Google’s parent company is paying executives again, worth tens of millions of dollars

Google, long known as “other people’s company,” recently grabbed the spotlight with a multimillion-dollar stock incentive package for its executives.The plan shows four executives from Alphabet, Google’s parent company, CFO Ruth Porat, president of global affairs and chief legal officer Kent Walker, Prabhakar Raghavan, senior vice president of search, and Philipp Schindler, the company’s chief commercial officer,Will increase base salary from $650,000 to $1 million in 2022.They will also receive stock awards worth between $23m and $35m each.The executives’ lavish rewards reflect a year of stellar growth at Alphabet.By the end of 2021, Alphabet’s stock was up more than 70%, giving it a market cap of just under $2 trillion.After 17 years as a public company, why is Alphabet still growing so fast?As a representative of the established tech giants, what lessons does Alphabet have for maturing tech companies?Most of us are probably more familiar with Alphabet’s predecessor, Google.In August 2015, in order to make the company’s internal operations more simple and efficient, Google announced the establishment of a new parent company “Alphabet”, which will separate the original core search business from other emerging businesses, and set up independent wholly-owned subsidiaries under business lines, such as Google, Verily, DeepMind, etc.The change is significant for Google, as it is an experiment by a mature company to better incubate its internal innovation business.Under normal circumstances, large enterprises in the mature stage will often face the problem that the growth of core business slows down and the emerging business is not yet formed after the early stage of rapid development.Google is no exception. As the core business at that time, search business was the company’s most important source of income, and its strategic goal was to enhance profitability and bring more income to shareholders.But in the long run, the development of diversified businesses is the key to ensure the company’s strong and lasting vitality.Forward-looking business exploration is essential, though it comes with great risk and almost no upfront cost.In order to resolve the conflict between core business and forward-looking business, Larry Page, then Google’s chief executive, said he would split the company into several subsidiaries and incubate them into lean startups that could grow iteratively and quickly.As it turned out, that decision helped Alphabet break new ground.Judging by last year’s results, the vast majority of Alphabet’s revenue still comes from Google’s advertising business.But it’s worth noting that Google’s cloud revenue, excluding advertising, climbed 45% in the third quarter to $4.99 billion, while operating losses narrowed to $644 million from $1.21 billion a year earlier.In addition, Alphabet has seen big returns from its VENTURE capital firms GV and CapitalG.Alphabet recorded investment gains of $188m in the third quarter, up from $26m in the same period last year.Above all, it can be seen that Alphabet incubated new businesses at the beginning, the multi-line parallel strategic layout has begun to take shape.However, the adjustment of organizational structure alone is not enough to support the ambition of Alphabet’s overall layout. How to retain core talents and how to better motivate employees to focus on the promotion of innovative business has become one of the important issues to be urgently solved by Alphabet.| new equity incentive plans in 2016 Alphabet is committed to within the group to implement a new type of equity incentive plan.Emerging businesses within the group, such as Fiber (Google Fiber) and Verily (life sciences), will receive options granted by subsidiaries rather than Alphabet stock.That means the value of the options employees receive will be entirely dependent on the performance of the unit and not tied to the performance of Alphabet’s other businesses.There are two main reasons for implementing the new equity incentive plan.First of all, as a company that has been listed for a long time, the growth rate of subsidiaries represented by Verily has exceeded the core business of the group.As a result, Alphabet’s incentive plan using restricted stock units (Rsus) does not fully reflect the value created and effort made by employees.Secondly, the use of Alphabet restricted stock as an incentive tool provides employees with a comfort zone to some extent, which makes them lack the crisis risk awareness needed in the start-up stage.Because No matter whether the new business is successful or not, Alphabet can make profits as a whole, and the stock value of employees will increase to make profits, so that the real incentive effect cannot be achieved.| executive compensation incentive plan, on the other hand, Alphabet for executive compensation design is more focus on global concerns, to shareholder returns (TSR) as indicators of performance appraisal.Take current CEO Sundar Pichai for example. Pichai’s equity incentive review period is from the beginning of 2020 to the end of 2022, and the evaluation index is the fractional value of TSR relative to S&P100.Fifty percent of the effective restricted stock units will be determined based on the relative TSR performance from 2020 to 2021, and the remaining 50 percent will be determined based on the relative TSR performance from 2020 to 2022.To put it simply, Alphabet gets 100% of the grants only if it beats 50% of the S&P 100 stocks over the review period;If you beat 75% of the stock, you can get up to 200% of the stock grant.But if you don’t beat 25% of the stock, you don’t get incentive grants.In fact, as a long-listed tech giant, it is obviously very difficult for Alphabet to sustain rapid growth when its new businesses are still in the incubation stage.Therefore, how to ensure the long-term interests of shareholders, balance the development of the group’s internal risk business and core profit business, and make the market value and stock price show a healthy growth trend are important criteria for evaluating senior executives.In addition, Google’s assessment cycle spans three years, giving enterprises more time and flexibility to adjust their business development.Equity incentive plans designed from a long-term perspective can also achieve better retention of core talents and demonstrate full trust in their abilities.After 17 years on the market, Alphabet has completed a magnificent turnaround after splitting and restructuring.Through the strategy of leading the core business and parallel multiple business lines, Alphabet has always maintained the innovation ability like a start-up company, continuously injected fresh blood into the group and maintained a strong vitality.Even more remarkable is Alphabet’s willingness to experiment with a variety of equity incentive plans to suit the different stages of its internal business.Always in order to motivate core talents for the purpose of constantly dynamic adjustment of incentive programs, in order to ensure the healthy and steady growth of the company.

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