Started Out On Burgandy But Soon Hit the Harder Stuff: Google’s Drug Dividend

Has Google ever declared a dividend? The answer is not exactly.

The Wall Street Journal had an excellent follow-up story last week (“Sting that Cost Google Millions”) about Google’s drug sting and how responsibility for profiting from selling drugs went all the way to the top of the company’s executive team. The sting was very well coordinated and revealing of Google employees knowingly advising advertisers of how to avoid getting caught selling ads for illegal drugs. That obviously did not work out for Google although it worked out well for the people, and Google contributed another $500,000,000 to reducing the national debt (query whether that is more than they paid in income tax through the company’s tax havens.)

MTP readers will remember that Google Chairman Eric Schmidt (who was CEO at the time Google Drugs was in full swing) refused to answer Senator Cornyn’s erudite questions at the recent Senate Antitrust Subcommittee hearing that resulted in a referal to the FTC by Chairman Kohl and Ranking Member Lee calling for a full investigation of Google.

Two things about the Journal’s story caught my attention. First, the story had an interesting quote from the brilliant professor Eric Goldman. This is of note to me because of Professor Goldman’s prescient prediction made earlier when the no-indictment agreement first became news that Google’s stock price would take a hit if its senior executive team were to be indicted.

This quote was equally sharp:

“If Google were to adopt a much more restrictive definition of problematic advertisements, everyone would immediately notice a drop in their revenue,” said Eric Goldman, director of the High Tech Law Institute at Santa Clara University. (emphasis mine)

My immediate thought was that the professor once again was right on the money, so to speak, but I would wonder who he meant to include in “everyone” because I feel pretty confident that “everyone” would include stockholders but “everyone” would not include Google executives.

In the accompanying story about that sting, we found out that the drugs being sold were RU-486, human grown hormone and steroids through the site “SportsDrugs.net”. Although RU-486 must be taken in a doctor’s office, Google executive approved ads saying “no prescription needed”. Given the seedyness of the sting (which soon moved straight to oxycontin and the harder stuff), Professor Goldman is no doubt exactly correct again.

But the other thing that struck me about the story is that the reporters accepted as a given that Google was sitting on top of $45 billion in cash and paying a $500,000,000 fine was of no consequence to them.

I hope that I don’t ever get to the point that I think $500,000,000 is of no consequence. But I thought, how in the world could Google be sitting on top of that much of the stockholders money–in cash. Don’t they pay a dividend?

The Motley Fool gives this advice:

“Think of Google as you would an expert poker player. No doubt it’ll lose some big hands, but by investing heaviest when the odds favor success, it produces better-than-average returns on equity and invested capital.”

You mean like this?

Ah yes. A poker player like Charles Nesson or Lawrence Lessig perhaps?

But here is the reality from Google’s investor relations site:

Does Google pay a cash dividend?

No, we have never declared or paid a cash dividend nor do we expect to pay any dividends in the foreseeable future.

Well, aside from the sheer arrogance of that answer for executives who have to lease Moffet Field from NASA in order to have room for their fleet of jets, I would say that they do pay a cash dividend–for the benefit of their executive team when they are about to be indicted for violating controlled substances laws.

I started out on burgandy but soon hit the harder stuff…

On Highway 61 Revisited