n Chapter 2, we talked about how Microsoft had changed its pay strategy to rely less on stock options, more on stock grants, and then to rely less on stock grants and more on cash as its product cycle phase changed from growth to maintenance and its stock price growth slowed. Google went public in 1994 and its stock price, already at around $100/share at that point, then rose rapidly (a great big understatement), peaking at around $370* in November 2007. However, as of May 2012, Googles stock price was right around $300 (with a 52-week high of about $335). As a result, Google was subjected to comments such as Google isnt the hot place to work and has become the safe place to work (per Robert Greene, who recruits engineers for start-ups such as Facebook).⁴⁶ Perhaps following in the footsteps of Microsoft, Google announced that it was giving a 10 percent across the board increase in salary. Not stock options. Not stock grants (but, see below). Salary.⁴⁷ The cost of the salary increase was estimated by Barclays to be $400 million.⁴⁸

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Analysts say Google is facing what all Silicon Valley companies struggle with when they graduate from start-up status and into the realm of Big Tech.⁴⁹ With or without the 10 percent increase, one report says that Google was paying computer science majors just out of college as much as $20,000 more than it was paying a few months ago and that salary is so far above the industry average that start-ups cannot match Googles salaries.⁵⁰ (Actually, one might ask how many non-start-ups are likely to match such salaries.)

It is also noteworthy that Google repriced 7.64 million stock options in 2009. Of 20,200 total employees, 15,642 took advantage of the opportunity to replace their existing options, which had an average exercise price of $522, with new options having an exercise price of $308.57.⁵¹ By one estimate, Google was on a path to spend $2 billion on stock-related compensation in 2011.⁵² Subsequently, Google moved from stock options to restricted stock units for employees. The latter are actual grants of stock and are restricted in the sense that employees need to remain with Google for a minimum amount of time.

As of early 2015, Googles stock price was around $560, so employee stock-related wealth has soared. That goes along with their high salaries (see above and also the beginning of Part Three of your text) and their well-known extensive benefits. (Recall from Chapter 2that they regularly top Fortunes list of Best Companies to Work For.)

Will Googles pay strategy work forever? Consider the evolution of Microsofts pay strategy as its growth slackened. Should Google prepare for a similar future? If so, when and what sort of actions should they take to prepare?