(Read the whole thing after the jump.)
Google's tactics belie its image
by Edward Cone
News & Record
Google is a company with a cute name and a cuddly reputation; 30-percent profit margins and a market capitalization of $144 billion; and a freshly inked, sweetheart deal to build a data center in the Caldwell County city of Lenoir.
Google's reputation is one of the keys to its financial success. People trust the company, which uses "Don't be evil" as its unofficial corporate motto, to safeguard their privacy and provide accurate, unbiased information as they search the Web and use its other online services. If Google comes to be seen as just another soulless moneymaking machine, it might lose some of its competitive advantage.
And that's what makes the California company's behavior as it negotiated its Tar Heel deal so hard to understand. Google strong-armed the public partners with which it worked on the incentive package, in ways that would be unseemly even for a company that doesn't publish a lengthy Code of Conduct that says things like, "Being a Googler means holding yourself to the highest possible standard of ethical business conduct. ... When it comes to ethical conduct, we believe in erring on the side of caution."
Except, apparently, when an annualized amount equal to two-tenths of 1 percent of its profits for the trailing 12 months is on the line.
At first, the tax incentives offered to the cash-gushing Internet
firm by the state of North Carolina and the down-at-the-heels county --
at least $165 million over 30 years, or about $800,000 for each of the
200 jobs that are expected to be created -- drew only knowing snickers
from the digerati. A data center is basically a climate-controlled
warehouse full of computers, with a seemingly limited capacity to
create excellent jobs or kick-start further business growth around it.
Snarked the tech industry blog Valleywag, "The Google server farm, despite the search engine's status as icon of the new digital age, will need electricity, air-conditioners -- and thorough mopping."
The economic development folks, eager to replace Lenoir's departed furniture-factory jobs with, well, anything, had gone even lower on the technology food chain than they did in shelling out big bucks for Winston-Salem's Dell assembly plant. Beyond the tax breaks, Google gets cheap and reliable power for its energy-hungry facility; beyond the data-center jobs, Caldwell County and North Carolina get a supersized construction project -- a big payoff in and of itself -- and a lot of national publicity as locales willing to put out for the rich and famous.
Not the best deal imaginable for the home team (that would be the relatively low-dollar snagging of Honda's mini-jet plant by Greensboro and Guilford County), but not a complete disaster, either.
But it turns out that there was a lot more to the story. Google
leaned hard on North Carolina lawmakers and officials, not just to get
the fattest deal possible but to choke off the flow of information
along the way.
According to documents obtained by The News & Observer of Raleigh, the company went beyond reasonable expectations of confidentiality to demand absolute secrecy while negotiations were under way, even asking participants to sign nondisclosure agreements; some legislators and local officials did so, but Department of Commerce officials did not. Google executive Rhett Weiss badgered Commerce Secretary Jim Fain about the state's adherence to process, complaining, for example, when lawmakers wanted an estimate of the cost to North Carolina in lost tax revenue, and threatening to kill the whole thing if Google didn't get its way.
Businesses need some measure of confidentiality when putting together this kind of transaction. Fair enough. But this is the people's business, and Google's high-handedness is an affront to the people of this state.
And then there's that whole "Don't be evil" thing. Google spokesman Barry Schnitt told me that the company's negotiations with the state were "very standard." If that's the case, and this is standard operating procedure for the company, then something has gone wrong in Silicon Valley.
"Google displayed an arrogance that belies its public image," wrote technology sage Nicholas Carr at his Rough Type blog. "You have to wonder whether saving $100 million over the course of 30 years was really worth it."
Reputations are fragile things, for companies and governments as much as for people. North Carolina comes out of this with mixed results, in terms of perceptions of both our business savvy and our backbone.
Google, which has done much to earn its good reputation, looks penny wise and pound foolish when it comes to that most valuable of assets; if it allows itself to be just another company, it won't be Google anymore.
© News & Record 2007