Eric Schmidt: Is the executive chairman of Google really the arrogant defender of tax avoidance that his critics claim?

He remains the public face of Google, but is he its most authentic voice?

Tim Walker
Friday 14 December 2012 20:06
Eric Schmidt: to think of him as a ruthless businessman would be a misperception, says one insider
Eric Schmidt: to think of him as a ruthless businessman would be a misperception, says one insider

Its motto is “Don't be evil”, yet MPs on the Public Accounts Committee recently described Google's spectacular tax avoidance scheme as “immoral”. And this week, Margaret Hodge, the committee's chairman, called Google's executive chairman Eric Schmidt “arrogant” and “out of touch”, for suggesting in public that he was “very proud” of the complex structures which allowed his company to funnel $10bn in revenue into tax haven Bermuda in 2011, thus slashing more than £200m from its UK tax bill. “It's called capitalism,” said Schmidt.

It's tempting to wonder what Barack Obama made of this attitude. The US President – to whom Schmidt is an informal adviser – is intent on a new tax increase for the rich. According to Forbes, Schmidt is worth about $7bn, making him the 135th richest person in the world. When he stood aside as Google's CEO last year, his parting gift was not a cheap gold watch – nor even an expensive one – but $100m.

This is not the company's first ethical controversy, nor Schmidt's. It was he, for example, who put the business case to his colleagues for expanding into China, the world's biggest digital market. Google founders Larry Page and Sergey Brin were uneasy about the Beijing government's demand for search filters, whereby search terms such as "Tiananmen Square" generated censored results; they spent a year weighing the decision on their "evil scale", before approving the launch of in 2006. (In 2010, it ceased self-censorship in China.)

Of the company motto, Schmidt told CNN in 2005: "Think of 'Don't be evil' as an organising principle about values. You and I may disagree on the definition of what is evil, but at least it gives us a way to have a very healthy debate." As the events of this week prove, Schmidt remains the public face of Google, but is he its most authentic voice?

For the first few years of his life, anyone guessing at Schmidt's destiny might well have picked academia. Born in 1955, he grew up in Blacksburg, Virginia, home of Virginia Tech, where his father Wilson was a professor of economics. He earned a BS in electrical engineering from Princeton, followed by an MS and a PhD from UC Berkeley, where he designed a computer network linking the campus computer centre to the computer science department.

Enlisting in the tech industry as Silicon Valley boomed, he worked in research and development at Bell Labs and Xerox, among others, and in 1983 was made the first software manager of Sun Microsystems, the firm behind the Java software platform. He would stay there for 14 years, until 1997 – the year Google first registered its domain name – when he departed to become the CEO of Novell. As Steven Levy, the author of In the Plex: How Google Thinks, Works, and Shapes Our Lives, explains, "Eric never started a big company from scratch; he was a computer scientist who rose to the executive ranks. In that respect, he's different to the likes of Jeff Bezos, founder and CEO of Amazon, or Steve Jobs."

When Brin and Page were given funding by Sequoia Capital in 1999, the venture capitalists made it a condition that they hire a seasoned executive to grow the company. The Google founders' first choice was Jobs, who was busy retaking the reins at Apple. "They liked the idea that Eric was a computer scientist, and he knew how to get along with them," says Levy. Schmidt joined the board of Google in March 2001, and was appointed CEO in August. He, Page and Brin agreed to run the company as a triumvirate.

Douglas Edwards, aka Google Employee No 59, recalls in his memoir I'm Feeling Lucky that when Schmidt first joined the company, "he seemed to spend much of his time roaming the halls with a bemused look on his face, as if he couldn't believe he'd actually joined this company populated with big rubber balls and lava lamps". To bond with his younger colleagues, Schmidt attended the annual Burning Man festival in the Nevada desert; rather than camp, however, he would commute two and a half hours on each day of the week-long event, from a hotel in Reno.

His job was to impose some conventional business wisdom on a company that had previously refused to embrace it. "I don't think Eric would describe himself as a visionary, but when you have Larry Page, you have all the vision you need," Edwards said. "What Eric added was more transparency. Before he joined Google, everything was in Larry and Sergey's head. Eric forced things into the public; he set up meetings that allowed people to get together and debate the vices and virtues of different courses of action. He was a user interface for Google employees. Larry and Sergey were not user-friendly. Eric was adept at communicating."

Schmidt also tried to temper the impish instincts of his two fellow bosses, and occasionally succeeded. Page, for example, was keen that Google build its own accounting system. Schmidt convinced him it would never pass an audit, and would thus prevent the company from going public. "Eric came of age as an executive during the browser wars between Netscape and Microsoft," Levy explains, "and he got Larry and Sergey to hold off on doing a browser at Google for a couple of years. They wanted to launch Chrome earlier, but Eric was worried that it would inflame Microsoft."

In his book, Edwards writes that Page and Brin were keen to unveil Gmail, Google's web-based email service, on April Fools' Day, to confuse people into thinking it might be a joke. It was Schmidt who insisted they change the date and take the launch of a major new product seriously. He had a history with April Fools' pranks: one 1 April while he was an executive at Sun, colleagues dismantled a working Volkswagen Beetle and re-assembled it in his office. A local TV report of the incident is immortalised on YouTube to this day.

As well as being CEO of Google, Schmidt sat on the board of directors at Apple from 2006 to 2009, when he resigned, after falling out with Jobs over Google's plans for a smartphone to rival the iPhone. With stature in Silicon Valley came influence in the wider world. Schmidt is a regular attendee at the World Economic Forum in Davos, a member of the semi-mysterious Bilderberg Group, and a friend of Al Gore's. He is an adviser to Obama on both scientific and economic matters, not to mention a generous donor. The President is even said to have considered him for the role of Commerce Secretary in his forthcoming second term.

Despite his high public profile, and his company's place at the heart of the debate on internet privacy, Schmidt guards his own private life fiercely. In 2005 he blacklisted reporters from tech news website CNET, after they tested the search engine's privacy controls by using it to find and publish its CEO's personal information: his salary, the name of his neighbourhood, his hobbies (collecting art, flying). In In the Plex, Levy claims Schmidt once tried to have details of one of his political donations removed from Google's search results. Schmidt denies the story. A simple Google search also suggests he has a complicated love life: he reportedly separated from his wife, Wendy, in 2011, and has since been linked to partners including concert pianist Chau-Giang Nguyen, and Lisa Shields, communications vice president of the Council on Foreign Relations.

Last year, Schmidt stood down as CEO to be replaced by Page, but he remains executive chairman. "Since neither Larry nor Sergey like to go around making speeches, he is still the public face of the company," says Levy. In that role, it is Schmidt who has taken the flak for Google's tax avoidance. And yet, according to Edwards, to think of him as the ruthless businessman of the triumvirate would be a misperception. He says: "Sergey's opening gambit in any negotiation is 'they should pay us'. He is a guy who does not like to let go of a dollar that he doesn't have to let go of. Cost-savings or cost-cuttings at Google did not begin with Eric."

A Llife In Brief

Born: Eric Emerson Schmidt, 27 April 1955, Falls Church, Virginia.

Family: The son of Eleanor and Wilson, a professor. He has a wife, Wendy; they have one daughter.

Education: Yorktown High School; BS in electrical engineering from Princeton; MS and a PhD in computer engineering from the University of California, Berkeley.

Career: Worked for several IT companies including Bell Labs and Xerox's Palo Alto Research Center. Joined Sun Microsystems as software manager in 1983; became president of Sun Technology. In 1997 became CEO and chairman of the board of Novell. Joined Google as chief executive in 2001; made executive chairman last year.

He says: "I feel that we have made a material change in the lives of literally billions of people."

They say: "For Eric Schmidt to say that he is 'proud' of his company's approach to paying tax is arrogant, out of touch and an insult." Margaret Hodge, Public Accounts Committee

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