Google's top execs keep $1 salaries amid turmoil

Google Inc. Chief Executive Eric Schmidt and co-founders Larry Page and Sergey Brin maintained their traditional salaries of $1 last year even as the value of their combined stakes in the Internet search leader plunged by nearly $26 billion.

The paltry paychecks, disclosed Tuesday in a regulatory filing, come as no surprise because Schmidt, Page and Brin have insisted on their annual salaries remaining at $1 since Google (nasdaq: GOOG - news - people ) went public in 2004.

The trio also don't get any bonuses or the stock awards that most of Google's other 20,000 employees receive.

That's because Page and Brin, who founded the company in 1998, already are Google's largest stockholders with about 29 million shares apiece.

Page, 36, and Brin, 35, made Schmidt, 53, a major shareholder when they hired him as CEO in 2001.

 

Schmidt received perquisites valued at $508,763 last year, mostly to cover personal security bills totaling $402,562. Google also paid a total of $106,201 to fly his family and friends on airplanes chartered by the Mountain View, Calif.-based company.

Including his perks, Schmidt's 2008 compensation package edged up 6 percent from 2007 when his package totaled $478,662.

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The Associated Press formula is designed to isolate the value the company's board placed on the executive's total compensation package during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission, which reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

 

Limiting their salaries to $1 didn't seem like a big sacrifice for Schmidt, Brin and Page until 2008. That's because they became multibillionaires as their holdings in Google soared eight-fold between the time of the company's initial public offering in August 2004 and the end of 2007.

Although all three men remain among the world's wealthiest people, they suffered a major setback last year. Combined, their fortunes plunged by a combined $25.8 billion, or nearly 56 percent, in 2008, as investors began to fret that Google would be hurt by the faltering economy.

Google held up better than many people feared as its revenue rose 38 percent to $21.8 billion, but the company's stock price still plummeted from $691.48 at the close of 2007 to $307.65 at the end of last year.

Google shares have rallied along with the overall market recently, closing Thursday at $347.17.

The steep decline in Google's market value prompted the company to recently decrease its employees' cost to exercise a total of 7.64 million stock options. The re-pricing gives the 15,642 who participated in the program a better chance to strike it rich in future years.

Signaling its intent to hand out even more stock options as it expands, Google wants to add another 8.5 million shares to the pool of available awards. The request will be voted on at the company's annual meeting May 7.

Other Silicon Valley billionaires, such as Yahoo Inc. (nasdaq: YHOO - news - people ) co-founder Jerry Yang and Apple Inc. (nasdaq: AAPL - news - people ) co-founder Steve Jobs, also have limited their salaries to $1 while serving as CEO.

But mogul CEOs haven't been as egalitarian. For instance, Oracle Corp. (nasdaq: ORCL - news - people ) CEO Larry Ellison pocketed a $1 million salary in the company's last fiscal year and received an additional 7 million stock options valued at $71.4 million when they were granted.

Wall Street retreated Monday on concerns that Israel's attack on Gaza might disrupt oil production and shipments from the Middle East, driving oil prices higher.

Investors remained cautious in a holiday-shortened week, unwilling to make many big bets in the final three days of trading for 2008. Israel's escalating attacks against Gaza's Hamas rulers made traders more hesitant to buy.

The tensions pushed oil prices above $40 a barrel during the session, though crude was up just 37 cents at $38.03 a barrel on the New York Mercantile Exchange at midday. Oil has fallen more than $100 from its peak of $147.27 a barrel on July 11 as a slowing economy curbed demand.

Todd Leone, managing director of equity trading at Cowen & Co., said volume is extremely light and that is contributing to the market's swings. Low volume tends to skew price movements.

"What's going on in Israel didn't read well over the weekend," Leone said. "Beyond that, it is an incredibly quiet session. It's really not taking much to move the markets."

Investors also digested a potential blow to dealmaking on Wall Street. On Sunday, Kuwait's government canceled its $17.4 billion K-Dow Petrochemicals joint venture with Dow Chemical Co., saying it was "very risky" because of the global financial crisis and low oil prices. The joint venture was set to begin Thursday.

Rohm & Haas Co. maintains that its proposed $15.3 billion takeover by Dow Chemical won't be affected by Dow's substantial loss of income from the venture. But investors punished shares, driving them down $10.76, or 17 percent, to $10.76. Dow Chemical shares lost $3.89, or 21 percent, to $15.03.

In early afternoon trading, the Dow Jones industrial average fell 121.55, or 1.43 percent, to 8,394.00.

Broader indexes also declined. The Standard & Poor's 500 index fell 14.21, or 1.63 percent, to 858.59; the Nasdaq composite index fell 34.20, or 2.23 percent, to 1,496.04.

Declining issues were ahead of advancers by nearly 2 to 1 on the New York Stock Exchange, where volume came to 353.1 million shares.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.06 percent from 2.14 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.02 percent from 0.01 percent late Friday.

The dollar was lower against other major currencies, while gold prices edged higher.

Wall Street has largely written off the final three trading days of 2008, the worst year since Herbert Hoover was president. The Dow has fallen 36.2 percent, the biggest drop since 1931 when the Great Depression sent stocks reeling 40.6 percent. And the Standard & Poor's 500 index is set to record the biggest drop since its creation in 1957. The index of America's biggest companies is down 40.9 percent for the year.

Dave Rovelli, managing director of trading at brokerage Canaccord Adams, said investors will be waiting to make big moves until after the Jan. 20 inauguration of President-elect Barack Obama. Wall Street is eager for details on his proposed stimulus package for the economy.

"No one is going to do anything until the New Year," he said.

However, if companies release earnings warnings early in January, or if the first wave of fourth-quarter reports are disappointing, the market could see a return of heavy selling. Investors will be focusing on any word from companies deemed critical to the economy, especially from the beleaguered financial and retail sectors.

This week, investors will also be looking for insight into how retailers fared after the weak Christmas selling season. Stores have slashed prices even further to entice post-holiday shoppers but with many consumers nervous about the economy they're reluctant to open their wallets. That's a troubling prospect for investors, since consumer spending accounts for more than two-thirds of U.S. economic activity.

The Russell 2000 index of smaller companies fell 14.35, or 3.01 percent, to 462.42.

Overseas, Japan's Nikkei stock average rose 0.09 percent. In afternoon trading, Britain's FTSE 100 rose 2.44 percent, Germany's DAX index rose 1.63 percent, and France's CAC-40 rose 0.47 percent.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Wall Street proceeded cautiously Thursday, with stocks moving in a narrow range as investors weighed corporate earnings reports that signaled further economic deterioration, but drew some comfort from a better-than-expected reading on new jobless claims.

The Labor Department reported that initial jobless claims fell by more than economists anticipated to 554,000 last week. The claims remain near last week's 26-year high, and the four-week moving average for claims is up, but investors had been bracing for a gloomier reading.

However, a batch of mixed corporate earnings reports on Thursday kept investors on edge.

FedEx Corp. reported a 3 percent rise in quarterly earnings, but announced further cost cuts as demand continues to wane. Ingersoll-Rand Co. cut its fourth quarter earnings forecast by more than half, and motor home maker Winnebago Industries Inc. swung to a loss.

But Discover Financial Services swung to a profit and homebuilder Lennar Corp.'s quarterly loss was smaller than last year's.

Meanwhile, a private research group's measure of the economy's health fell again in November and its six-month rate of decline hit the worst level since 1991.

That reinforced perceptions that the economy's troubles are far from over. The market remains unsure how steep and prolonged the recession will be.

But investors seemed pleased that President-elect Barack Obama's aides were assembling a two-year stimulus plan that could cost $850 billion. The package would reportedly include new jobs, middle-class tax relief and expanded aid for the poor and the unemployed.

A stimulus for U.S. consumers became an especially high priority earlier this month, when the Labor Department reported that U.S. employers slashed more than half a million jobs in November.

Still, amid very light trading, stocks struggled to take a definitive direction.

"The economic data today was not as bad, but it wasn't great," said Jon Biele, head of capital markets at Cowen & Co. "You might see a little window dressing going on into year end, but the market is just churning."

In midday trading, the Dow Jones industrial average fell 38.71, or 0.44 percent, to 8,785.63. The Standard & Poor's 500 index rose 1.58, or 0.17 percent, to 906.00, while the Nasdaq composite index rose 4.39, or 0.28, to 1,583.70.

The Russell 2000 index of smaller companies rose 3.51, or 0.72 percent, to 490.10.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to just 482.74 million shares. Volume will likely remain light for the remainder of the year as investors break for the holidays.

On Wednesday, the Dow fell nearly 100 points as enthusiasm over the Federal Reserve's historic rate cut Tuesday dampened on news of a larger-than-expected loss at Morgan Stanley and layoffs at Cooper Tire and Rubber Co. and Newell Rubbermaid Inc.

In recent weeks, the market has moved away from the wild 300-point swings of September, October and early November, an encouraging sign for many analysts who believe Wall Street is beginning to show some stability.

Since the S&P 500 and the Dow hit multiyear lows on Nov. 20, the Dow has risen 16.8 percent, while the S&P 500 is up 20.2 percent. Both indexes are still down more than 30 percent for the year.

"People in general are less pessimistic," said Bernie McGinn, chief executive of Alexandria, Va.-based McGinn Investment Management. "They are still not optimistic, but they are less pessimistic, and I think the market reflects that."

McGinn also attributed some of the recent calm to the typical end-of-year slowdown - which is even more pronounced this year in comparison with the unprecedented turmoil of the fall.

"I think that people are getting into the holiday season earlier this year," he said. "People have been through the ringer this year and they just want the year to be over."

Biele echoed that sentiment, saying that investors are simply "exhausted."

"You can't really glean anything in this market right now," he said. "Everybody is still very much in cash. ... Nobody is going to make any bets right now."

On Thursday, Obama named three veteran regulators to round out his economic team and vowed to overhaul regulatory rules to prevent a repeat of the financial and economic turmoil the country is currently suffering.

If confirmed by the Senate, Mary Schapiro would take over the Securities and Exchange Commission. Schapiro, who currently heads a nongovernment regulatory group for securities firms, is also a former head of the Commodity Futures Trading Commission and former member of the SEC.

The SEC faces mounting criticism for its failure to protect investors and detect trouble on Wall Street. Its latest blemish comes from the fraud investigation of prominent money manager Bernard L. Madoff, who is accused of running a $50 billion Ponzi scheme.

Meanwhile, the Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.

The White House is expected to soon unveil ways to provide emergency aid to the automakers, which have said they could run out of cash within weeks without government help.

The fate of Detroit's three biggest automakers was put in serious jeopardy last week after the Senate failed to pass a $14 billion bailout for Chrysler LLC and General Motors Corp. Ford Motor Co. has said in the past that it does not need government money to survive.

GM shares dropped 59 cents, or 13 percent, to $3.78. Ford shares tumbled 27 cents, or 8.6 percent, to $2.87. Chrysler is not publicly traded.

Energy stocks were also big decliners Thursday as the price of oil plunged below $38 a barrel. BP PLC dropped $1.91, or 3.9 percent, to $47.68, while Chevron Corp. fell $1.68, or 2.2 percent, to $75.13.

Discover's earnings report sent shares soaring 14 percent, or $1.22 to $9.80. Other credit card companies also rose. MasterCard Inc. added 45 cents, or 4.5 percent, to $10.46, while Capital One Financial Corp. rose 37 cents to $29.84.

Long-term Treasury prices soared, sending yields down to new record lows. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.12 percent from 2.19 percent late Wednesday. The yield on the popular three-month T-bill - whose yield has at times gone negative due to frenzied buying - was at 0.01 percent, unchanged from late Wednesday.

The strong surge in buying has been stoked by the Fed's decision Tuesday to lower its federal funds rate target to a range of zero to 0.25 percent, and express an interest in buying long-term government debt.

The dollar rose against the euro and the British pound, but fell against the Japanese yen. Gold prices declined.

Light, sweet crude fell $1.11 to $38.95 a barrel on the New York Mercantile Exchange.

In Asia, Japan's Nikkei stock average rose 0.64 percent, and Hong Kong's Hang Seng index rose 0.24 percent. In afternoon trading in Europe, Britain's FTSE 100 rose 0.15 percent, Germany's DAX index rose 1.02 percent, and France's CAC-40 fell 0.24 percent.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

Ford Motor Co. says it is considering selling Volvo Car Corp. as the struggling U.S. automaker seeks to raise cash and weather the industry crisis.

Ford said Monday it expects its strategic review of the Swedish luxury automaker will take several months.

The Swedish government has said it has been in talks with Volvo and with General Motors Corp. (nyse: GM - news - people )'s Saab unit following reports that the U.S. parent companies were seeking aid for their Swedish carmakers.

Ford, GM and Chrysler LLC will go before Congress on Tuesday to present a proposal for $25 billion in loans to keep them afloat as sales sag.

Ford shares are up 18 cents at $2.87 in morning trading.

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