Want CNET to notify you of price drops and the latest stories?

Co-founders release Google 'owner's manual'

Founders Larry Page and Sergey Brin craft a letter to map out Google's credo as a public company.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
4 min read
Google founders Larry Page and Sergey Brin have always done it their own way.

Nowhere is this attitude reflected more vividly than the opening letter included in Google's regulatory filing for its initial public offering. Dubbed "'An Owner's Manual' for Google's Shareholders," the seven-page letter is an organizational manifesto crafted by the co-founders to map out Google's credo as a public company that goes against most principles for operating a public company.

Download the S-1
Google's registration

Click here to download
Google's S-1 filing.
Caution: Large file.

Authored by Page, the letter outlines everything from the triumvirate leadership between the co-founders and CEO Eric Schmidt to its promise not to be "evil" by sacrificing its ideals for short-term financial gains. It promises more spending on employee perks such as free meals, a separate voting structure for executives, and avoidance of making financial predictions for Wall Street. Instead, the company will focus on long-term priorities that do not have an immediate effect on earnings.

"If opportunities arise that might cause us to sacrifice short-term results but are in the best long-term interest of our shareholders, we will take those opportunities," the letter read. "We will have the fortitude to do this. We would request that our shareholders take the long-term view."

Indeed, Page and Brin have shaped Google with a pervasive sense of idealism for creating a different kind of company. The pair, who founded Google in 1998 at the expense of their Stanford University doctoral studies, have created a corporate environment that fosters individual creative pursuits while pampering employees with free meals and regular beer bashes.

Complete coverage
Google's IPO
Web search king
plans to raise $2.7 billion

Whether or not Page and Brin can maintain Google's current shangri-la atmosphere in the face of Wall Street scrutiny and shareholder demands remains a formidable task. If history is a guide, one can look no further than Yahoo, Google's biggest competitor. Also founded by a pair of Stanford graduate students--Jerry Yang and David Filo--Yahoo underwent an executive and cultural purge when its fortunes went south during the dot-com bust.

Here are some of Google's promises and processes as outlined in their own words from the owner's manual:

Managing Wall Street: "Many companies are under pressure to keep their earnings in line with analysts' forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction."

Risk vs. reward: "As the ratio of reward to risk increases, we will accept projects further outside our normal areas, especially when the initial investment is small. We encourage our employees, in addition to their regular projects, to spend 20 percent of their time working on what they think will most benefit Google. Most risky projects fizzle, often teaching us something. Others succeed and become attractive businesses."

Executive decision-making: "To facilitate timely decisions, Eric, Sergey and I meet daily to update each other on the business and to focus our collaborative thinking on the most important and immediate issues. Decisions are often made by one of us, with the others being briefed later. This works because we have tremendous trust and respect for each other and we generally think alike."

Dual class voting: "While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results.

Googlers: "We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. We are careful to consider the long-term advantages to the company of these benefits. Expect us to add benefits rather than pare them down over time."

Kumbaya: "We aspire to make Google an institution that makes the world a better place. And now, we are in the process of establishing the Google Foundation. We intend to contribute significant resources to the foundation, including employee time and approximately 1 percent of Google's equity and profits in some form."

Salesforce.com, which is also getting ready for a public offering, has pledged 1 percent of its equity, profits and employee time to the Salesforce.com Foundation.

Donating pre-IPO stock to establish a charitable foundation is not without precedent. The eBay Foundation was created in 1998 with a donation of 107,250 shares of eBay common stock, according to Community Foundation Silicon Valley, which facilitated the process. The current value of the eBay Foundation is just over $30 million.

"We're delighted to see Google's founders including philanthropy in their initial public offering," said Peter Hero, president of Community Foundation Silicon Valley. "Using pre-IPO stock to fund charitable giving is a terrific way for young companies to establish a solid program of corporate philanthropy in their early years."