Alphabet shareholders grill execs about the company's San Jose expansion as picketers protest

Alphabet's aggressive real estate expansion in the Bay Area was a big topic at its annual shareholders meeting Wednesday, as about 50 picketers protested outside and two shareholders asked questions about how its plans would affect local residents.

At issue is the mega-campus Google intends to build in San Jose, which will accommodate 15,000 to 20,000 employees and include offices, retail space, and thousands of residential units. Earlier this year, the city agreed to sell Google nine parcels of land to be used in the project for $67 million.

Proponents of the deal expect it to revitalize San Jose, which is the only major U.S. city that has a higher population at nighttime than it does during the day, while critics fear it could exacerbate gentrification and inequality in the area.

The protesters and shareholders were affiliated with Silicon Valley Rising, a coalition of Bay Area organizations that has been critical of Google's plans.

The organization has a list of priorities that it thinks the San Jose City Council should include in any building agreement with Google, including commitments to minimize displacement, address area homelessness through affordable housing, provide well-paying contract jobs, give locals first consideration for employment, support area schools.

One representative, Chava Bustamente, highlighted how only 4 percent of Google's technical workers are Hispanic or black, while many of its service workers are people of color.

"As Google works to increase diversity in its workforce, will the company also make a commitment to ensure that its plans for a Google campus do not damage the diversity of San Jose?" he asked during the question period of the meeting.

Alphabet general counsel Kent Walker said the company was exploring different housing initiatives but declined to offer specifics.

San Jose has created an advisory group that includes both Google and Silicon Valley Rising, as well as other parties, and will present recommendations to the city council by the end of the year. Kim Walesh, San Jose's director of economic development, told CNBC that the negotiations are going to stretch over several years, with plenty of public back-and-forth.

"There's no question that the Google project has heightened fears about lower-income residents being able to stay in the community, and we're taking that really seriously," she said.

By showing up at the shareholders meeting, members of Silicon Valley Rising wanted to bring their concerns to people who didn't necessarily know about Google's San Jose plans. The protesters stayed for several hours, handing out fliers and waving signs.

"Our hope is to raise the concerns of everyday people and really put out a vision of what this project could look like," said one participant, Maria Noel Fernandez. "This isn't about saying no to Google, it's about making sure that if it's going to thrive off the backs of working people, we need to see some real commitments around how it will make sure this project benefits everyone."

Alphabet Chairman John Hennessy ended the meeting by saying that all of Silicon Valley needs to focus on solving problems around housing and transportation, with tech companies working alongside city governments. The area is facing sky-high housing prices, with real estate experts expecting a mass exodus of people if things don't change.

"If we're not committed to that, somebody will eventually replace the Bay Area as the next center of innovation and it will be shame on all of us," he said.

San Jose isn't the only Silicon Valley city Google is targeting for expansion. The company also has plans for a massive campus in Sunnyvale and has spent about $1 billion buying properties there. The company has said in the past that it prefers to own, rather than lease, real estate when it sees good opportunities.

In Q1, Alphabet's capital expenditures hit $7.7 billion, largely due to facility costs, including its $2.4 billion purchase of New York City's Chelsea Market.

Shareholders at Alphabet's meeting also highlighted issues around Google's diversity efforts and gender pay gap.

This interactive map, created by The Mercury News in April, show's Google's plans for San Jose. Red areas indicate parcels bought by Google or its real estate partner Trammell Crow, while blue sections are government-owned properties that Google wants to purchase: