Subtitles section Play video Print subtitles >>Eric Schmidt: It's a great pleasure to invite all of you back. I hope everybody enjoyed their breakfast. I certainly did. And it's my privilege to invite you and welcome you to our shareholder meeting. I'm, of course, Eric Schmidt, the executive chairman. You know me. Everybody should have registered. If you haven't, please go ahead and get your badge so we know who you are. There is an agenda that includes, on the back, a Rules of Procedure for the meeting, which we will, of course, be following. I want to make sure everybody knows we've got a couple of folks here -- I'm just going to describe them. Starting with John Doerr, one of our longest-serving board members, my personal friend for many decades, and a fantastic venture capitalists. John Hennessy, among other things, a brilliant computer scientist, and former president, I guess just recently stepped down at Stanford, and remaining at Stanford as a computer scientist and also on our board. And, of course, Larry Page. It's hard to describe the contribution that Larry Page has made to the world, but just say that he is one of the most extraordinary human beings alive today. And I'll stop there. [ Laughter ] I can go on, but I don't -- he hates this, so I want to be respectful and just say, let's start with that as our threshold. You're going to hear from Ruth Porat, myself, and David Drummond. And -- who are part of the management. We also have Maura Stanley, she's a representative of Computershare. Maura, I didn't see where she was -- Oh, there she is. I'm sorry, would you raise your hand there. She's right over here on the right. And she's our Inspector of Elections. So make sure the numbers add. That was a problem in another award show. And Andrew Cotton and Matthew Taggart, representatives of Ernst & Young. Where are those two? Over here. Okay. Sitting in the opposite corner. And they're our independent accountants. And they've done this forever and, of course, do a great job. What we normally do here is we have sort of the formal procedural part of the meeting and then what will happen is I'll do a short sort of update of where we are and go right to your questions. David Drummond, my colleague for 20 years, I think, close to 20 years, will now run the proper part of the meeting. I think you all know, he's the senior vice president, corporate development, chief legal officer, and secretary of everything. >>David Drummond: All right. >>Eric Schmidt: David. Thank you. >>David Drummond: Thank you, Eric. [ Applause ] Well, thanks, everyone. And welcome to the Annual Meeting of Stockholders, as well as the annual opportunity for Eric and myself to wear a tie on the Google premises. So we're really glad to have you here. So quick note about logistics. As stated in the Rules of Procedure that you probably received -- you should have received, stockholders should not address the meeting until you're recognized. We -- as Eric said, we have a question and answer period, so you can ask your questions after we've finished the formal business. So when we get to the Q&A period, if you'd like to ask a question, we have -- we usually have mics -- I don't see them. Maybe they will be from in the Q&A period -- where you can step up to the mic and ask your question. Once you've been recognized, when you are recognized, please identify yourself and your status as either a stockholder or a representative of a stockholder, and then you can ask your question. I've received the Affidavits of Mailing from Computershare and Broadridge, which state that the notice of the meeting was dual given. All stockholders of Class A and/or Class B common stock as of the close of business on April 19th, 2017, are entitled to vote at this meeting. I've also been advised by the Inspector of Elections that holders of our outstanding Class A and Class B common stock representing at least a majority of the voting power of our outstanding Class A and Class B common stock, which are entitled to vote, is represented in person or by proxy at today's meeting. And I apologize for the longest sentence in the history of mankind that I just read. Therefore, a quorum is present today, and the meeting is duly constituted, and the business of the meeting can proceed. So the first item of business, as always, is election of directors. We have 12 directors to be elected at the meeting today. Those directors will hold office until the 2018 Annual Meeting of Stockholders. The board of directors has nominated the following: Larry Page, Sergey Brin, Eric E. Schmidt, L. John Doerr, Roger W. Ferguson, Jr., Diane B. Greene, John L. Hennessy, Ann Mather, Alan R. Mulally, Paul S. Otellini, K. Ram Shriram, and Shirley M. Tilghman. Now, our bylaws require that stockholders provide advance notice of their intent to nominate persons as directors. We didn't receive any such notice, so accordingly, I declare the nominations for directors closed. Now, the next matter being submitted to our stockholders is the ratification of the appointment by the board of Ernst & Young as our independent registered public accounting firm. And our board has recommended that our stockholders ratify the appointment of Ernst & Young as our public accounting firm for the 2017 fiscal year. The next matter that we've submitted to stockholders is the approval of an amendment to our 2012 Stock Plan to increase the maximum number of shares to our Class C capital stock that can be issued under the plan by 15 million shares of Class C capital stock. Our board has also recommended that our stockholders approve this amendment to the 2012 Stock Plan. All of that is described in detail in our proxy statement. Now, the next matter being submitted, on an advisory basis, is the approval of the compensation awarded to Alphabet's named executive officers. Our executive compensation program and the compensation paid to our named executive officers is described in full on pages 38 to 48 of our proxy statement. Now, our compensation programs are overseen by the Leadership Development and Compensation Committee of the board. And they reflect our philosophy to pay all of our employees, including our named executive officers, in ways that support our primary business objectives and mission. Our board of directors has recommended that our stockholders approve the compensation awarded to our named executive officers. The next matter being submitted to the stockholders is an advisory vote, again, to determine the frequency of the future stockholder vote regarding compensation awarded to the named executive officers. So how often we're going to have the advisory vote that we just -- I just discussed. Now, our board of directors has recommended that our stockholders vote for a frequency of every three years for the stockholder advisory vote on compensation awarded to named executive officers. Okay. So now the next seven items are all stockholder proposals. Our board of directors has unanimously recommended that our stockholders vote against all seven stockholder proposals that will be presented. You have the arguments for in our proxy statement, as well as the company's response to each of the proposals. So let's start with the first one. It's being brought by John Chevedden, James McRitchie, Myra K. Young and the NorthStar Asset Management funded pension plan as the colead filers, as well as Boston Common Asset Management, as a co-filer. Ms. Ivy Jack, who is representing NorthStar Asset Management, will be presenting the proposal. There she is. Ms. Jack, you'll have a total of three minutes to make a statement about the proposal. And I'm advise you when your time is up. >>Ivy Jack: Good morning, my name is Ivy Jack, from NorthStar Asset Management in Boston, the beneficial owner of over 7.2 million dollars of Alphabet common stock. Fellow shareholders, I am here to represent resolution number 6, a good governance proposal about equal voting rights. When shareholders of common stock do not have an equal right to weigh in on significant governance matters, we subject ourselves to greater financial risk. When Alphabet went public, shareholders already lacked opportunities to give substantive input into matters of policy. Alphabet's voting structure is heavily weighed to favor insiders, given that Class B shares are granted ten times the voting rights of Class A shares. Matters were made worse when Class B insiders voted in a -- voted in a brand-new class of stock with zero voting rights. The fact that this was approved is particularly remarkable, because our calculations show that only 15% of Class A outside shares that voted approved of establishing Class C capital stock. How was this possible? Well, this measure passed because Mr. Brin and Mr. Page, who currently own only 11% of the outstanding shares of the company, together have 51% of the voting power. While we can ignore this reality when profits are up, this voting structure constitutes a considerable risk to governance and shareholder value. Our company's own 10-K identifies this risk when it states that, "The concentration of our stock ownership limits our stockholders' ability to influence corporate matters and that the Class C structure could prolong the duration of Larry and Sergey's current relative ownership of our voting power and their ability to elect all of our directors to determine the outcome of most matters submitted to a vote of our stockholders." In other words, it continues to be impossible for outsaid shareholders to have any meaningful input on company decisions. Furthermore, the 10-K notes that as a result of this concentrated control, company management may take actions that our stockholders do not view as beneficial. Since Class C shares have no voting rights and given the importance of voting at annual meetings, Class A shares are the only way for outside shareholders to have a say in company matters. We are very concerned about the governance risks that come from relying upon merely two or three people's vision and ability to reduce threats to the company long term without broad input. The founders brought this company into fruition and led it into profitability. But the company's decision to offer common shares of the company on public exchanges makes Alphabet a public company, brings with it a responsibility to shareholders to practice good governance. Shareholders, we urge you to vote for proxy item number 6. >>David Drummond: Thank you very much, Ms. Jack. [ Applause ] The -- thank you. The second stockholder proposal is being brought by Walden Asset Management as the lead filer. They are joined by the Benedictine Sisters of Baltimore, the Benedictine Sisters of Pan de Vida, and other organizations as co-filers. We have today Ms. Meredith Benton, who will be presenting the proposal. Ms. Benton, you have three minutes. >>Meredith Benton: Thank you. My name is Meredith Benton, and I'm here representing Walden Asset Management, the primary sponsor of proposal 7, seeking information on how Alphabet directly and indirectly works to affect legislation and public policy. Walden owns over 160,000 shares of Alphabet. On behalf of Walden and approximately 20 co-filers, I'm pleased to move this resolution. On their behalf, let me start by thanking Alphabet for its steadfast leadership on climate change, both by reducing its greenhouse gas emissions, but also by speaking out to support the Paris Accord and committing to continuing leadership on climate. It is a part of Alphabet's lobbying for positive public policy solutions, and it matters a great deal. Thank you. We understand that corporate lobbying can be a positive force and that transparency is an important part of this. This request for transparency on lobbying has been made to hundreds of companies over the last six years. Lobbying is big for Alphabet. We know that in the last five years, Alphabet spent over $83 million in federal lobbying and has been one of the top five companies lobbying. While Alphabet discloses a summary of their direct federal lobbying on their Web site, with links to a report they provide to the Senate, these Senate quarterly reports are very difficult for investors to navigate. Alphabet also does not disclose meaningful details on dues and grants provided to the over 40 trade groups and advocacy organizations it is a part of, nor how it evaluates whether these lobbying organizations are vetted to be consistent with Alphabet's priorities and values. In order to better understand Alphabet's role in trying to affect legislation and regulation through trade association, additional disclosure is needed for investors. Once again, we want to congratulate Alphabet for the company's public decision several years ago to withdraw from ALEC, a known climate-denying group actively working to combat renewable energy standards. Alphabet acted on its stated values when it withdrew from ALEC, an action we enthusiastically commend. However, there are other trade associations whose actions conflict with Alphabet's values. For example, Alphabet is an active member of the U.S. Chamber of Commerce, a group which has spent over $1.2 billion on lobbying since 1998. This group has been an active force opposing climate change solutions, including suing the EPA to block the EPA's Clean Power Plan to address climate change. Clearly, this creates an outright conflict with our stated environmental position. Apple was so offended by the Chamber's policies and actions that they withdrew membership. We urge Alphabet to seek out challenging the Chamber's actions against climate policies and to lobby inside the Chamber with other companies to change the Chamber's policies. Another item of concern to investors is the Financial Choice Act, which will soon be before the House for a vote. This seeks to eliminate the filing of shareholder resolutions, an important tool for investor communication and trust-building within the financial markets. We urge Alphabet to speak up for the rights of investors to file resolutions. One final point. For several years, investors have written letters to top management and filed resolutions on lobbying disclosure and transparency issues, seeking an opportunity simply to meet and talk. But the letter and calls have gone unanswered. The filers of this resolution are perplexed. Alphabet doesn't have a bad investor relations record in general. So why doesn't the company agree to meet or talk on the phone with investors who want a hearing and to seek a middle ground? Thank you. >>David Drummond: Thank you, Ms. Benton. [ Applause ] The third stockholder proposal is being brought by Clean Yield Asset Management as the lead filer on behalf of John Fedor-Cunningham and David Fedor-Cunningham. And the Benedictine Sisters of Mount St. Scholastica. As the co-filer. Ms. Ivy Jack is back to present this proposal. >>Ivy Jack: Good morning, Mr. Chairman, board of directors, and my fellow shareholders. My name is Ivy Jack, and I have been asked to read the following statement by the filers of this proposal, Clean Yield Asset Management.