Silicon Valley Gives the Governator the Business

Twenty superstar tech execs met with California governor Arnold Schwarzenegger Thursday as he and State Controller Steve Westly made a barnstorming junket to Silicon Valley to pump up support for his bond measure.

Hewlett-Packard’s Carly Fiorina, Google’s Larry Page, Adobe chief Bruce Chizen and John Hennessy, president of Stanford University, were among the tech insiders who met with the governor.

Once the hottest economy on earth, the Valley is at a crossroads, according to these executives. The business leaders told the governor that, unless the state changes its way of doing business, they won’t be able to compete globally. The private meeting took place at the CEO Summit on the California Business Climate. The event, and Schwarzenegger’s appearance, were in support of the governor’s debt refinancing plan, to be voted on March 2.

California Proposition 57 would refinance the state’s whopping debt load by floating a bond issue of up to $15 billion. Proponents say it would save the state interest; the state’s legislative analysts says that the early interest savings would be offset in subsequent years by higher annual debt-service costs due to this bond’s larger size and the longer time period for its repayment. Prop 58 Proposition 58 requires California politicians to balance the budget every year in the future, and it prohibits bond financing of deficits after the initial one.

Schwarzenegger picked up endorsements from the Silicon Valley Manufacturing Group, the San Jose/Silicon Valley Chamber of Commerce, the American Electronic Association and TechNet. The governor did not discuss workers’ comp in the private session, but he’s given Congress a March 1 deadline to come up with a proposal to reform the system.

While A-list executives met with Schwarzenegger, 140 or so business leaders gathered in a theater in Adobe Systems’ San Jose headquarters to hear the result of a survey of CEO members of the Silicon Valley Manufacturing Group. Outside, protesters carried signs saying the governor’s budget hurts working families, children and seniors. Inside, the SVMG said the state’s onerous regulations on business have eliminated jobs, caused cuts to education and social welfare programs.

Larry Gerston, professor of political science at San Jose State University, presented the results of the SVMG’s Business Vitality Survey. It didn’t take a Ph.D. to figure out that the top problems are sky-high workers’ compensation costs, spiraling health-care expenses, and the high cost of housing, childcare and education for employees.

Three out of four of the 105 CEOs of SVMG member companies participating said the state legislation was moving in the wrong direction. Four out of five said that regulation was moving in the wrong direction for business. The report divided respondents into seven business sectors, with biotech the only sector showing much promise of job growth. But across all sectors, the concerns were the same, and workers’ comp reform topped the list in each sector.

The top gripe, across all sectors, was workers’ comp. According to the SVMG, California has the highest workers’ compensation insurance rates in the U.S., while actual payments to injured workers are among the lowest.

“It’s going to take a bi-partisan approach to come to a solution. We have to get the system to operate more efficiently,” Mike Splinter, CEO of Applied Materials, told He said administration costs for the program should be reduced, while litigation inflates the cost of the system without benefiting employees.

While the executives asked for relief from regulation and workers’ comp reform, complaining that skyrocketing costs kept them from hiring, they were unwilling to commit to keeping job in the area. “Legislation is the wrong focus for keeping jobs in the U.S.,” said Adobe CEO Bruce Chizen. Michael Cannon, CEO of Solectron, added, “Protectionist measures will hurt long-term growth. They threaten the core of Silicon Valley.”

In the private session Schwarzenegger clearly wowed the executives. “A lot of change will happen,” Aart de Geus, CEO of Synopsys, told “For change to happen, you need to have a common sense of reality. In interacting with the governor, he already listed many of the issues we were going to bring up. I think he has a good grasp of the issues. Second, you need to have this boundless optimism and belief that it can happen.”

After the star chamber meeting, Shwarzenegger took the podium to a standing ovation. He reiterated that his plan is not borrowing more money, but debt consolidation. “If this does not pass,” he warned, “the consequences are severe. We don’t even want to talk about it. Let’s just be positive,” he said. “Let’s pass the measures and get on the road to recovery.”

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