What’s $8m to Google?

October 24, 2014

For most of us, $8 million is a lot of money. But for a company the size of Google, it’s probably safe to say that it’s the equivalent of sofa change. Still, even we were surprised by this exhibit attached to the 10-Q that Google filed yesterday.

In the letter, which was dated July 18, 2014, Google agreed to forgive an $8m cash award that former Chief Business Officer Nikesh Arora was supposed to pay back within 30 days if he left the company prior to April 25, 2015. The condition was spelled out pretty clearly in this letter dated April 27, 2012. In that letter, the company said it made the $8m award to Arora “after discussion with Nikesh and in light of his personal circumstances”. Arora’s last day at the company was Sept. 7, which seems to indicate he should have been writing Google a check for $8m.

So what prompted Google’s sudden change of heart? It’s hard to tell just based on Google’s filings and based on our past experience, the company never comments on anything in their SEC filings. A separate separation agreement that was also attached to the Q filed yesterday doesn’t provide any additional insight (though it does note the existence of something called the GCard, which appears to be some sort of Google credit card that has long been rumored).

One other interesting thing that we noticed: while Google announced on July 17 that Arora was leaving to join Softbank to become a Vice Chairman and CEO of Softbank Internet and Media and various media reports, including this one from the FT described Arora’s hiring as a “poaching”, the July 18 agreement implies that Arora’s decision to leave Google wasn’t entirely voluntary. How else to explain this language in the agreement?

“You may characterize your departure from the Company as voluntary and communicate the same to your team and peers, however, any written communications related to your departure must be pre-approved by Google’s Communications representative; provided, however, that such communications shall not include any communications generated by Softbank on or before October 17, 2014 relating to your new position with Softbank.”

Based on our experience reading lots of separation agrements, companies don’t usually pay large chunks of money (or in this case, forgive a large chunk of money) to an outgoing executive when the move is entirely voluntary.

Clearly, things are not as they seem here.

Posted in: D&O Turnover

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Companies Mentioned: Google Inc.,
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