For years, individuals left the public sector to work for Wall Street. With promises of astronomical pay for exceptional performances, people left their cozy jobs in droves to jump on the bandwagon. The result was an undeniable accumulation of some of the greatest business professionals working in close quarters. However, for the first time in decades, Wall Street is experiencing what New Mexico has felt for years: a brain drain of the best talent leaving for greener pastures. Why work for the financial industry with its newfound intense scrutiny after the financial collapse and limited bonuses, when you can work for Silicon Valley with unlimited earning potential?
Ruth Porat, the former Chief Financial Officer of Morgan Stanley, has left her cozy financial position for one in the historically frivolous financial pasture of Silicon Valley. Given that Ms. Porat earned between $8 and $11.7 million annually during her tenure with Morgan Stanley, the financial incentives in Silicon Valley had to be sufficiently high. Indeed they are. Google has offered her in excess of $30 million in her first year, in addition to a sizeable bonus in the second year. Why in the world would a business such as Google offer a CFO this much money? After all, Google spends money like a drunken sailor, and its cavalier attitude towards finances has been seen as a key measure of its staff’s happiness and its continued success.
As it turns out, not everyone affiliated with Google was as happy as they could be, and investors were looking for more. There’s no indication that investor outcry was the impetus for bringing on Porat, but the result is clearly indisputable. Porat joined Google in May 2015, and just two months later, Google posted earnings in their second quarter that shattered analyst’s expectations and as a result, Google had a whopping $65 billion (yes, billion) added to their value. For Google’s co-founders Larry Page and Sergey Brin, they each earned an additional $4 billion overnight.
So how did Porat do it? An increase in a company’s valuation by $65 billion is certainly no laughing matter. Some of the credit belongs to her successor, but the bulk of the credit appears to belong squarely to Porat. Essentially, she is looking at trimming the fat at Google and is currently looking to eliminate underperforming sectors in the hopes of increasing overall financial health. The currently speculation is that Porat is going to take a list of underperforming projects to Page and Brin and request that they choose the projects they want to save. If you’re scratching your head as to how a company hell-bent on innovation would hire a woman to cut out their underperforming programs, and why she would be welcomed with open arms by investors, the founders, and staff, it’s because her measures are actually benefiting literally everyone at Google.
Porat is a likeable figure at Google because her first foray into cost saving measures didn’t result in a loss of employee freedom. If anything, she is meticulously worked to preserve the employee atmosphere currently found within Google’s tightlipped walls. She is also committed to investing in new talent, and with Google’s available cash now at $4.47 billion, they finally have more wiggle room to hire exceptional talent (not that they were exactly hurting before).
So even though Porat is looking to trim underperforming projects at Google, their share price is rebounding from a 4.5% loss from the year before. As the share price rises, so does each employees pay. With employees given stock options, the more money Google makes, the more money their employees make as well. Plus, considering that now Google is in a position to reward shareholders with buybacks and dividends, it seems as though no one at Google is exactly disappointed at Porat’s appointment. Will a reduced investment portfolio be worth the increased revenue to Google? Only time will tell. Although considering their vast resources, it seems unlikely that Google wouldn’t seek out new possibilities as time moves on. We’ll have to see though if innovation for innovation’s sake is enough of a driving force, or if money is the true currency to Google.
Photo credit: Google