Opinion

Felix Salmon

Eric Schmidt and the job of non-CEO executive chairman

By Felix Salmon
January 20, 2011

Ten years is a long time to be one of the most visible CEOs in the world, especially when the buck doesn’t really stop with you but rather with a triumvirate where you’re clearly the third wheel. So the news that Eric Schmidt is handing over the top job at Google to Larry Page makes a certain amount of sense. As he said on Twitter, Page has a decade’s experience as a senior executive of Google, and day-to-day adult supervision is no longer needed. Google’s venture-capital backers had every reason to want Page and Brin to bring in an experienced outside CEO in 2001. Today, most of those reasons no longer apply, and Google can be run by one of its two founders, in a world where founders, in general, beat out managers.

Schmidt is also keeping for himself the outside-facing parts of CEO-dom which Silicon Vally nerds by their nature are pretty bad at. He has a clumsy way of putting it, but when he talks about “the deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership that are increasingly important given Google’s global reach,” he basically means the large part of the CEO job which involves schmoozing various people in Google’s interest.

This is an interesting role, in terms of US corporate governance. Non-executive chairmen are common, but executive chairmen are nearly always the CEO as well. There’s a good reason for that: all executives ultimately report to the CEO, while the CEO reports to the board and its chairman. An executive chairman who’s not the CEO will be both an executive, reporting to the CEO, as well as being the CEO’s boss. That could conceivably get awkward — but Google is a special case. For one thing, the CEO isn’t going to be asking for a massive pay package, so tension surrounding compensation goes out the window. On top of that, the idea of Google being run by a triumvirate was already awkward, and this new setup isn’t any more awkward than that.

When I was pondering the idea that Facebook could remain a privately-traded company in perpetuity, it seemed to me that one of the main reasons for it to do so was that Mark Zuckerberg has neither the inclination nor the desire to do the kind of outward-facing schmoozing that Schmidt is taking as his job. But Zuckerberg can’t follow Google’s lead and hire an executive chairman while remaining CEO. He wants full control—which means being both chairman and CEO, reporting to no one but a hand-picked board.

So while the job of non-CEO executive chairman is a fascinating one, don’t expect to see it replicated much if at all. It works for Google; it probably doesn’t work elsewhere.

Comments
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Sounds like a good formula for turning Facebook into the next iteration of Friendster

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