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Ruth Porat suggests financial crisis could've been avoided if Wall Street acted more like Google

  • Alphabet CFO tells Economic Club of New York: "Culture is more important than rules and regulations."
  • Cites weekly gathering at which Alphabet executives answer questions as key Alphabet strength.
  • Financial crisis may have been different if Wall Street firms were run with that level of transparency, she says.
Ruth Porat, CFO of Alphabet, at the New York Economic Club on May 22, 2017.
Adam Jeffery | CNBC
Ruth Porat, CFO of Alphabet, at the New York Economic Club on May 22, 2017.

Ruth Porat, the former veteran Morgan Stanley executive who's now chief financial officer of Alphabet, suggested Monday that the financial crisis could have been prevented -- or at least made less severe -- if Wall Street had operated with the same transparency as Google's parent company.

"The financial crisis would have been different if someone had asked" whether taking on massive amounts of financial leverage was a good idea for the big banks, Porat told a luncheon gathering of the Economic Club of New York.

"Culture is more important than rules and regulations" in its contribution to the long-term success of a company, said Porat, who worked at Morgan Stanley for 28 years before joining Google in 2015.

"The most important thing is culture," she said.

Porat pointed to a long-time management tool used by Google founders Sergey Brin and Larry Page as key to why Google has continued to steadily boost sales and profits for more than a decade.

Every Friday at a company-wide, town-hall style meeting, the executives must answer a question that employees have selected through a vote.

The sessions, known as TGIF gatherings, are "not always pleasant," Porat said.

But "even though it's unpleasant, it can be hugely valuable," she said, because "it increases productivity and gives everyone a voice," Porat said.

"If banks had that kind of system, the financial crisis would have played out very differently."

The most important lesson she took away from the financial crisis of 2008-2009 was that companies need to focus on their "source of greatest vulnerability," she said during an interview with Maria Bartiromo, global markets editor of Fox Business Network.

On Wall Street, that vulnerability was liquidity.

When banks became over-leveraged and liquidity dried up, the resulting freeze nearly brought down the U.S. financial system.

For Alphabet, the greatest source of vulnerability is the speed of global innovation.

"Competition is one click away," she said. "Innovation happens everywhere...you better have a culture asking for a voice."

Part of Google's culture is that "we like all forms of engineering except financial engineering," Porat said, in explaining why the company -- unlike many other technology firms -- includes stock-based compensation in its operating results.

Porat is widely credited with bringing financial discipline to Alphabet.

Since she was named the company's CFO on March 25, 2015, the company's shares have climbed 70 percent, versus a 25 percent rise in the Nasdaq Composite Index.

Separately, Porat also said that she doesn't see the company's YouTube unit creating the same types of original shows as other tech rivals, including Netflix and Amazon, who are spending big on Hollywood-style content.

"We have a differentiated asset in our (YouTube) content creators. We don't see going to shows with glitzy production values that others have."