Google’s decision on China traces back to founders

Google Inc. co-founders Sergey Brin and Larry Page have always said they put their principles before profit, even to the point of using their control of the company to take a stand.

The billionaires’ idealism underlies a potentially expensive decision disclosed this week: Google’s threat to leave China’s rapidly growing Internet market in defense of free speech and its users’ privacy rights.

It’s a bold move unlikely to be made without the explicit support of Page and Brin, given the possible fallout. Departing the world’s most populous country could slow Google’s earnings growth and weigh on its stock.

Although Google has thousands of shareholders, it has two classes of stock, giving Page and Brin veto power over everyone else, including the company’s chief executive, Eric Schmidt. Combined, Page and Brin hold 58 percent of the voting power among shareholders while Schmidt has less than 10 percent, according to the company’s disclosures.

Google said this week’s China bombshell was the result of an “incredibly hard” decision, but the company declined to elaborate on the internal debate. Google declined requests to interview Page, Brin and Schmidt.

Page and Brin, both 36, pledged to strive to do the right thing in a manifesto that they distributed just a few months before Google took its stock public in 2004.

“Don’t be evil,” they wrote, evoking the phrase that has become Google’s motto. “We believe strongly that in the long term, we will be better served — as shareholders and in all other ways — by a company that does good things for the world.”

Critics contended Brin and Page broke that promise in 2006 when Google created a Chinese version of its search engine, at Google.cn, to be in a better position to profit from China’s booming economy. To gain the toehold, Google complied with the Chinese government’s demands for censorship of Internet search results about political dissent and other hot-button issues.

Human rights groups and even some Google shareholders have been urging Google to pull out of China for the past four years, only to have Schmidt diplomatically reject the idea. He has maintained that Google needs to be in China to protect its franchise as Chinese becomes the Internet’s predominant language — a transition that Schmidt thinks could occur within five years.

Brin, though, has never been completely comfortable with Google playing by the Chinese government’s rules.