Eric Schmidt is an American business leader. He has the same First Amendment rights as anybody else. He is obligated to follow the law, but he is not obligated to do so without complaint, let alone make excuses for his activities and those of his government.
Schmidt could have said "We understand that Google collects a lot of data; we have privacy policies that protect that data and we fire anyone who abuses them. We take data privacy very seriously. But we're aware that people are unhappy that various governments can compel us to disclose data. We believe that this is wrong. We believe that a world where anonymous government employees can see anything you do is a dangerous world. We believe in the power of data, but we want to encourage society to take steps to prevent this kind of abuse."
But he didn't, of course. Instead he told us that the innocent have nothing to hide.
it's unreasonable to expect [Google] to martyr themselves for our sakes
"Martyr", indeed. That is no mere hypothetical. Read this:
http://www.signandsight.com/features/1910.html
This is Herta Mueller, formerly of Romania, describing her life in the Ceausescu regime. There you could, indeed, face harsh reprisals, ranging all the way up to martyrdom, for refusing to spy on your fellow citizens.
I'm not sure it's reasonable to expect those people -- Mueller's friends, stuck in a scary totalitarian regime -- to stick up for their principles and resist the state's order to inform on their friends. (Though many did resist, and paid the price for it.) But Google? Google isn't even human. It has no fingernails to pull out. It is an American corporation, whose leaders live in America, with enough legal budget to sue God himself. I don't think it's unreasonable to expect the company's leader to use some of that power to lobby for good, instead of looking sheepishly at his feet, kicking the dust, and claiming that he's only following orders.