What's the Google secret?

A final comment on compensation, this one related to options. (Then, like the bonus cycle, we'll be done with this subject... until next year. That's the way the financial industry works -- for now.)

Google gets a lot of press about how great it is to work there and how people are lined up for interviews, like the lines for American Idol auditions. Stories about their 20% free time policy, creative culture, self-organization methods, and of course free food sound very appealing. I admire them for their innovative products and efforts to balance business with "not doing evil". And yes, some of my best friends are Googlers.

Recently, Google decided to reprice options that it had given out to employees. Due to the stock market cliff-dive, the options became worthless.

This reminded me of another tech company that was once considered the greatest in the world, hiring only the smartest of the smartest people. They minted many millionaires through stock options. People dreamed about working there.

The company? Microsoft, which many would say epitomizes everything that Google is against. It wasn't that long ago that Microsoft was the beautiful company.

Which led me to wonder: is the warm glow coming from Google really just a function of their (previously) red-hot stock price? Will Google be perceived as just another company now that the options payoff has disappeared, and their pay matches most other companies (i.e., now that even their masseuse can't become a millionaire).

Obviously, this is a simplistic view. Google represents the cloud revolution against the desktop, just as Microsoft represented the desktop revolution against big hardware. That's also important.

But what I'm interested in is whether Google is actually a fundamentally different type of company, or they just have a good business at the present time. I think if you asked Google management which they would rather have, they'd choose the former. (Of course, everyone would want both.)

The typical justification for options is to align both the long-term benefits of the employee and the employer, via the stock price of the company. At the point that the company reprices options, the options are no longer acting as an alignment tool, though. The employee benefited despite how the company fared. The company's options program is exposed as just a form of deferred compensation.

There's nothing inherently wrong with that. Any manager would be foolish not to exploit a cheap way to fund super salaries for great people, as long as the shareholders don't mind.

Going forward, it will be interesting to see whether Google's creative organization continues to be heralded as their secret weapon, or whether their exalted image will follow their stock price.