Why Google CEO Eric Schmidt Should Stay the Course on Apple's Board

 
 
By Clint Boulton  |  Posted 2009-07-20 Print this article Print
 
 
 
 
 
 
 

Over the weekend, eWEEK published a piece I wrote quoting legal experts who were befuddled as to why Google CEO Eric Schmidt has not yet removed himself from Apple's board of directors.

The situation began boiling over last spring when the Federal Trade Commission was reported to be scrutinizing whether or not Schmidt was in danger of violating Section 8 of the Clayton Antitrust Act, which prohibits an individual's presence on the board of two rival companies when it would reduce competition between those two companies.

Schmidt of course sits on Google's board and Apple's, something some Apple fans seem to find repugnant considering Google and Apple increasingly find themselves competing in smartphone software, Web browsers and, with Chrome OS, desktop operating systems.

Indeed, bloggers, journalists and pundits renewed their pleas after the Chrome operating system announcement two weeks ago. Gary Reback, of counsel in the litigation practice group of Carr & Ferrell, told me he doesn't understand why Schmidt remains on Apple's board considering the scrutiny.

The hardest thing for me to understand is why there is resistance on Eric's part. This is a real law, it has a very sound purpose, it's been on the books for a long time. I never heard of anybody fight over it. I'm kind of amazed by the resistance, to just acknowledge it, resign and move on. Why would you fight them, why would you push on that? If the government goes so far as to say they're investigating it, you'd normally expect an executive to say, 'I'm not doing anything wrong' but why let anybody raise the issue?

I couldn't argue with Reback, Goldman or my fellow journalists. My position has always been: Do the benefits of Schmidt remaining on Apple's board outweigh the scrutiny over his position?

Considering Google long ago turned the corner as a company flying under the federal government's radar, wouldn't it behoove Google to keep a lower profile? In short, is Schmidt's position at Apple worth the additional heat? I argue it is not.

But reader Scott offered the best counterpoint I've heard yet in response to the story. Noting that no one, (not even the FTC) has offered evidence that Eric's seat on Apple's board has reduced competition between Apple and Google, Scott asked us to assume that there is nothing wrong with Eric sitting on the board, and that no wrong is being done.

Why doesn't Eric step down anyway? If it was me, my answer would be, "First, because it would set a bad precedent for board membership to be dictated by journalists, bloggers and legal pundits. Second, resigning in response to mere allegations would cause many people to conclude that something wrong was indeed being done. Finally, my affiliations and business relationships should be limited by what is legal and ethical, and directed by what I believe is best for myself and my company, not by a mob of vigilantes (who happens to make money by being whiny, paranoid and unfriendly)".

First, and with no apology to my waving my "power of the press" card, I believe journalists, bloggers and legal pundits often get the ball rolling on government antitrust inquiries, so the precedents have been set, whether it was the DOJ vs. Microsoft, or PeopleSoft vs. Oracle.

But it would be a bad precedent indeed for Schmidt to step down simply because many in the press believe he should. At this point, with this issue being written about and dissected, stepping down appears as an affirmation of guilt, even if Google tries to spin it by saying Schmidt is too busy at Google or elsewhere.

Though it would be most refreshing for Schmidt to step down after acknowledging the competitive concerns with Apple, the issue becomes moot the moment Google makes the announcement. There will be nothing else to talk about in this vein.

Maybe that's for the best for fervent Apple lovers whom I believe form the core of those concerned that Schmidt is spying on Apple, but that's a whole other fight I don't care to pick with whom I call the rabid Apple Seeds.

I almost feel as if Schmidt is holding on to the seat to keep us all from writing that Google and Apple now hate each other and are full-scale combatants in the mobile, browser and operating system wars. In any case, if Schmidt does step down, expect things between Google and Apple to get chillier.

For both Apple and Google, I believe it is much better to remain a united front against Microsoft, than to be two separate entities combating each other and Microsoft.

 
 
 
 
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