Google's Corporate Governance: Structure, Culture & Global Reach

Introduction

Corporate governance comes in a variety of forms and may be adapted to the specific needs of the company under discussion. The model has changed in some cases for different reasons, and the rise of e-commerce and online business has necessitated some of that change. One of the most successful online entities created since the rise of the Internet is the online search engine Google, a company that has a unique style of corporate governance, just as it has developed a strikingly different business model for its search engine — its core business — and for the many spin-offs it has instituted around that business.

Google was never the only search engine offered on the Internet, but it soon became the most popular and the most effective, so much so that the name of the company itself became a verb used by millions of people to describe the very act of looking something up online. Like many computer technology companies, Google from the outset had a certain iconoclastic sense of its mission, its relationship to users, its offerings, and its form of governance. The business world at first rejected the looser and more tolerant nature of corporate governance on the Web, though the success of a number of companies using this approach has caused considerable rethinking.

Google.com stands today as a model of a certain type of online business and has also shown the ability to incorporate what others do into its own business plan. The rise of online book sites caused Google to offer its own version through Google Books, trying to outdo competitors by offering search options and full text wherever possible. The company saw maps distributed by companies like MapQuest and added its own, developing a more extensive mapping service that includes satellite imagery and additional features. Google has also found ways to offer its own versions of music downloading, online television, and selling sites to compete with Amazon.com, among many other services. In some cases Google expanded by purchasing other sites and adapting them to its business plan; in other cases it simply created a more competitive version and introduced that to the public. Throughout, the company has maintained its unique brand of corporate governance — less centralized and less rigid than the norm — a model now being emulated by other online businesses.

Corporate Governance in a Global Economy

Corporate governance is usually described as referring to both the structure and the relationships that determine corporate direction and performance. The Board of Directors is considered central to corporate governance and is the body most often seen as representing it. The relationship of the Board to a company's shareholders and management is seen as vital, and others who may affect corporate governance include employees, customers, vendors, and creditors. The framework for corporate governance includes legal, regulatory, institutional, and ethical elements, all linked to the prevailing environment of the business community.

Corporate governance has received increased attention in recent years, first because of governance failures such as the Enron scandal, and second because of the perception that corporate governance is key to success in the developing global marketplace. Some observers see corporate governance in the developing global economy as offering a new locus of power and control in the capital market itself, reducing the sway of individual nations while increasing the potential for nations to be obstructive as they attempt to influence the flow of capital and other issues best left to the markets themselves. The role now seen for nations is to react — and to do so in a way that is beneficial to the power of the market. Often, governments react by trying to assert their own power, even at the expense of the economy, because they want control. They will not have that control in the developing global economy, however, and governments should adapt accordingly and allow the market to take its course.

This shift is likely to change the way markets are governed and the roles of both governments and corporate governance structures. Corporate governance will seek to maximize benefits by enhancing the flow of capital and production methods and by accelerating these processes. The system developing is an open, global system — a move away from the closed, national system — and this changes who bears the risk. Corporate governance must recognize this fact and take it into account, moving away from the protections afforded by the closed national system and toward the open global system that is emerging regardless of what any single actor might prefer. This opens many new possibilities because there is no state mechanism standing between the participant and the global market, but it also creates challenges because participants must think through all possibilities without the security net of the past.

Such an image of the global economy fits well with an Internet-based business like Google. The Internet is a truly global marketplace, able to operate around the world without the need for a costly infrastructure in each country, without separate physical stores in various locations, and with a truly global reach that is built into the very nature of an online company.

The Rise of Google

The development of Google in its current form, and the way its corporate governance developed, can be traced to the history of the company and to decisions made at various junctures by its founders. The company was started in 1995 by computer science graduate students Larry Page and Sergey Brin as they set out to find a unique approach to one of computing's greatest challenges: retrieving relevant information from a massive set of data. By 1996, the two had created a search engine called BackRub, named for its ability to analyze the "back links" pointing to a given website. They continued to refine the technology, and by 1998, Page and Brin had built their own computer housing in Larry's dorm room, with a business office in Sergey's room — and Google had a new home.

They then set out to find potential partners willing to license their search technology, which outperformed anything available at the time. One of those they approached was David Filo, the founder of Yahoo!, who encouraged them to develop the service themselves by starting a search engine company. They devised the name "Google" from the word "googol," a mathematical term for the number represented by the digit 1 followed by 100 zeros — reflecting the company's mission to organize the vast and seemingly infinite amount of information available on the World Wide Web ("Google, Inc." paras. 1–4).

When they were unable to secure financial support from the major portal players of the day, the co-founders decided to go their own way. They wrote a business plan and searched for an investor, eventually approaching Andy Bechtolsheim, founder of Sun Microsystems, who wrote a check to Google Inc. for $100,000. The company was incorporated in 1998 and soon opened new headquarters in a garage in Menlo Park, California. By then, Google.com was answering 10,000 search queries a day, and articles about the new website began to appear. By December, PC Magazine named Google to its list of Top 100 Web Sites and Search Engines for 1998. The number of queries per day soon increased to 500,000, and the number of employees grew to eight. Google moved its offices to University Avenue in Palo Alto in 1999 and signed on with RedHat as its first commercial customer. By June of that year the company had secured $25 million in equity funding from two leading Silicon Valley venture capital firms. Staff members from those investors joined Google's board of directors, and new managers were recruited for various departments. The company soon outgrew its new headquarters and moved to the Googleplex in Mountain View, California ("Google, Inc." paras. 5–10).

The company continued to expand. Traffic reached over three million queries as AOL/Netscape selected Google as its web search service, followed by the Italian portal Virgilio and the UK's leading online entertainment guide, Virgin Net. Over this period, the company culture developed into the form that continues to inform its brand of corporate governance. Google nurtured an atmosphere of innovation and collegiality, bolstered by a corporate culture featuring exercise balls, lava lamps, workout rooms, grand pianos, and visiting dogs. The company attributed much of its success to this culture, emphasizing innovation and performance over adherence to rigid corporate structure. Google also showed a global reach early by adding numerous language versions around the world. In 2000, the company reached 18 million search queries per day and officially became the world's largest search engine ("Google, Inc." paras. 11–14).

The company then sought to address its need for income by introducing a keyword-targeted advertising program as an additional revenue source. It partnered with Yahoo! and other partners such as China's leading portal NetEase and NEC's BIGLOBE in Japan. Google introduced AdWords, a self-service advertising program that could be activated with a credit card. By December of 2000, Google was receiving more than 60 million searches per day, and reached the 100-million search mark per day in 2001 ("Google, Inc." paras. 15–16).

Conclusion

Google is a company founded at the height of the technology boom of the 1990s, and one that took a unique approach to business from the first. The company prided itself on being different and on placing a certain commitment to doing good above purely commercial considerations. Once it became a publicly traded company, though, it had to comply with a number of regulations and so developed a more formal corporate identity, including a Board of Directors led by someone with deeper experience in the corporate world, better able to ensure that rules were followed and the business handled properly.