SEC raises tensions at the Googleplex
Published: 10 Jan 2005 14:20 GMT
Google's clubby campus has been hit with an embarrassment of riches -- literally -- thanks to a rarely invoked securities law requiring the company to report stock sales of hundreds of employees, rather than just top shareholders.
Since its August IPO, Google has filed documents with the Securities and Exchange Commission (SEC) detailing the multimillion-dollar stock sales of founders Sergey Brin and Larry Page, all the way down to the rank and file. The disclosures have so far affected about 400 of the company's 3,000 employees, and include documenting one trade of just five shares worth $850. (Planned stock sales can be reviewed on Yahoo finance.)
Employee complaints aren't exactly piling up about Google's generous stock grant policies, which have helped create an estimated 1,000 new millionaires, on paper at least. But the SEC filings have struck something of a nerve inside the company by offering an unusually candid look into the wealth of co-workers. That's creating unaccustomed tensions inside a workplace that has long projected an image of collegial egalitarianism to the outside world, some people said.
"The whole culture's really strange when there are two people in the same cubicle and one's worth $1m and the other is worth nothing and they both know it," said one person close to the company. "It's created this asymmetry where some people feel more entitled than others."
Google, brimming with idealism and its seemingly altruistic goal of turning the world into a giant digital library, is now wrestling with the discomforting mixture of instant employee wealth and a little too much information of its own.
Google declined to comment for this story. But securities lawyers said the stock sale disclosures stem from an SEC rule regarding the sale or purchase of securities outside of a public offering.
Typically only executive officers or directors of a company must file their trades with the SEC, allowing most employees to buy and sell their stock anonymously.
Google's IPO offers an exception to the general rule, however, thanks to the unusually large number of employee stock purchases that took place in advance of the public offering. In order to benefit from certain tax advantages, hundreds of employees decided to purchase their shares outright in pre-public private sales rather than wait for the IPO. As a result, they owned restricted stock instead of options at the time of the offering, forcing them to report their stock sales as insiders.
Securities lawyers said companies can typically avoid reporting restricted stock sales under an exemption known as rule 701, but only if they meet certain thresholds. To qualify for the exemption, a company cannot sell more than $1 million worth of stock; 15 percent of the total assets of the company; or 15 percent of the outstanding shares within a 12-month period.
"Google blew through the 701 limit," said Mark Tanoury, senior securities attorney at law firm Cooley Godward.
Garry Mathiason, senior partner at labour and employment law firm Littler Mendelson, said he recalls a similar situation for about a dozen other technology companies over the years, adding that the filings caused some distress for otherwise good-spirited office cultures.
For some people, sudden IPO wealth may validate the work they have put into the company and boost self-confidence, he said.
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