Eric Schmidt Should've Left SoonerS

Everyone's trying to pinpoint exactly what pushed Eric Schmidt to leave Apple's board—or Apple to oust him—but whether it was Google Voice or the FCC doesn't really matter. Eric Schmidt shouldn't have been there in the first place.

Schmidt's presence the Apple board of directors has been conceptually weird from the start, but in the last year or so, he's been treading in dangerous territory. Many saw these concerns crystallize when the FTC invoked a century-old antitrust law that prohibits "interlocking directorates"—essentially, the sharing of leadership between two competing companies to investigate the companies after Google announced Chrome OS (an investigation which is still moving forward, despite Schmidt's exit). The NYT, discussing the issue in May:

Antitrust experts say that investigations of interlocking directorates rarely lead to major confrontations between companies and the government. Executives typically choose to resign from the board of a competitor if it poses a problem rather than face a lengthy investigation or a bruising legal fight.

The thing is, until just now, Eric Schmidt didn't step down, nor did he seriously talk about it. He didn't feel he had to, because of a disingenuous loophole:

Under the Clayton Act, interlocking directorates are not considered a problem if the revenue from products in which the companies compete is less than 2 percent of either company's sales.

Google's competing services are generally free, including Android and the upcoming Chrome OS, and therefore don't directly account for much—or depending on how stubbornly literal you want to be about it—any of the company's revenue. This should have be a clear cue to step the hell aside, but it wasn't taken that way. Schmidt was comfortable staying, and wasn't afraid to say so as early as last week.

In an interview printed in the Mercury News on Friday, Schmidt said "the board question can be solved by recusing yourself, which I do with the iPhone," hardly talking like a guy who was about to walk away. He was comfortable with this relationship; the regulatory bodies, the public and, most importantly, Apple, were not. It's hard to imagine Steve Jobs, or Apple's various board members, taking kindly to the consistent surprises they were getting from Google. As they saw it, the iPhone begot Android, Safari begot Chrome, and in a small way, OS X begot Chrome OS. Steve Jobs didn't waste any words in their press release on Schmidt's departure, and made these concerns pretty clear:

Unfortunately, as Google enters more of Apple's core businesses, with Android and now Chrome OS, Eric's effectiveness as an Apple Board member will be significantly diminished.

Chrome OS was announced in May, and Android in November of 2007. To Jobs and Apple, Schmidt's overlapping interests were old news; to Schmidt, it's safe to assume they were ancient history.

The Google/Apple relationship has been steadily getting more awkward since people first started talking about it, and at a fast clip since Schmidt's been onboard. The relationship was unnecessarily strained as it was, but now Schmidt's company is giving Apple some serious headaches, all the while looking like the innocent party in a confusing PR nightmare that's drawn the wrath of the FCC. Granted, they deserve it, but having a Google CEO to step over only muddles the issues. It bears repeating: nothing good could've come from Schmidt staying. He'd either be accused of collusion, sabotage or both—his presence was a lose-lose proposition. He didn't seem to mind, but it looks like Apple finally did.

Drawing a thicker line between these corporate structures is good for everyone, no matter how this plays out. If Apple and Google turn into direct rivals, they need distinct management. If they want to continue working together, like they do on browsers, iPhone software, or some as-of-yet-unannounced project—Apple could sure as hell use Google's help with their cloud efforts, for example—they need the exact same thing.