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Schmidt explained that the guideline is meant to provoke internal debate over what constitutes ethical corporate behaviour, rather than representing an absolute moral position.

"We don't have an 'Evilmeter' we can sort of apply - you know - what is good and what is evil," Schmidt said during an on-stage interview with writer Ken Auletta of the New Yorker magazine at Syracuse University's Newhouse School in San Francisco.

When he first joined Google as CEO seven years ago, Schmidt acknowledged thinking the "Don't be evil" phrase was a joke being played on him by founders Larry Page and Sergey Brin.

Schmidt recalled sitting in Google's offices later in 2001 when an engineer interrupted a strategy discussion over a planned advertising

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product by saying, "That is evil."

"It is like a bomb goes off in the room. Everything stopped. Everyone had a moral and ethical conversation, which by the way, stopped the product," Schmidt claimed.

"So it is a cultural rule, a way of forcing a conversation, especially in areas which are ambiguous," he said of how the mission statement works in practice at Google.

Patience for profits

On other fronts, Schmidt said Google was taking a patient view to making money from online video advertising, while it sees mobile phones attracting the most lucrative ad rates.

Google is moving to transform YouTube, its popular online video-sharing site, into a money-maker via new forms of advertising it will unveil over the next year, Schmidt said.

He was cautious about how profitable this might prove to be. For now, YouTube's video traffic consumes the majority of Google's outgoing network bandwidth. But he said it could possibly lead to the "creation of a whole new industry."

"We don't yet know how we are going to make significant amounts of money on YouTube," Schmidt said. "But it seems obvious that we should be able to make some money from this."

His optimism is based on two key facts: "We know people are watching it" and "we have the luxury of time to invest."