Is Google (Nasdaq: GOOG) headed higher, or lower? That's the question we ask when we evaluate insider buying and selling. We ask because how executives spend their paychecks is often a reflection of what they think of their companies' prospects.

Of course, not all buys are equal. According to two decades of research from Dr. H. Nejat Seyhun compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) it's performed in bulk. Seyhun found buys of between 10,000 and 100,000 shares to be most informative.

How do Google's managers measure up against Seyhun's benchmarks over the past year? See for yourself:

Insider Rating Bearish ... sort of
More than 250 open market sales in a year at prices below current. But there is a catch.
Business Description Owner of the world's leading search engine.
Recent Price $616.47
CAPS Stars (out of 5) ***
Percentage of Shares Owned by Insiders 21.46%
Net Buying (Selling)* $1.18 billion
Last Buyer (% Increase) None over the last 12 months.
Last Seller (% Decrease)

Nikesh Arora, president Global Sales Operations,
2,547 shares at $615 apiece on Oct. 25, 2010.
(Reduced direct holdings by 25%.)

Competitors (Nasdaq: AMZN)
Apple (Nasdaq: AAPL)
Microsoft (Nasdaq: MSFT)

Sources Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Oct. 27.)
* Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: bearish, sort of
For all the disruptive change Google's created via Android, Google Apps, Google TV, Google Voice, and more, insiders show little faith in the stock. They're dumping it like a hot potato. I'd want to sell my own shares if I didn't have a better understanding of how the company compensates employees.

Co-founders Larry Page and Sergey Brin and CEO Eric Schmidt all take less than $2,000 in salary annually, choosing instead to be compensated via ownership in the business. They're big sellers of stock as a result.

As a company, Google paid out more than $1.16 billion pre-tax in stock compensation benefits last year. Employees count on this largesse as if it were part of their regular paychecks. That's why, when the Great Recession torpedoed the stock, Google took $460 million from shareholders and distributed it to employees via an options repricing.

What else is there to do when you treat stock like cash? Valuation, risk ... everything that investors typically care about becomes meaningless, which is why these sales are probably indicative of exactly nothing.

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Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He had stock and options positions in Apple and a stock position in Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has its eye on you.