you, and will reduce the impact of printing and mailing these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
A: The items of business scheduled to be voted on at the Annual Meeting are:
We will also consider any other business that properly comes before the Annual Meeting.
A: Our board of directors recommends that you vote your shares:
A: Each share of Google Class A common stock and Class B common stock issued and outstanding as of the close of business on the Record Date for the 2011 Annual Meeting of Stockholders is entitled to be voted on all items being voted on at the Annual Meeting. You may vote all shares owned by you as of the Record Date, including (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner in street name through a broker, bank, trustee, or other nominee. On the Record Date we had 322,128,393 shares of common stock issued and outstanding, consisting of 252,671,620 shares of Class A common stock and 69,456,773 shares of Class B common stock.
A: Each holder of shares of Class A common stock is entitled to one vote for each share of Class A common stock held as of the Record Date, and each holder of shares of Class B common stock is entitled to 10 votes for each share of Class B common stock held as of the Record Date. The Class A common stock and Class B common stock are voting as a single class on all matters described in this proxy statement for which your vote is being solicited.
A: Most Google stockholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record, and the Notice was sent directly to you by Google. As the stockholder of record, you have the right to grant your voting proxy directly to Google or to vote in person at the Annual Meeting. If you requested to receive printed proxy materials, Google has enclosed or sent a proxy card for you to use. You may also vote on the internet or by telephone, as described in the Notice and below under the heading How can I vote my shares without attending the Annual Meeting?
If your shares are held in an account at a brokerage firm, bank, broker-dealer, trust, or other similar organization, like the vast majority of our stockholders, you are considered the beneficial owner of shares held in street name, and the Notice was forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank, trustee, or nominee how to vote your shares, and you are also invited to attend the Annual Meeting.
Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares at the meeting. If you do not wish to vote in person or you will not be attending the Annual Meeting, you may vote by proxy. You may vote by proxy over the internet or by telephone, as described in the Notice and below under the heading How can I vote my shares without attending the Annual Meeting?
A: Contact our transfer agent by either writing to Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940, or by telephoning 866-298-8535 or 781-575-2879.
A: You are entitled to attend the Annual Meeting only if you were a Google stockholder as of the Record Date or you hold a valid proxy for the Annual Meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. You must present photo identification for admittance. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you must also provide proof of beneficial ownership as of the Record Date, such as your most recent account statement prior to April 4, 2011, a copy of the voting instruction card provided by your broker, bank, trustee, or nominee, or other similar evidence of ownership.
If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting. For security reasons, you and your bags will be subject to search prior to your admittance to the meeting.
Please let us know if you plan to attend the meeting by marking the appropriate box on the enclosed proxy card, if you requested to receive printed proxy materials, or, if you vote by telephone or internet, by indicating your plans when prompted.
The meeting will begin promptly at 2:00 p.m., local time. Check-in will begin at 12:30 p.m., local time, and you should allow ample time for the check-in procedures.
A: For your convenience, we are pleased to offer a live webcast of our Annual Meeting on the Investor Relations section of our website at investor.google.com/webcast.html.
A: Shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.
A: Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. If you hold shares beneficially in street name, you may also vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by telephone or mail by following the voting instruction card provided to you by your broker, bank, trustee, or nominee.
A: You may change your vote at any time prior to the taking of the vote at the Annual Meeting. If you are the stockholder of record, you may change your vote by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) providing a written notice of revocation to Googles Corporate Secretary at Google Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043 prior to your shares being voted, or (3) attending the
Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, bank, trustee, or nominee following the instructions they provided, or, if you have obtained a legal proxy from your broker, bank, trustee, or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting in person.
A: Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Google or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide on their proxy card written comments, which are then forwarded to Google management.
A: The quorum requirement for holding the Annual Meeting and transacting business is that holders of a majority of the voting power of the issued and outstanding Class A and Class B common stock of Google as of the Record Date (voting together as a single class) must be present in person or represented by proxy. Both abstentions and broker non-votes (described below) are counted for the purpose of determining the presence of a quorum.
A: In the election of directors (proposal number 1), you may vote FOR all or some of the nominees or your vote may be WITHHELD with respect to one or more of the nominees.
With respect to the advisory vote on the frequency of holding future stockholder advisory votes regarding compensation awarded to named executive officers (proposal number 5), you may vote 1 YEAR, 2 YEARS, 3 YEARS, or ABSTAIN. If you elect to ABSTAIN, the abstention does not count in the determination of which alternative receives the highest number of votes cast.
For the other items of business, you may vote FOR, AGAINST, or ABSTAIN. If you elect to ABSTAIN, the abstention has the same effect as a vote AGAINST.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If no instructions are indicated, the shares will be voted as recommended by the board of directors.
A: In the election of directors, the nine persons receiving the highest number of affirmative FOR votes at the Annual Meeting will be elected.
The approval of the following proposals requires the affirmative FOR vote of a majority of those shares present in person or represented by proxy and entitled to vote on them at the Annual Meeting: (1) the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011, (2) the amendment to our 2004 Stock Plan to increase the number of shares of Class A common stock issuable under the plan by 1,500,000 shares, (3) the approval of the 2010 compensation awarded to named executive officers, (4) the stockholder proposal regarding the formation of a board committee on sustainability, (5) the stockholder proposal regarding the adoption of a simple majority voting standard for stockholder matters, and (6) the stockholder proposal regarding a conflict of interest and code of conduct compliance report. In the case of the proposal to determine the frequency of future stockholder advisory votes regarding compensation awarded to named executive officers, the frequency that receives the highest number of votes cast will be deemed to be the frequency selected by stockholders.
If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute broker non-votes. Broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as non-routine matters. All of the matters scheduled to be voted on at the Annual Meeting are non-routine, except for the proposal to ratify the appointment of Ernst & Young LLP as Googles independent registered public accounting firm for the fiscal year ending December 31, 2011. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered votes cast on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, assuming that a quorum is obtained.
Abstentions are considered votes cast and thus will have the same effect as votes against each of the matters scheduled to be voted on at the Annual Meeting, except the proposal to determine the frequency of future stockholder advisory votes regarding compensation awarded to named executive officers. Abstentions will have no effect on the outcome of that proposal.
Please note that the rules regarding how brokers may vote your shares have changed. Brokers may no longer vote your shares on the election of directors or on executive compensation matters in the absence of your specific instructions as to how to vote so we encourage you to provide instructions to your broker regarding the voting of your shares.
A: No. You may not cumulate your votes for the election of directors.
A: Other than the eight items of business described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Eric E. Schmidt, Larry Page, Patrick Pichette, and David C. Drummond, or any of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the board of directors.
A: The inspector of elections will be a representative from Computershare Trust Company, N.A.
A: Google will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials and/or vote over the internet, you are responsible for internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We also have hired Georgeson Inc. to assist us in the distribution of proxy materials. We will pay Georgeson Inc. a fee of $750 plus customary costs and expenses for these services.
A: We will announce preliminary voting results at the Annual Meeting and publish them on the Investor Relations section of our website at investor.google.com. We will also disclose voting results on a Form 8-K filed with the SEC within four business days after the Annual Meeting, which will also be available on our website.
A: Stockholder Proposals: Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to Googles Corporate Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2012 Annual Meeting of Stockholders, the Corporate Secretary of Google must receive the written proposal at our principal executive offices no later than December 23, 2011; provided, however, that in the event that we hold our 2012 Annual Meeting of Stockholders more than 30 days before or after the one-year anniversary date of the 2011 Annual Meeting, we will disclose the new deadline by which stockholders proposals must be received under Item 5 of Part II of our earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably determined to inform stockholders. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (Exchange Act). Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Attn: Corporate Secretary
1600 Amphitheatre Parkway
Mountain View, California 94043
Fax: (650) 618-1806
Our bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of a meeting given by or at the direction of our board of directors, (2) otherwise properly brought before the meeting by or at the direction of our board of directors, or (3) properly brought before the meeting by a stockholder entitled to vote at the annual meeting who has delivered timely written notice to our Corporate Secretary, which notice must contain the information specified in our bylaws. To be timely for our 2012 Annual Meeting of Stockholders, our Corporate Secretary must receive the written notice at our principal executive offices:
In the event that we hold our 2012 Annual Meeting of Stockholders more than 30 days before or after the one-year anniversary date of the 2011 Annual Meeting, then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received not later than the close of business on the earlier of the following two dates:
If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
Nomination of Director Candidates: You may propose director candidates for consideration by our Nominating and Corporate Governance Committee. Any such recommendations should include the nominees name and qualifications for membership on our board of directors, and should be directed to the Corporate Secretary of Google at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see Directors, Executive Officers and Corporate GovernanceCorporate Governance and Board MattersConsideration of Director NomineesStockholder Recommendations and Nominees on page 19 of this proxy statement.
In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the information required by our bylaws. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary within the time period described above under Stockholder Proposals for stockholder proposals that are not intended to be included in our proxy statement.
Copy of Bylaw Provisions: A copy of our bylaws is available at http://investor.google.com/corporate/bylaws.html. You may also contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.
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Directors and Executive Officers
The names of our directors and executive officers and their ages, positions, and biographies as of April 13, 2011 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
Larry Page, one of our founders, has served as a member of our board of directors since our inception in September 1998, and as our Chief Executive Officer since April 4, 2011. From July 2001 to April 3, 2011, Larry served as our President, Products. In addition, from September 1998 to July 2001, Larry served as our Chief Executive Officer, and from September 1998 to July 2002, as our Chief Financial Officer. Larry holds a Masters degree in computer science from Stanford University and a Bachelor of Science degree in engineering, with a concentration in computer engineering, from the University of Michigan.
Sergey Brin, one of our founders, has served as a member of our board of directors since our inception in September 1998. From July 2001 to April 3, 2011, Sergey served as our President, Technology. In addition, from September 1998 to July 2001, Sergey served as our President and chairman of our board of directors. Sergey holds a Masters degree in computer science from Stanford University and a Bachelor of Science degree with high honors in mathematics and computer science from the University of Maryland at College Park.
Eric E. Schmidt has served as the Executive Chairman of our board of directors since April 4, 2011. From July 2001 to April 3, 2011, Eric served as our Chief Executive Officer. He was the chairman of our board of directors from March 2001 to April 2004, and again from April 2007 to April 3, 2011. Prior to joining us, from April 1997 to November 2001, Eric served as chairman of the board of directors of Novell, Inc., a computer networking company, and, from April 1997 to July 2001, as the Chief Executive Officer of Novell. From 1983 until March 1997, Eric held various positions at Sun Microsystems, Inc., a supplier of network computing solutions, including Chief Technology Officer from February 1994 to March 1997, and President of Sun Technology Enterprises from February 1991 until February 1994. Eric was previously a director of Apple Inc., a designer, manufacturer, and marketer of personal computers and related products, and Siebel Systems, Inc., a customer relationship management software company. Eric holds a Doctoral degree and a Masters degree in computer science from the University of California at Berkeley, and a Bachelor of Science degree in electrical engineering from Princeton University.
L. John Doerr has served as a member of our board of directors since May 1999. John has been a General Partner of Kleiner Perkins Caufield & Byers, a venture capital firm, since August 1980. John has also been a member of the board of directors of Amyris, Inc., a synthetic biology company, since May 2006, and serves on its Nominating and Governance Committee. John was previously a director of Amazon.com, Inc., an internet retail company; Intuit, Inc., a provider of business and financial management software; Move, Inc., a provider of real
estate media and technology solutions; and Sun Microsystems, Inc., a supplier of networking computing solutions. John holds a Master of Business Administration degree from Harvard Business School, and a Master of Science degree in electrical engineering and computer science, and a Bachelor of Science degree in electrical engineering from Rice University.
John L. Hennessy has served as a member of our board of directors since April 2004, and as Lead Independent Director since April 2007. John has served as the President of Stanford University since September 2000. From 1994 to August 2000, John held various positions at Stanford, including Dean of the Stanford University School of Engineering and, Chair of the Stanford University Department of Computer Science. John has also been a member of the board of directors of Cisco Systems, Inc., a networking equipment company, since January 2002, and serves on its Nominating and Governance Committee and Acquisition Committee. John was previously the chairman of the board of directors of Atheros Communications, Inc., a wireless semiconductor company. John holds a Doctoral degree and a Master of Science degree in computer science from the State University of New York, Stony Brook, and a Bachelor of Science degree in electrical engineering from Villanova University.
Ann Mather has served as a member of our board of directors since November 2005. Ann has also been a member of the board of directors of: Glu Mobile Inc., a publisher of mobile games, since September 2005, and serves as chair of its Audit Committee; MGM Holdings Inc., a motion picture and television production and distribution company, since December 2010, and serves on its Compensation Committee; MoneyGram International, a global payment services company, since May 2010; and Netflix, Inc., an internet subscription service for movies and television shows, since July 2010, and serves on its Audit Committee. Ann was previously a director of Central European Media Enterprises Group, a developer and operator of national commercial television channels and stations in Central and Eastern Europe; Zappos.com, Inc., a privately held, online retailer, until it was acquired by Amazon.com, Inc., an internet retail company, in 2009; and Shopping.com, Inc., a price comparison web site, until it was acquired by eBay Inc., an e-commerce company, in 2005. From 1999 to 2004, Ann was Executive Vice President and Chief Financial Officer of Pixar, a computer animation studio. Prior to her service at Pixar, Ann was Executive Vice President and Chief Financial Officer at Village Roadshow Pictures, the film production division of Village Roadshow Limited. Ann holds a Master of Arts degree from Cambridge University and is a chartered accountant.
Paul S. Otellini has served as a member of our board of directors since April 2004. Paul has served as the Chief Executive Officer and President of Intel Corporation, a semiconductor manufacturing company, since May 2005. Paul has been a member of the board of directors of Intel since 2002. He also served as Intels Chief Operating Officer from 2002 to May 2005. From 1974 to 2002, Paul held various positions at Intel, including Executive Vice President and General Manager, Intel Architecture Group, and Executive Vice President and General Manager, Sales and Marketing Group. Paul holds a Masters degree from the University of California at Berkeley, and a Bachelors degree in economics from the University of San Francisco.
K. Ram Shriram has served as a member of our board of directors since September 1998. Ram has been a managing partner of Sherpalo Ventures, LLC, an angel venture investment company, since January 2000. From August 1998 to September 1999, Ram served as Vice President of Business Development at Amazon.com, Inc., an internet retail company. Prior to that, Ram served as President at Junglee Corporation, a provider of database technology, which was acquired by Amazon.com in 1998. Ram was an early member of the executive team at Netscape Communications Corporation. Ram is also on the board of trustees of Stanford University. Ram holds a Bachelor of Science degree from the University of Madras, India.
Shirley M. Tilghman has served as a member of our board of directors since October 2005. Shirley has served as the President of Princeton University since June 2001. From August 1986 to June 2001, she served as a Professor at Princeton University, and from August 1988 to June 2001, as an Investigator at Howard Hughes Medical Institute. In 1998, she took the role as founding director of Princetons multi-disciplinary Lewis-Sigler Institute for Integrative Genomics. Shirley holds a Doctoral degree in biochemistry from Temple University, and a Bachelor of Science degree with honors in chemistry from Queens University.
Nikesh Arora has served as our Senior Vice President and Chief Business Officer since January 2011. Previously, he served as our President, Global Sales Operations & Business Development from April 2009 to December 2010, and as our President, International Operations prior to that. Prior to joining us in December 2004, Nikesh served as Chief Marketing Officer and a member of the management board at T-Mobile Europe, a mobile communications company. Prior to that, Nikesh worked for Deutsche Telekom, parent company of T-Mobile, Putnam Investments, and Fidelity Investments. Nikesh has been a member of the board of directors of Bharti Airtel Limited, an Indian telecommunications company, since October 2009, and serves on its Compensation Committee. Nikesh holds a Master of Business Administration degree from Northeastern University, a Masters degree from Boston College, and a Bachelor of Science degree in electrical engineering from the Institute of Technology in Varanasi, India. He is also a chartered financial analyst.
David C. Drummond has served as our Senior Vice President, Corporate Development since January 2006 and as Chief Legal Officer since December 2006. Previously, he served as our Vice President, Corporate Development and General Counsel since February 2002. Prior to joining us, from July 1999 to February 2002, David served as Chief Financial Officer of SmartForce, an educational software applications company. Prior to that, David was a partner at the law firm of Wilson Sonsini Goodrich & Rosati. David holds a Juris Doctor degree from Stanford University and a Bachelor of Arts degree in history from Santa Clara University.
Patrick Pichette has served as our Senior Vice President and Chief Financial Officer since August 2008. Prior to joining us, from January 2001 until July 2008, Patrick served as an executive officer of Bell Canada Enterprises Inc., a telecommunications company, including, most recently, as PresidentOperations for Bell Canada, and previously as Executive Vice President, Chief Financial Officer, and Executive Vice President of Planning and Performance Management. Prior to joining Bell Canada Enterprises, from 1996 to 2000, Patrick was a principal at McKinsey & Company, a management consulting firm. Prior to that, from 1994 to 1996, he served as Vice President and Chief Financial Officer of Call-Net Enterprises Inc., a Canadian telecommunications company. Patrick has been a member of the board of directors of Amyris, Inc., a synthetic biology company, since March 2010, and serves on its Audit Committee and Leadership Development and Compensation Committee. Patrick holds a Master of Arts degree in philosophy, politics, and economics from Oxford University, where he attended as a Rhodes Scholar, and a Bachelor of Arts degree in Business Administration from Université du Québec à Montréal.
Corporate Governance and Board Matters
We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well, and maintaining our integrity in the marketplace. We have adopted a code of business conduct and ethics for directors, officers (including our principal executive officer and principal financial and accounting officer), and employees, known as the Google Code of Conduct. We have also adopted Corporate Governance Guidelines, which, in conjunction with our certificate of incorporation, bylaws, and board committee charters, form the framework for our corporate governance. The Google Code of Conduct and our Corporate Governance Guidelines are available on the Investor Relations section of our website at investor.google.com. We will post amendments to the Google Code of Conduct or waivers of the Google Code of Conduct for directors and executive officers on the same website.
Stockholders may request free printed copies of the Google Code of Conduct, the Corporate Governance Guidelines, and committee charters by filling out our contact form at investor.google.com or sending inquiries to:
1600 Amphitheatre Parkway
Mountain View, CA 94043
During 2010, the board of directors held seven meetings and acted by written consent four times. Each director attended at least 80% of all board of directors and applicable committee meetings. We encourage our directors to attend our Annual Meeting of Stockholders. Last year, six directors attended our Annual Meeting of Stockholders.
Board Leadership Structure
Effective April 4, 2011, Larry Page took over as our Chief Executive Officer and Eric E. Schmidt became Executive Chairman of our board of directors.
The board of directors believes that this new leadership structure, which separates the Chairman and Chief Executive Officer roles, is appropriate at this time in light of the evolution of Googles business and operating environment. In particular, the board of directors believes that the new structure clarifies the individual roles and responsibilities of Eric, Larry, and Sergey and will help streamline decision making and enhance accountability. As Executive Chairman, Eric will remain involved in key matters, such as transactions, customers and broader business relationships, and government outreach, that are increasingly important given our global reach, and will continue to advise Larry and Sergey. In this newly-defined role and given his in-depth knowledge of the issues, challenges, and opportunities facing us, the board of directors believes that Eric continues to be best positioned to develop agendas that ensure that the boards time and attention are focused on the most critical matters. His role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate its message and strategy clearly and consistently to our stockholders, employees, customers, and users.
Our certificate of incorporation and bylaws provide that the chairman of our board of directors may not be an employee or officer of our company and may not have been an employee or officer for the last three years, unless the appointment is approved by two-thirds of the members of our board of directors. In April 2007, our board of directors unanimously appointed Eric as chairman of the board of directors, and in January 2011, the board of directors unanimously appointed Eric as Executive Chairman, effective April 4, 2011.
Each of the directors other than Larry, Sergey, and Eric is independent (see Director Independence below), and the board of directors believes that the independent directors provide effective oversight of management. In addition, in April 2007, our board of directors appointed John L. Hennessy as our Lead Independent Director. As Lead Independent Director, Johns responsibilities include:
The board of directors believes that these responsibilities appropriately and effectively complement our Executive Chairman and Chief Executive Officer structure.
For 2010, our board of directors consisted of nine directors. Our board of directors has the following five standing committees: (1) an Audit Committee, (2) a Nominating and Corporate Governance Committee, (3) a Leadership Development and Compensation Committee, (4) an Executive Committee, and (5) an Acquisition Committee. Each of the committees operates under a written charter adopted by the board of directors. All of the committee charters are available on the Investor Relations section of our website at http://investor.google.com/corporate/board-committees.html. Free printed copies of the charters are available to any stockholder who requests it by following the instructions on page 13 of this proxy statement.
The committee membership and meetings during 2010 and the primary functions of each of the committees are described below.
The main function of our Audit Committee is to oversee our accounting and financial reporting processes, including our disclosure controls and procedures and system of internal controls, audits of our financial statements, relationships with our independent auditors, including appointment or changing the auditors and ensuring their independence, and providing oversight regarding our financial matters. This committees responsibilities include:
During 2010, the Audit Committee held six meetings. Our Audit Committee is currently comprised of Ann Mather, L. John Doerr, and K. Ram Shriram, each of whom is a non-employee member of our board of directors. Our board of directors has determined that each of the directors serving on our Audit Committee is independent within the meaning of the rules of the SEC and the Listing Rules of the Nasdaq Stock Market (Nasdaq).
The board of directors has determined that Ann Mather is an audit committee financial expert as defined under the rules of the SEC. Anns relevant experience includes her service as Executive Vice President and Chief Financial Officer for Pixar. Prior to her services at Pixar, she was Executive Vice President and Chief Financial Officer at Village Roadshow Pictures. She also held various executive positions at The Walt Disney Company, including Senior Vice President of Finance and Administration for its Buena Vista International Theatrical Division. Ann is a director and chair of the audit committee of Glu Mobile Inc., a director and a member of the audit committee of Netflix, Inc., and also served as a director and a member of the audit committee of Central European Media Enterprises Group. Ann also served as a director of Shopping.com, Inc. until it was acquired by eBay Inc. in 2005, and was chair of the audit committee and a member of its corporate governance and nominating committee. Ann also served as a director of Zappos.com, Inc. until it was acquired by Amazon.com, Inc. in 2009. Ann holds a Master of Arts degree from Cambridge University and is a chartered accountant.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committees purpose is to assist our board of directors in identifying individuals qualified to become members of our board of directors consistent with criteria set by our board of directors, to oversee the evaluation of the board of directors and management, and to develop and update our corporate governance principles. This committees responsibilities include:
During 2010, the Nominating and Corporate Governance Committee held five meetings. Our Nominating and Corporate Governance Committee consists of John L. Hennessy and Shirley M. Tilghman, each of whom is a non-employee member of our board of directors. Our Nominating and Corporate Governance Committee does not have a chairperson. Our board of directors has determined that each of the directors serving on our Nominating and Corporate Governance Committee is independent as defined in the Listing Rules of Nasdaq.
Leadership Development and Compensation Committee
The purpose of our Leadership Development and Compensation Committee (LDC Committee) is to oversee our compensation programs. The LDC Committees responsibilities include:
During 2010, the LDC Committee held five meetings and acted by written consent 25 times. Our LDC Committee currently consists of L. John Doerr and Paul S. Otellini (Chair), each of whom is a non-employee member of our board of directors. Each member of our LDC Committee is an outside director as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (Code), and a non-employee director within the meaning of Rule 16b-3 of the Exchange Act. Our board of directors has determined that each of the directors serving on our LDC Committee is independent as defined in the Listing Rules of Nasdaq.
The Executive Committee, for which the board of directors adopted a formal charter in 2004, serves as an administrative committee of the board of directors to act upon and facilitate the consideration by senior management and the board of directors of certain high-level business and strategic matters. During 2010, the Executive Committee held 13 meetings and acted by written consent four times. Our Executive Committee consists of Eric (Chair), Larry, and Sergey.
The Acquisition Committee, for which the board of directors adopted a formal charter in 2006, serves as an administrative committee of the board of directors to review and approve certain investment, acquisition, and divestiture transactions proposed by management. During 2010, the Acquisition Committee acted by written consent five times. Our Acquisition Committee consists of Eric (Chair), Larry, Sergey, and K. Ram Shriram.
Boards Role in Risk Oversight
The board of directors as a whole has responsibility for risk oversight, with reviews of certain areas being conducted by the relevant board committees. These committees then provide reports to the full board. The oversight responsibility of the board and its committees is enabled by management reporting processes that are designed to provide visibility to the board about the identification, assessment, and management of critical risks and managements risk mitigation strategies. These areas of focus include strategic, operational, financial and reporting, succession and compensation, compliance, and other risks. The board of directors and its committees oversee risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session with key management personnel and representatives of outside advisors as required.
The board of directors has determined that each of the director nominees standing for election, except Larry, Sergey, and Eric, has no relationship that, in the opinion of the board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is an independent director as defined in the Listing Rules of Nasdaq. In determining the independence of our directors, the board of directors has adopted independence standards that mirror exactly the criteria specified by applicable laws and regulations of the SEC and the Listing Rules of Nasdaq. In determining the independence of our directors, the board of directors considered all transactions in which we and any director had any interest, including those discussed under Certain
Relationships and Related Transactions on pages 27-29 of this proxy statement, transactions involving payments made by us to companies in the ordinary course of business where L. John Doerr, John L. Hennessy, Paul S. Otellini, or K. Ram Shriram serve on the board of directors or as a member of the executive management team of the other company, and transactions involving payments made by us to educational institutions with which John L. Hennessy and Shirley M. Tilghman are affiliated.
Compensation Committee Interlocks and Insider Participation
During 2010, Paul S. Otellini and L. John Doerr served on the LDC Committee. None of the members of the LDC Committee has been an officer or employee of Google. None of our executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on our board of directors or the LDC Committee.
Consideration of Director Nominees
Stockholder Recommendations and Nominees
The policy of our Nominating and Corporate Governance Committee is to consider properly submitted recommendations for candidates to the board of directors from stockholders. In evaluating such recommendations, the Nominating and Corporate Governance Committee seeks to achieve a balance of experience, knowledge, integrity, and capability on the board of directors and to address the membership criteria set forth under Director Qualifications below. Any stockholder recommendations for consideration by the Nominating and Corporate Governance Committee should include the candidates name, biographical information, information regarding any relationships between the candidate and Google within the last three years, at least three personal references, a statement of recommendation of the candidate from the stockholder, a description of our shares beneficially owned by the stockholder, a description of all arrangements between the candidate and the recommending stockholder and any other person pursuant to which the candidate is being recommended, a written indication of the candidates willingness to serve on the board of directors, any other information required to be provided under securities laws and regulations, and a written indication to provide such other information as the Nominating and Corporate Governance Committee may reasonably request. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or otherwise. Stockholder recommendations to the board of directors should be sent to:
Attn: Corporate Secretary
1600 Amphitheatre Parkway
Mountain View, CA 94043
In addition, our bylaws permit stockholders to nominate directors for consideration at an annual meeting. For a description of the process for nominating directors in accordance with our bylaws, see Questions and Answers about the Proxy Materials and the Annual MeetingWhat is the deadline to propose actions for consideration at next years Annual Meeting of Stockholders or to nominate individuals to serve as directors? on page 9 of this proxy statement.
Our Nominating and Corporate Governance Committee will evaluate and recommend candidates for membership on the board of directors consistent with criteria established by our board of directors. While our board of directors has not adopted a formal diversity policy or specific standards with regard to the selection of director nominees, due to the global and complex nature of our business, the board of directors believes it is important to consider diversity of race, ethnicity, gender, age, education, cultural background, and professional experiences in evaluating board candidates.
Although our board of directors has not formally established any specific, minimum qualifications that must be met by each candidate for the board of directors or specific qualities or skills that are necessary for one or more of the members of the board of directors to possess, when considering a potential non-incumbent candidate, the Nominating and Corporate Governance Committee will factor into its determination the following qualities of a candidate: educational background, diversity of professional experience, including whether the person is a current or former chief executive officer or chief financial officer of a public company or the head of a division of a large international organization, knowledge of our business, integrity, professional reputation, independence, and ability to represent the best interests of our stockholders.
The board of directors is composed of a diverse group of leaders in their respective fields. Many of the current directors have senior leadership experience at major domestic and international companies. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Most of our directors also have experience serving on boards of directors and board committees of other public companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies. Other directors have experience as presidents or trustees of significant academic, research, and philanthropic institutions, which brings unique perspectives to the board of directors. Further, our directors also have other experience that makes them valuable members, such as experience developing technology or managing technology companies, which provides insight into strategic and operational issues faced by us.
The Nominating and Corporate Governance Committee and the board of directors believe that the above-mentioned attributes, along with the leadership skills and other experiences of our board members described below, provide us with a diverse range of perspectives and judgment necessary to guide our strategies and monitor their execution.
Eric E. Schmidt
L. John Doerr
John L. Hennessy
Paul S. Otellini
K. Ram Shriram
Shirley M. Tilghman
Identification and Evaluation of Nominees for Directors
Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating nominees for directors. Our Nominating and Corporate Governance Committee regularly assesses the appropriate size and composition of the board of directors, the needs of the board of directors and the respective committees of the board of directors, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the Nominating and Corporate Governance Committee through stockholders, management, current members of the board of directors, or search firms. The evaluation of these candidates may be based solely upon information provided to the committee or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the committee deems appropriate, including the use of third parties to review candidates.
Executive sessions of independent directors are held in connection with each regularly scheduled board of directors meeting and at other times as necessary, and are chaired by the Lead Independent Director. The board of directors policy is to hold executive sessions without the presence of management, including the Chief Executive Officer and other non-independent directors. The committees of the board of directors also generally meet in executive session at the end of each committee meeting, except for meetings of the Executive Committee and the Acquisition Committee as these committees have only one or no independent directors.
Our board of directors and each of its committees may retain outside advisors and consultants of their choosing at our expense. The board of directors need not obtain managements consent to retain outside advisors.
Our board of directors performs an annual self-assessment, led by the Lead Independent Director, to evaluate its effectiveness in fulfilling its obligations.
Communications with the Board of Directors
Stockholders may contact the board of directors about bona fide issues or questions about Google by sending an email to email@example.com or by writing the Corporate Secretary at the following address:
Attn: Corporate Secretary
1600 Amphitheatre Parkway
Mountain View, CA 94043
Any matter intended for the board of directors, or for any individual member or members of the board of directors, should be directed to the email address or street address noted above, with a request to forward the communication to the intended recipient or recipients. In general, any stockholder communication delivered to the Corporate Secretary for forwarding to the board of directors or specified member or members will be forwarded in accordance with the stockholders instructions.
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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of March 31, 2011, concerning, except as indicated by the footnotes below:
Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Google Inc., 1600 Amphitheatre Parkway, Mountain View, California 94043.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 252,670,318 shares of Class A common stock and 69,456,773 shares of Class B common stock outstanding at March 31, 2011. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 31, 2011, and common stock issuable upon the vesting of GSUs within 60 days of March 31, 2011, ignoring the withholding of shares of common stock to cover applicable taxes. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. GSUs entitle the reporting person to receive one share of Class A common stock for each share underlying the GSU as the GSU vests. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers, and holders of more than 10% of our Class A and Class B common stock to file with the SEC reports regarding their ownership and changes in ownership of our securities. We believe that, during 2010, our directors, executive officers, and 10% stockholders complied with all Section 16(a) filing requirements, with the exceptions noted below.
In making these statements, we have relied upon examination of the copies of Forms 3, 4, and 5, and amendments to these forms, provided to us and the written representations of our directors, executive officers, and 10% stockholders.
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Related Party Transactions Policy and Procedure
Our Related Party Transactions Policy provides that we will only enter into or ratify a transaction with a related party when our board of directors, acting through the Audit Committee, determines that the transaction is in the best interests of Google and its stockholders.
For the purposes of this policy, a related party means:
We review all known relationships and transactions in which Google and our directors, executive officers, and significant stockholders or their immediate family members are participants to determine whether such persons have a direct or indirect interest. Our legal staff, in consultation with our finance team, is primarily responsible for developing and implementing processes and controls to obtain information regarding our directors, executive officers, and significant stockholders with respect to related party transactions and then determining, based on the facts and circumstances, whether Google or a related party has a direct or indirect interest in these transactions. On a periodic basis, the legal and finance teams review all transactions involving payments between Google and any company that has a Google executive officer or director as an officer or director. In addition, our directors and executive officers are required to notify us of any potential related party transactions and provide us with the information regarding such transactions.
If our legal department determines that a transaction is a related party transaction, the Audit Committee must review the transaction and either approve or disapprove it. If advance approval of a transaction is not feasible, the chair of the Audit Committee may approve the transaction and the transaction may be ratified by the Audit Committee in accordance with the Related Party Transactions Policy. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate:
Any member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations or vote on the approval of the transaction.
Related Party Transactions
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
Corporate Use of Personal Aircraft
Eric E. Schmidt, our Executive Chairman, beneficially owns 100% of one aircraft and 33% of another aircraft, both of which are used by Eric and our other executive officers from time to time for business trips. The reimbursement rate for use of these aircraft is $7,500 per hour. The board of directors approved this hourly reimbursement rate based upon a competitive analysis of comparable chartered aircraft and which our board of directors determined was at or below market rates for the charter of similar aircraft. In 2010, we used these aircraft for business-related travel services for certain of our executive officers, including Eric, and we reimbursed Eric approximately $1.2 million. Due to the fact that the $7,500 hourly costs paid for the use of these aircraft is less than the actual operational costs incurred by Eric as owner of these aircraft, Eric does not profit from the use of these aircraft and therefore does not have a monetary interest in these transactions.
Payments to Stanford University
In 2010, we paid approximately $2.4 million to Stanford University. Of this amount, approximately $1.7 million primarily represented donations for scholarships and other philanthropic endeavors and approximately $600,000 related to the license by Stanford of patents, including the PageRank patent, to Google. Pursuant to Stanfords standard royalty arrangements with its students who develop patents in the course of their studies at Stanford, Stanford shares a portion of the royalty revenues associated with some of these patent licenses with Larry and Sergey. John L. Hennessy, President of Stanford University, is a member of our board of directors. In addition, K. Ram Shriram, another member of our board of directors, serves on the Stanford Board of Trustees. Neither John nor Ram have a direct interest in any of the transactions described above.
X PRIZE Foundation
In 2010, we donated approximately $1.3 million to the X PRIZE Foundation. The X PRIZE Foundation is an educational nonprofit prize institute whose mission is to create radical breakthroughs for the benefit of humanity. Larry is a Trustee of the X PRIZE Foundation and is our Chief Executive Officer, one of our founders, and a member of our board of directors. As of March 31, 2011, Larry beneficially owned approximately 39.6% of our Class B common stock. He does not have a direct interest in this transaction.
Investment in 23andMe
In November 2010, Google Ventures invested approximately $3.2 million in the Series C preferred stock financing of 23andMe, Inc., a privately-held personal genetics company dedicated to helping individuals understand their own genetic information through DNA analysis technologies and web-based interactive tools. Google Inc. is the sole limited partner of Google Ventures, and previously invested approximately $3.9 million in the Series A preferred stock financing of 23andMe in May 2007 and approximately $2.6 million in the Series B preferred stock financing of 23andMe in June 2009. In November 2007, we purchased additional shares of Series A preferred stock of 23andMe held by an investor in 23andMes Series A preferred stock financing for approximately $500,000. Google Ventures made its investment in the Series C preferred stock financing of 23andMe pursuant to Googles existing right to purchase its pro rata share of new securities issued by 23andMe. We continue to hold a minority interest in 23andMe as a result of the Series C investment. In June 2009, we also entered into a lease agreement with 23andMe under which 23andMe leases office space from us. The terms and conditions of the lease with 23andMe were reviewed by an independent real estate appraiser.
23andMes Series C financing involved a number of additional investors, including two new investors. Anne Wojcicki, who is a co-founder, President and CEO of 23andMe, and who is also a stockholder and member of its board of directors, is married to Sergey, one of our founders. As of March 31, 2011, Sergey beneficially owned approximately 39.1% of our Class B common stock. Sergey is also an investor in 23andMe and invested approximately $3.4 million in 23andMes Series C preferred stock financing. The valuation of the Series C investment was determined by negotiations between the new investors and 23andMe in which neither Google nor Google Ventures played any role.
Investment in Certain Private Companies in 2010
Google Ventures invested in certain private companies in 2010 alongside Kleiner Perkins Caufield & Byers as a co-investor:
KPCB Holdings, Inc., as nominee for certain funds of Kleiner Perkins Caufield & Byers and several of the managers of the fund, holds more than 5% of the outstanding shares of each of the above entities. L. John Doerr, who is a member of our board of directors, is a managing director of these funds and the general partner of certain Kleiner Perkins Caufield & Byers funds.
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Board Compensation Arrangements
Googles director compensation program is designed to enable continued attraction and retention of highly qualified directors by ensuring that director compensation is in line with peer companies competing for director talent, and is designed to address the time, effort, expertise, and accountability required of active board membership. In general, the Nominating and Corporate Governance Committee and the LDC Committee believe that annual compensation for non-employee directors should consist of both a cash component, designed to compensate members for their service on the board of directors and its committees, and an equity component, designed to align the interests of directors and stockholders and, by vesting over time, to create an incentive for continued service on the board. The LDC Committee reviews the compensation programs for non-employee directors on an annual basis.
We did not make any changes to our standard compensation arrangements and practices for non-employee directors in 2010. Our employee directors, Eric, Larry, and Sergey, did not receive any compensation for their services as members of our board of directors in 2010.
Our standard compensation arrangement for non-employee directors consists of an annual $350,000 Google Stock Unit (GSU) grant and an annual $75,000 cash retainer. GSUs are restricted stock unit awards of our Class A common stock that are paid out in installments. These grants and payments are made on the first Wednesday of the month following each annual stockholder meeting. In addition, a $25,000 annual cash retainer is paid to the Audit Committee chairperson.
In 2010, we awarded our standard compensation arrangement to L. John Doerr, John L. Hennessey, and Paul S. Otellini. K. Ram Shriram declined his compensation and therefore did not receive GSUs or an annual cash retainer. Consistent with our revised compensation arrangement as disclosed in 2009, Ann Mather and Shirley M. Tilghman each received a one-time $500,000 GSU grant in 2010 as their previously awarded equity grants became fully vested in the last quarter of 2010. Starting in 2011, they will receive our standard annual compensation arrangement.
We calculate the exact number of GSUs comprising equity grants by dividing the target dollar amount by the closing price of Googles Class A common stock on the day prior to grant. GSUs vest at the rate of 1/4th on the first anniversary of the grant date and an additional 1/16th each quarter thereafter, subject to continued service on the board of directors on the applicable vesting date. All GSUs are granted under and subject to the terms and conditions of our 2004 Stock Plan and its related grant agreements.
We reimburse our directors for reasonable expenses in connection with attendance at board of directors and committee meetings.
Compensation for 2010
The following table summarizes compensation paid to non-employee directors during 2010.
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Compensation Discussion and Analysis
This section discusses the objectives, policies, and elements of our executive compensation program and analyzes our decisions concerning compensation for our named executive officersEric, Larry, and Sergey, our Chief Financial Officer and our three other most highly compensated executive officers during the fiscal year ended December 31, 2010:
Our compensation programs reflect our philosophy to pay all of our employees, including our named executive officers, in ways that support three primary business objectives:
To help achieve these objectives, we intend our named executive officers compensation to be primarily at risk with significant upside potential for strong performance, as well as downside exposure for underperformance. We believe this is appropriate given our named executive officers ability to influence Googles overall performance. Through our bonus programs, we annually measure and reward both individual and company performance. Our equity compensation plans emphasize longer-term success and prudent risk management. Our bonus and equity compensation programs form the basis of our pay-for-performance philosophy.
In 2010, our financial results demonstrated significant year-over-year growth in revenue (24% to $29.32 billion) and operating income (25% to $10.38 billion). Based on these results, our 2010 performance exceeded the goals established under our executive bonus plan at the start of the year for both non-GAAP revenue (17% above goal of $25.06 billion) and non-GAAP operating income (20% above goal of $9.81 billion), each as defined under the heading Company Performance Measurement below.
Although we intend for performance-based incentives and rewards to be substantial when warranted, these incentives are secondary to career growth, work environment, and engaging work opportunities. We seek to develop a highly-motivated and collaborative workforce that pursues achievements for the sake of progress and innovation before individual gain. When Google and individual executives achieve our goals, we ensure that appropriately significant economic rewards follow.
None of the named executive officers has any type of employment agreement or severance arrangement with us. We generally do not provide supplemental retirement benefits to the named executive officers, nor do we provide change in control benefits to these officers that are not available to employees generally.
Larry and Sergey have voluntarily elected to receive only nominal cash compensation. Their primary compensation continues to come from returns on their ownership stakes in Google. As significant stockholders, their personal wealth is tied directly to sustained stock price appreciation and performance, which provides direct alignment with stockholder interests. Starting in 2011, in connection with Erics new role as Executive Chairman, Eric has agreed to accept compensation as outlined below under Recent Cash Compensation Changes, and 2011 Equity Awards.
We review our compensation philosophy and practices, including those for our named executive officers, with the LDC Committee on an ongoing basis so that the LDC Committee can recommend changes, if needed, to keep our employees aligned with our business objectives.
Effective January 1, 2011, we increased base salaries for all of our non-executive employees by 10%, as well as shifted a portion of the bonus into base salary. See Recent Cash Compensation Changes below for the changes to cash compensation for our executive officers.
We review both our cash and equity compensation relative to that of market comparable companies.
We analyze market pay rates at least annually using the most directly-relevant published survey sources available, including surveys from Radford, Towers Watson, and IPAS. In addition, we analyze information reported in our peer companies SEC filings for all direct pay elements, including salary, cash incentives, and equity. For our named executive officers in 2010, we considered peers to be companies that met at least three of the following criteria:
The following companies met these criteria as of the first quarter of 2010 and were selected as peer companies by the LDC Committee (the reported fiscal year reflects data available at the time we completed our analysis in the first quarter of 2010):
In addition to these peer benchmarks for our named executive officers current roles, we also consider their likely future role if they were to leave Google. In many cases, the next step in career progression outside of Google for our named executive officers would likely be the CEO role at another large company (e.g., an S&P 500 company). With this in mind, we review CEO compensation levels and trends across companies in the S&P 500 to further inform our compensation decisions for all named executive officers. This enables us to better assess the range of compensation needed to attract, retain, and motivate our executive talent.
In the first quarter of 2011, we completed our annual peer group review using the same criteria as those applied in 2010. Based on this review, we made no changes to our peer group. Although two of our 2009 peers (eBay and Yahoo!) no longer met three of our five criteria in 2010, we elected to include them because they are within the high-technology industry and are among our most significant labor market competitors. Our 2011 peer group is below (the reported fiscal year reflects data available at the time we completed our analysis in the first quarter of 2011):
Elements of Compensation
Our named executive officer compensation program includes three main elements:
As discussed under the heading Comparative Framework above, we review compensation against our peer group, as well as CEO compensation levels and trends in S&P 500 companies.
In 2010, we intended to generally align our named executive officer compensation against the market as follows:
We believe the resulting compensation mix supported our goal of providing primarily at risk compensation with significant upside potential for strong performance, as well as downside exposure for underperformance.
In 2011, we increased compensation, with an emphasis on total target cash, for our named executive officers to remain competitive with other outside employment opportunities. Going forward, we intend to generally align named executive officer compensation against the market as follows:
The 2010 pay mix for our named executive officers, excluding Eric, Larry, and Sergey is shown in the tables below. Total compensation for 2010 includes base salary, target bonus, and the fair value of equity grants made in 2010. Actual cash compensation for 2010 includes base salary and the 2010 actual bonuses approved by the LDC Committee.
2010 Total Compensation
2010 Actual Cash Compensation
Role of Executives in Determining Compensation
In 2010, Eric and Shona, together with the LDC Committee and our internal compensation team, reviewed an assessment of our executive compensation practices against our defined comparative framework. Eric then made recommendations to the LDC Committee regarding our pay practices for executive officers. Any changes to our pay practices were approved by the LDC Committee before they were made.
We intend base salaries to provide named executive officers with a reasonable base level of monthly income relative to their job functions and the level of market-competitive salaries. In 2004, Eric, Larry, and Sergey requested that their salaries each be reduced to $1 per year. However, due to their strong leadership and Googles strong overall performance, we have offered each of them market-competitive salaries at the beginning of each year since 2005. Eric, Larry, and Sergey each declined these offers in 2010 and instead elected to receive base salaries of $1.
We establish base salaries for our other named executive officers based on the scope of their responsibilities, market data, and internal equity. We review salaries at least annually and may adjust them from time to time if
needed to reflect changes in market conditions. To determine 2010 salary recommendations for each executive, Eric reviewed the market data discussed above with Larry and Sergey and made a recommendation to the LDC Committee for review and final approval.
Although we generally differentiate salaries by role and by individual for most positions at Google, we have continued to maintain salaries at the same level for all of our named executive officers other than Eric, Larry, Sergey, and Shona due to the similar scope of their overall organizational leadership responsibilities across Google. In the first quarter of 2010, the LDC Committee and board of directors reviewed our named executive officers base salaries, and decided to increase the standard salary for each named executive officer to $500,000. Shonas salary (along with her bonus and equity grants) is prorated to 75% of this amount as this roughly matches the percentage of her full time that she spends on matters related to her role at Google. Shonas percentage of actual time worked is actively tracked on a quarterly basis and reported to the LDC Committee. In the LDC Committees assessment, Shona continues to contribute at levels similar to other named executive officers. However, at Shonas request and with the approval of the LDC Committee, we have prorated her compensation levels.
Cash IncentivesExecutive Bonus Plan
Our executive bonus plan provides 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 in 2010. Since 2004, the LDC Committee has offered Eric, Larry, and Sergey the opportunity to participate in each years executive bonus plan, but they continued to decline to participate in 2010.
For the 2010 fiscal year, we calculated bonuses under the executive bonus plan using the following formula:
Individual Performance Measurement. At the beginning of 2010, we set broad annual operational, strategic, and financial goals. These goals served as the foundation of personal goals for each Googler. In fact, many named executive officers retain the company goals as their own personal goals. For named executive officers, these goals were agreed to with the CEO at the start of the year. At the end of the year, together with our internal compensation team, the CEO assessed each executives performance against the pre-established goals and provided the LDC Committee with a performance appraisal, which included a performance rating. The LDC Committee used this assessment to inform its discretion in determining the individual component of the cash bonus. This performance appraisal process was largely subjective, with much discretion exercised by our CEO and the LDC Committee. There was no specific weight given to any one individual goal or performance criterion. The assessment was based on our CEOs and the LDC Committees determinations regarding how well the executive performed his or her job, and such assessment is qualitative, not quantitative, in nature. For example, when our CEO and the LDC Committee determined how well each executive grew his or her organization, they placed more importance on the quality of the new hires than on the number or percentage of people hired. The performance appraisal process was the same for each of our named executive officers with the exception of Eric, Larry, and Sergey. Eric, Larry, and Sergey did not receive any plan-based bonus in 2010. Larry and Sergey were not measured against formal performance goals. Erics performance goals were set by the LDC Committee and were subsequently reviewed by the full board of directors.
Company Performance Measurement. Eric and Shona, working with our internal compensation team and upon consultation with the LDC Committee, proposed bonus funding metrics under our executive bonus plan for 2010. The proposed company performance metrics were based on equal weighting of non-GAAP operating income at 50% and non-GAAP revenue at 50%. The 2010 formula established goals for non-GAAP operating income and non-GAAP revenue at $9.81 billion and $25.06 billion, respectively. For 2010, non-GAAP operating
income consisted of GAAP operating income excluding stock-based compensation expense and the direct sales of Nexus One, and non-GAAP revenue consisted of GAAP revenue excluding Nexus One revenue. The LDC Committee reviewed and approved the proposed performance metrics based on its assessment that the proposed goals were reasonable and aligned with stockholder interests. Our 2010 non-GAAP operating income and non-GAAP revenue for purposes of the executive bonus plan were $11.75 billion and $29.21 billion, respectively, which resulted in a multiplier of 224% for executives.
In 2010, the target bonus percentage for each participating named executive officer was 150% of base salary. The Individual and Company Multipliers are each derived based on performance and are equally weighted. The Individual Multiplier reflects each executives individual performance and is determined at the LDC Committees 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 financial 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 $4.5 million, based on performance.
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 six 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 LDC Committee has reserved negative discretion to reduce or eliminate any actual award under the executive bonus plan. In addition, the board of directors retains authority to pay additional discretionary bonuses outside the executive bonus plan if warranted by performance not measured under the plan. In 2010, our board of directors did not authorize any such discretionary bonus payments outside of the executive bonus plan to our executive officers.
Recent Cash Compensation Changes
In November 2010, as part of a broad-based review of our compensation programs, the LDC Committee approved significant changes to the cash compensation for all of our employees, including our named executive officers, effective as of January 1, 2011. As Google grows, we are increasingly competing for talent against companies that have aggressive cash compensation positioning. Based on this, the LDC Committee approved base salary increases for our named executive officers other than Eric, Larry, and Sergey. Increased base salaries are as follows: $650,000 annually to Patrick, Nikesh, and Alan and $487,500 annually to Shona (prorated to be at 75% of the $650,000 salary paid to other named executive officers).
In combination with these salary increases, the LDC Committee also approved changes to the executive bonus program. The target bonus percentage for all named executive officers other than Eric, Larry, and Sergey was increased to 250% from 150%. In addition, starting with the 2011 fiscal year, bonuses for named executive officers under the executive bonus plan will be calculated using the following formula:
As disclosed in our Form 8-K filed with the SEC on November 12, 2010, the 2011 base salary and target bonus percentage changes described above result in an 82% year-over-year increase in target total cash compensation (increased to $2.28 million from $1.25 million).
However, since the revised bonus formula functionally averages the Individual and Company Multipliers (instead of multiplying them together, as in 2010), it becomes more difficult to achieve a maximum bonus payout. Actual total cash compensation in 2011 would increase approximately 20% assuming similar levels of individual and company performance. As in prior years, actual bonuses can range from zero to a maximum of $4.5 million.
Separately, in connection with the management changes that we announced in January 2011, the LDC Committee has offered and Eric has accepted annual cash compensation. Effective as of April 4, 2011, Eric agreed to receive an annual base salary of $1.25 million and a target bonus of 400% of base salary. Erics actual bonus payment for 2011 can range from zero to a maximum of $6.0 million.
We use equity compensation to further 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.
In early 2009, the LDC Committee formalized our policy of biennial equity grants in odd number years for our named executive officers. However, in 2010, because of SEC rule changes requiring the disclosure of the aggregate grant date fair value of equity awards granted in the fiscal year rather than the dollar amount recognized for financial statement purposes for the fiscal year, the LDC Committee determined that annual equity awards would give stockholders a more transparent and understandable view of our named executive officers compensation. Therefore, the LDC Committee approved an annual grant for 2010 in November 2010. Going forward, we expect these annual equity awards to be made in the first quarter of every year.
The 2010 equity awards were made in December 2010 to each of our named executive officers, with the exception of Eric, Larry, and Sergey. These awards acknowledged the scope of our named executive officers
leadership and their contributions to Google. In addition, on February 2010, we made an equity grant to Shona as, unlike other named executive officers, she had not received a grant in 2009. This grant was intended to reflect both her historical role in our success and her expected future performance. All equity awards were reviewed and approved by the LDC Committee within the context of our market 90th percentile equity target.
We generally grant stock options and GSUs in the ratio of two stock options for each GSU. We believe the ratio of these awards offers an appropriate balance between a leveraged upside opportunity and a reliable level of income. A stock option is the right to purchase shares of our Class A common stock at a fixed exercise price for a fixed period of time. GSUs are restricted stock unit awards of our Class A common stock that are paid out in installments.
Eric, Larry, and Sergey did not hold any stock options at the 2010 fiscal year-end, and all of their stock holdings were fully vested. They requested not to be considered for additional equity awards in 2010. 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.
2011 Equity Awards
In the first quarter of 2011, in accordance with our recently updated annual equity granting practice, we made equity awards to our named executive officers, excluding Eric, Larry, and Sergey who requested not to be considered. Separately, we made equity awards in the aggregate amount of $100.0 million to Eric in connection with the management changes that we announced in January 2011.
The LDC Committee believes that the following risk oversight and compensation design features guard against excessive risk-taking:
The LDC Committee has also reviewed our compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the company. The LDC Committee believes that the design of our annual cash and long-term equity incentives provides an effective and appropriate mix of incentives to help ensure that our performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results. In general, bonus opportunities for our employees are capped, and we have discretion to reduce bonus payments (or pay no bonus) based on individual performance and any other factors that we may determine to be appropriate in the circumstances. As with the compensation of our named executive officers, a substantial portion of the compensation for employees generally is delivered in the form of equity awards that help further align the interests of employees with those of stockholders.
Timing of Equity Grants
Pursuant to a policy adopted by the LDC Committee in 2005, the effective grant date for all ongoing equity awards to executive officers, members of our board of directors, and non-employee advisors is the first Wednesday of the month following the date on which the LDC Committee approves the dollar value of the equity award, unless otherwise specified by our board of directors or the LDC Committee. All stock option grants to named executive officers are granted with an exercise price equal to or above the fair market value of the underlying stock on the date of grant. The LDC Committee does not grant equity compensation awards in anticipation of the release of material nonpublic information. Similarly, we do not time the release of material nonpublic information based on equity award grant dates.
Stock Ownership Guidelines
To align our named executive officers and directors interests with those of our stockholders, the board of directors has instituted stock ownership guidelines under our corporate governance guidelines as follows: (i) Eric, Larry, and Sergey must own at least 7,500 shares of Google stock; (ii) our Senior Vice Presidents must own at least 2,000 shares of Google stock; and (iii) each director must own at least 500 shares of Google stock. Our executive officers shall have five years to meet these ownership requirements, and our directors have two years to do so.
Transactions in Company Securities
We have an insider trading policy, which among other things prohibits employees, officers, and directors from engaging in any speculative or hedging transactions in our securities. Hedging transactions such as puts, calls, collars, swaps, forward sale contracts, exchange funds, and similar arrangements or instruments designed to hedge or offset decreases in the market value of Googles securities are prohibited. No employee, including named executive officers, or director may engage in short sales of Google securities, hold Google securities in a margin account or pledge Google securities as collateral for a loan.
Post-Employment and Change in Control Payments
We have no agreements with any of our named executive officers that provide for additional or accelerated compensation on the termination of the executives employment or a change in control of Google, except as set forth below.
Upon a change in control of Google and unless our board of directors or LDC Committee determines otherwise, if the successor corporation refuses to assume or substitute the equity awards held by our employees, including our named executive officers, unvested options and unvested GSUs will fully vest. The table below shows our estimates of the amount of the benefit each of our named executive officers would have received if the unvested options and unvested GSUs held by them as of December 31, 2010 had become fully vested as a result of a change in control. The estimated benefit amount of unvested options was calculated by multiplying the number of unvested options held by the applicable named executive officer by the difference between the closing price of our Class A common stock on December 31, 2010, which was $593.97, and the exercise price of the option. The estimated benefit amount does not take into account any premium from our TSO program. The estimated benefit amount of unvested GSUs was calculated by multiplying the number of unvested GSUs by the closing price of our Class A common stock on December 31, 2010, which was $593.97. No values are shown in the table below for Eric, Larry, and Sergey because they had no unvested options or GSUs as of December 31, 2010.
162(m) Tax Deductibility
Section 162(m) of the Code may preclude us from deducting certain forms of non-performance-based compensation in excess of $1,000,000 to named executive officers. We expect the payments made pursuant to our executive bonus plan for the 2010 fiscal year to be eligible for deduction.
Perquisites and Other Benefits
Our named executive officers, like our other employees, participate in various employee benefit plans, including medical, dental, and vision care plans, flexible spending accounts for healthcare, life, accidental death, and dismemberment and disability insurance, employee assistance programs (e.g., confidential counseling), and paid time off. As with our other employees, we also paid life insurance premiums for the benefit of our named executive officers, other than Eric, Larry, and Sergey in 2010.
In addition, we maintain both a pre-tax 401(k) and a Roth 401(k) Retirement Savings Plan for the benefit of all of our employees, including our named executive officers. In 2010, we provided a company match equal to the greater of 100% of contributions up to $3,000; or 50% of contributions up to a maximum company match of $8,250 per employee, which our named executive officers also were able to receive. Our company match is fully vested to all employees, including named executive officers, at the time of contribution. As is the case with all employees, named executive officers are not taxed on their contributions to the pre-tax 401(k) Plan or earnings on those contributions until they receive distributions from the pre-tax 401(k) Plan, and all Google contributions are deductible by us when made. For the Roth 401(k) Plan, employees (including named executive officers) are taxed on their contributions to the plan, and all Google contributions are deductible by us when made. Eric, Larry, and Sergey did not participate in the 401(k) company match in 2010.
In 2010, we paid for personal security and amounts related to the personal use of non-commercial aircraft for Eric.
We regularly review the perquisites that named executive officers receive.
No Additional Executive Benefit Plans
Since we do not generally differentiate the benefits we offer our named executive officers from the benefits we offer our other employees, we also do not maintain any executive retirement programs such as executive pension plans, deferred compensation plans, or other executive retirement benefits.
Leadership Development and Compensation Committee Report
The LDC Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the LDC Committee recommended to our board of directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for 2010 and this proxy statement.
LEADERSHIP DEVELOPMENT AND COMPENSATION COMMITTEE
Paul S. Otellini, Chair
L. John Doerr
Summary Compensation Table
The following table sets forth information regarding the compensation to our named executive officers for the fiscal year ended December 31, 2010.
Grants of Plan-Based Awards in 2010
The following table provides information regarding the amount of awards under our executive bonus plan and equity awards granted in 2010 for each of the named executive officers.