Will Alphabet Stock Be Hurt by the Activism of Its Employees?

Alphabet's employees have been stopping their work to protest on a semi-regular basis. That could be negative for GOOG stock.

By James Brumley, InvestorPlace Feature Writer

http://bit.ly/2yTW7VN

In June, I pointed out that employees of Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), the parent company of Google, were at least partially calling the shots at the company, and that one of their decisions was not in the best interests of the organization’s owners, i.e. the owners of GOOG stock. In short, more than 3000 workers petitioned against an artificial intelligence project that the company planned to carry out for the U.S. Department of Defense. Google’s employees claimed that the work could be used as part of a “first strike” weapon.

GOOG acquiesced and chose not to continue developing the project for the Pentagon.

Something similar just happened. Last week, almost 17,000 Google employees walked out of work as a way of protesting the company’s handling of multiple sexual harassment accusations that were made against some of its top male executives.

The workers’ action is certainly understandable. If Alphabet is facilitating inappropriate workplace behavior and fails to do anything meaningful to stop it, workers can and will take matters into their own hands. On the other hand, since GOOG fired 48 people for sexual harassment over the course of the past two years including 13 executives who didn’t receive any sort of severance package, Alphabet is arguably already handling such matters as firmly as it reasonably can. The walkout, though quite public, never actually clarified what those workers want the company to do going forward that it’s not already doing.

To that end, there’s a much bigger-picture question that has to be asked once again: With this kind of dramatic work disruption starting to become a semi-regular occurrence, what other, less-visible distractions may be going on that will ultimately erode the value of GOOG stock?

What Was Their Intent?

To be clear, I’m not making a judgment call on the merits of workers’ protests. I’m strictly looking at the issue from the perspective of owners of GOOG stock. Corporations can hire whomever they want and manage their company however they want. Employees can spend their time any way they want. At the end of the day, as an investor, my one and only real concern is whether Company A is a better investment prospect than Company B.

From that perspective, it’s becoming even more difficult to say if everyone working at GOOG has prioritized making it the most productive, profitable company it can be.

It’s possible that’s exactly what the most recent protest has actually done, to be clear. By sending a loud, clear and well-publicized message that sexual harassment won’t be tolerated in any form and at any level in Alphabet’s offices, employees may no longer have to worry about handling uncomfortable situations, freeing them to focus more fully on their work.

Or maybe it’s possible a few thousand Alphabet employees just took a few hours of paid leave to extract and underscore a clear message on the matter from CEO Sundar Pichai.

Or perhaps it’s possible a few thousand employees used their company’s visibility as a platform to bring attention to a problem that has nothing to do with the company.

It wouldn’t be the first time that the latter scenario has played out, and GOOG is not the first major tech company whose employees have publicly protested its actions.

Public Protests by Employees Aren’t Unusual Now

In June a few hundred Amazon.com (NASDAQ:AMZN) employees wrote a public letter to CEO Jeff Bezos protesting the facial recognition software it was planning to sell to immigration officials. Last month, a number of Microsoft (NASDAQ:MSFT) employees posted a public letter to the company’s management expressing their wish to see the company bow out of the bidding for a lucrative cloud computing contract with the Pentagon.

It’s a sign of the times. Just a few years ago, such actions would have been labeled insubordination and would have promptly led to terminations. Now these types of protests are common.

As for how we got here, there’s no easy answer, but the advent of technology has much to do with it. And ironically, most companies did it to themselves.

Before the advent of smartphones and text messages, when a worker clocked out at 5 pm, he or she truly clocked out and didn’t have to think about his or her job until 9 a.m. the next day. But once bosses realized all of their employees were essentially “on call” 24/7, they balanced out their invasiveness by letting employees bring their personal lives to work. In many cases, large employers now even encourage self-expression at work and even applaud the formation of groups of like-minded workers.

The intent was admirable. The outcome, however, has been questionable. With the lines between work life and personal life now blurred, employees feel comfortable dictating their project preferences to management.

The Bottom Line on GOOG Stock

Maybe that’s the way it should be. Maybe the world is ready to obliterate the lines between who you are, what you do for a living, whom you work for and the work that company does… as unlikely as that would have sounded just a few years ago.

That’s fine, if that’s the choice corporations, individuals, and societies are making.

Make no mistake, though. If that is indeed becoming the new normal for GOOG and other companies, current and prospective owners of GOOG stock are in a bit of a difficult situation. A couple of walkouts aren’t the end of the world and may ultimately make the world a better place. They may also, however, only be the tip of an iceberg that will make some for-profit corporations more focused on achieving ideals than turning a profit. If Alphabet becomes one of those companies, the owners of GOOG stock could be hurt.

As of this writing, James Brumley held a long position in GOOG stock. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2018/11/alphabet-investors-goog-stock/.

©2018 InvestorPlace Media, LLC