In the latest example of Alphabet (NASDAQ:GOOGL) laying down the law with its employees, the company has fired one worker and put two others on leave for violating company policies.
Owners of Google stock ought to take this latest flare-up seriously because if the company doesn’t put out an olive branch to its employees, a palace revolt is not out of the question.
Here’s why.
Labor-related activism isn’t new at Google. More than 20,000 Google employees walked out from work last November to protest the way the company dealt with sexual harassment allegations.
Other companies are experiencing rising tensions.
Amazon (NASDAQ:AMZN) has seen a half-dozen worker groups created to fight for the rights of rank-and-file employees as well as climate change and other subjects conducive to employee activism.
“That’s why more Amazonians are speaking out. We do have high standards for Amazon because Amazon has high standards for us,” said Bobby Gordon, a finance manager in Seattle who’s part of the climate group. “The sentiment that I’ve heard is, yes, we’re interested in working with other groups, because I think there’s connectivity throughout the issues.”
Employee activism isn’t a bad thing if it’s dealt with openly and transparently. Amazon published a list of 11 positions that are important to the company to acknowledge many of its workers’ biggest concerns.
Google should do the same because if it doesn’t, employee tensions are only going to get worse, and an angry workforce, no matter how smart, is not a good thing for GOOGL stock.
We’re in an Election Cycle
In the months leading up to the November 2020 election, Google employees are going to hear the battle calls of Elizabeth Warren and Bernie Sanders. Of all the donations made by Google employees to political campaigns in 2019, 56% have gone to the two left-leaning candidates while President Trump got just 1.4% of their contributions — and they’re going to be emboldened to speak out against what they see as corporate injustice.
From an investor’s perspective, this must seem so unrelated to the task at hand, which is to make suitable investments in companies that make money consistently — end of the story.
Owners of GOOGL stock probably don’t want to hear it. Still, the nomination of either Warren or Sanders as the Democratic Party’s presidential candidate could ultimately mean the breakup of the company.
I don’t believe a breakup of Alphabet is a big deal. I said as much in early 2018. It would probably be good for Google stock.
However, what would be bad for GOOGL stock investors is if the company’s leadership put their heads in the sand and ignored employee dissent.
The world is moving in that direction. In Google’s mass protest last year, workers called on management to elect an employee representative to the company’s board. In May, CtW Investment Group, an organization that works with union-sponsored pension funds, issued a five-page letter to Alphabet shareholders asking them to approve Proposal 11 at the company’s annual meeting in June.
Proposal 11 requested that the board elect an Employee Representative Director to the company’s board. The board of directors recommended that shareholders vote against the proposal. More than 98% of shareholders who voted also rejected the proposal.
Big mistake.
The latest U.S. election cycle is going to turn up the heat on management and the board.
“As a company we’ve prided ourselves on transparency and information-sharing,” wrote one employee, in a post reviewed by Bloomberg News. “As I was told as a noogler [new Google employee], one of the big benefits of Google is that you can see what everyone else is working on, and how it all fits together. But I guess we’ve abandoned that now. And that both disappoints and terrifies me.”
Bottom Line on Google Stock
I don’t think there’s any question Alphabet is a great stock to own. At least, for now.
However, if it continues to clash with employees, I could see a day when those same employees crash the palace and that would be very bad for Google stock, whether you own GOOGL shares or the more-restricted GOOG stock.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
