Why Investors Should Pay Attention to Google's Employee Protests

Especially in a tight labor market, there are palpable consequences to internal turmoil.
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Google employees are speaking up against management, and more than meets the eye could be at stake.

Workers at Google (GOOGL) - Get Report have protested company policies on numerous recent occasions:

-- In November, employees protested the suspension of two colleagues, allegedly over their activism. 

-- In June, during a shareholder meeting, a group spoke out against Google’s handling of sexual harassment complaints. 

-- And late last year, employees sounded the alarm on Google’s plan to build a censored China search engine. (The Mountain View, Calif., search giant has since shelved that project.)

These disputes frequently spill out into the public square. This week, Bloomberg reported that Google’s top lawyer advocated for a much more restrictive policy on accessing internal documents, sparking a swift internal backlash. 

Some employee complaints cited by the news service bemoaned that proposed policy change as the death knell of Google’s historically open and transparent corporate culture.

Although Google is still a sought-after employer, Sundar Pichai, who was elevated to CEO of both Google and parent Alphabet (GOOGL) - Get Report, inherits a company with a more bruised reputation compared with a few years ago -- not to mention antitrust investigations and other potential regulatory action.

Glassdoor, which tracks quarterly and yearly data on the best places to work, currently shows Google as the #11 U.S. workplace, based on employee reviews. (By contrast, it was rated the #1 U.S. employer in 2015.)

“It’s a legitimate risk, in a tight labor market; being able to attract top talent and quality talent is key,” said Ann Skeet of Santa Clara University’s Markkula Center for Applied Ethics, who studies corporate behavior in Silicon Valley. 

“Anything that signals to people that there’s turbulence within the company could hurt their ability to attract top talent.”

In an environment where major tech firms compete heavily for the best and brightest -- particularly in specialized niches such as AI -- some prospective workers could shy away from Google if they perceive that the company is misaligned with their values, or that there’s internal unrest and disagreement over the direction of the 21-year-old tech firm.

It also means that Pichai, in his newly expanded role, will need to dedicate more resources and time to redefining the company’s culture.

“For a long time they’ve relied, maybe too much, on one kind of cultural element, which is the things they say about their culture: Being Googley, having phrases like ‘do no evil,’” Skeet added. 

“They’ve said these things but haven’t clearly defined what they are and backed them up with their practices in the company. It can mean very different things to different people.”

That lack of clarity has come back to bite Google in the recent past, with financial consequences to boot. In 2018, more than 4,000 Googlers cosigned a letter demanding that Pichai ditch Project Maven -- a contract with the Pentagon to analyze drone footage -- and other warfare-related technology. Among other concerns, the letter cited waning public trust in Google.

Pichai eventually agreed to back away from the drone analysis project, writing in a blog post that Google would not develop AI specifically for use in weapons technology.

The Maven project itself was believed to be valued less than $10 million, but it could have expanded lucrative ventures, such as military cloud deals. Months later, Google decided to drop out of the running for a sought-after $10 billion Pentagon cloud deal.

In addition to growing scrutiny of Google’s market power -- and growing distrust of the firm -- Sundai must prioritize building trust within Google’s own workforce as well.

“I hope that Sundar Pichai has the capability to do this, based on what we’ve seen so far,” Skeet added.

Pichai and the rest of Google management face numerous challenges heading into 2020, including growing regulatory risks and shoring up growth and profits. 

Alphabet shares are up 28% in 2019.