Google’s unofficial motto, “Don’t Be Evil,” surely qualifies as one of the most risible of its kind. The admonition seems better suited for a fortune cookie than one of the world’s most ruthlessly aggressive companies. But there it is, a monument to corporate claptrap. Don’t be evil? Please, don’t be ridiculous.
Early indication that Google might not be living up to its high ethical standards came with the revelation that in 2006, to gain access to the world’s largest market of Internet users in China, it acceded to demands that it censor material objectionable to that country’s authoritarian government. The company defended its decision at the time, offering up the self-serving defense that a restricted Google was better for Chinese consumers than no Google at all. According to company CEO Eric Schmidt, “We concluded that although we weren’t wild about the restrictions, it was even worse to not try to serve those users at all.” Then referencing Google’s credo, Schmidt added, “We actually did an evil scale and decided not to serve at all was worse evil.”
Google subsequently pulled out of Mainland China, though only following a massive cyber attack on its online email service, apparently by government authorities trying get information on Chinese human rights activists. Google couched the move in principled terms. Its users’ privacy, it said, was sacrosanct.
Meanwhile, Google’s ambitious plan to scan every book ever written, even without authors’ consent, was struck down by a District Court judge, who claimed it “would simply go too far” by giving the company a monopoly over online literary searches. Google might have also gone too far for European regulators, who have launched a broad inquiry into the company’s alleged monopolistic practices to stifle competition. Congress is also slated to examine whether the company has market power.
But perhaps no practice by the information technology Goliath is more at odds with its paean to do-goodism than its use of offshore tax havens. As Bloomberg News’ Peter Coy and Jesse Drucker report, Google has employed since 2003 an IRS-endorsed “Double Irish” profit-shielding maneuver. The colorfully named scheme works by shifting all of Google’s non-US rights to its intellectual property, i.e., those rights generating foreign sales, to an Irish subsidiary. Why Ireland? Because the Emerald Isle’s corporate tax rate, 12.5 percent, is significantly lower than the US’ 35 percent rate. Google also maintains another subsidiary—a mailbox, really–in Bermuda that functions as a parent to its Irish subsidiary. Thus, the Bermuda entity charges the Irish one for licensing its intellectual property, thereby reducing the latter’s taxable profits—hence the Double Irish. Google’s machinations saved it more than $3 billion in taxes over the last three years.
That Google owes its existence to Uncle Sam—the National Science Foundation helped finance the Stanford project from which the company grew, and it helped finance the graduate studies at that time of one of Google’s founders—makes its shortchanging the federal treasury all the more galling. Or maybe not. To expect better behavior is unreasonable.
Whatever its credo, Google’s raison d’etre has nothing to do with virtue. Nor is it about making fantastic Internet products per se. Rather, Google’s sole purpose, like that of any company, is to make money. This should be applauded, not condemned. Indeed, capitalism, which ingeniously exploits the profit motive, has proven to be the most effective system of wealth creation in human history. Morality, however, does not figure into its equation—child labor laws and environmental regulations exist for a reason.
Perhaps nobody understands capitalism’s unsentimental amorality better than capitalists. Speaking of Google, Steve Jobs, whose own company, Apple, is engaged in cutthroat competition with the search engine giant, remarked, “This ‘don’t be evil mantra,’ it’s bullshit.”