Just-published correspondence between Google parent company Alphabet and the Securities and Exchange Commission breaks down how the company makes decisions regarding its dozen different businesses.
Since Google blew up its corporate structure to form Alphabet in late 2015, it now separates its financials between Google, which it divides between advertising and everything else (like cloud computing and hardware), and its "Other Bets," which currently includes 11 different companies, like self-driving car unit Waymo and healthcare arm Verily.
Late last year, the SEC asked Alphabet for specific details around how much decision-making power Alphabet CEO Larry Page has on individual Google businesses, and the different kinds of information given to Page versus president Sergey Brin and Google CEO Sundar Pichai, among other things.
Alphabet's response letter, dated December 15, was just released today due to SEC correspondence rules.
Although none of the information Alphabet provided in response is shocking, it provides an unusually granular look at the company's complicated corporate structure and which executives have authority over what decisions.
Here are some of the interesting insights:
Alphabet CEO Larry Page receives regular financial information about every Alphabet company but doesn't allocate resources to individual product areas within Google or within individual Other Bets.
Page proposes compensation for Google CEO Pichai and all the other Other Bet CEOs, but no other executives below that.
The Other Bet CEOs include:
While Google accounted for all of Alphabet's profit and more than 98% of its revenue in its last quarter, Google CEO Sundar Pichai neither receives financial information about Alphabet's Other Bets nor has any decision-making power over them.
That hands-off relations played out dramatically in the case of Nest, the company Google acquired for $3.2 billion in 2014. When Nest spun-out as an Alphabet unit, the two companies had no incentive to work together and ended up building similar products. Ultimately, Alphabet decided to roll Nest back into Google earlier this month.
Pichai also does not have authority over Alphabet's overall resource allocation to Google.
Without Page's approval, Pichai can commit Google to non-standard licensing or similar arrangements, investments, mergers and acquisitions, and other commitments up to a set dollar threshold. Also, capital expenditures, real estate, commercial arrangements, including licensing, partnership and revenue generating agreements and other similar transactions and expenditures up to a set dollar threshold (which is undisclosed).
Although Susan Wojcicki and Diane Greene both have "CEO" titles within Google, for YouTube and Cloud respectively, Pichai is the only Google executive who reports directly to and maintains regular contact with Page.
Brin receives all of the same reports as Page. Along with Page, he will give preliminary approval to individual Other Bet annual business plans, but Page has to give the final approval. Both Brin and Page will work with Other Bets and occasionally various product area leaders within Google, but those leaders don't have direct accountability or contact with them. Page and Brin's interactions "involve advice on engineering and technical specifications related to research and product development initiatives."
Alphabet CFO Ruth Porat participates in the annual business planning process of Google as well as each individual Other Bet.
Read Alphabet's response in its entirety here.