Why the Clock Ran Out on Eric Schmidt's Time as Google CEO [Update]

Last Updated Jan 22, 2011 6:02 AM EST

In a stunning announcement less than half an hour before Google (GOOG) was scheduled to release its quarterly earnings, Eric Schmidt announced that he would step down as CEO, becoming, instead, an executive chairman of the board. Larry Page will become chief executive on April 4 and Sergey Brin will work on "strategic projects."

This indicates an enormous shakeup in the decision making structure at the company:
For the last 10 years, we have all been equally involved in making decisions. This triumvirate approach has real benefits in terms of shared wisdom, and we will continue to discuss the big decisions among the three of us. But we have also agreed to clarify our individual roles so there's clear responsibility and accountability at the top of the company.
Although Google has a large revenue base, more than 96 percent of it comes from its traditional advertising business. The company has been utterly ineffective in diversifying its business. In addition, many of its high profile new projects, such as the Nexus One and Google Wave, were complete flops. That raised natural questions as to whether the company was sufficiently focused on an effective strategy and product marketing.

Microsoft (MSFT) Bing has been slowly catching up to Google's core search capabilities and in some respects is providing results more relevant to users. That's a threat to Google's main business. Google also feels enormous pressure from Facebook, and recently fell on its face when it attempted to acquire Groupon. Additionally, Schmidt has repeatedly made enormous public gaffes at a rate almost unheard of among chief executives.

Another factor could be Brin's health. He announced that he has the gene for Parkinson's disease and is actively searching for a cure. [Update: He does not have the disease, but is at risk for it.] He may want to focus more time and energy on his health rather than on corporate considerations.

It may be that Schmidt, Page, and Brin hope that the new structure will lead to smarter decisions, but it is odd. An executive board member means one actively serving in management. Often, a CEO will also have the chairman title. But to split the two jobs and yet have both be executive members is highly unusual. It raises the question of exactly who will be in charge at the company and what happens when there is a difference of opinion.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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