U.S. Could Lose Tech Edge, TechNet Warns

WASHINGTON — The nation’s top technology executives, led by Cisco’s John
Chambers and venture capitalist John Doerr, took Capitol Hill today
with a unified message for lawmakers: the United States is in danger of
losing its competitive IT edge.

Chambers and Doerr are co-founders of the five-year-old TechNet, a
150-member network of CEOs and senior partners organized to lobby
Washington on national technology issues. After holding a series of summits
throughout the country last year, TechNet drafted an “Innovation Policy
Agenda” to present to lawmakers.

“Just because we led before doesn’t mean we’ll lead in the future. Now, more
than ever, we need tools and capabilities that allow us to lead on this
global basis,” Chambers, Cisco’s president and CEO, said at a National Press
Club early-morning media briefing.

Rick White, TechNet president and CEO, said the organization’s findings
after the regional summits prompted TechNet to issue and promote its new
innovation agenda.

“What was abundantly clear from discussing the critical innovation issues
with leaders from all over the country is that this is no longer an academic
debate,” White said. “Innovation and competitiveness are real issues now for
the United States. And, they are affecting jobs and our economy right now.
TechNet’s Innovation Policy Agenda is not a white paper to ponder — it’s an
action-oriented wake-up call.”

The new report focuses on old issues: U.S. math, science and engineering
education lagging behind other countries; attracting and retaining the
world’s best innovators; continued concern over America’s lagging broadband
deployment; cyber security, research and development investments; and the
looming June deadline for corporations to expense stock options.

“The countries that create the best environment for innovation will be the
economic powers of tomorrow,” Doerr, a partner at Kleiner, Perkins, Caufield
& Byers, said. “Look at the last 10 years for evidence. High technology
represented less than 10 percent of the overall economy, but the industry
drove more than 25 percent of overall economic growth.”

“We are not competitive.
Somewhere between the fourth grade and the eighth grade we lose a lot of the leadership
we have on a global basis.”

— John Chambers, Cisco president and CEO

NASDAQ CEO Robert Greifeld, a TechNet board member, added, “Clearly, at the
top, we look very, very strong. But we have to reflect on the fact that we
are enjoying our success based on policies that were enacted 20 to 30 years
ago. We have to make sure that the polices and procedures that we have in
place today will ensure our continued success in the decades to come.”

In the education field, TechNet is calling on Congress to increase spending
on math and science education and to fund more and better tech-oriented
retraining programs for displaced workers.

“We are not competitive. We have to be honest about this,” Chambers said.
“Somewhere between the fourth grade and the eighth grade we lose a lot of
the leadership we have on a global basis. Many of our top global
competitors, especially in China, India and other countries of Asia — they
are graduating five times as many engineers as we are.”

Doerr ranked the issue of stock options as one of TechNet’s most pressing
issues. Last March, the Financial Accounting Standards Board (FASB), an
independent board that establishes accounting practices, alarmed many in the
tech community with its proposal to require publicly traded companies to
expense all forms of share-based payments to employees.

The FASB proposal came in the aftermath of accounting scandals at Enron and
WorldCom. The FASB proposal is set to become a standard accounting practice
in June and has drawn the support of Federal Reserve Chairman Alan
Greenspan, Securities and Exchange Commission Chairman William Donaldson and
billionaire investor Warren Buffett.

“When it comes to the future of innovation, the most important thing we can get
right is to protect broad-based employee ownership in the form of stock
options,” Doerr said.

According to Doerr, 14 million workers receive stock options and 80 percent
of them earn less than $75,000.

“In recent days, for example, Time Warner, Pfizer and others have announced
they are no longer going to use this powerful incentive to motivate their
workforces. Pfizer in fact said no one will be granted stock options in the
future except for the most senior executives,” Doerr said.

“For those policy makers who felt that expensing, in effect,
eliminating stock options, would deal with executive compensation abuse or
somehow had something to do with the scumbags at WorldCom, Tico and Enron,
they are mistaken,” added Doerr. “They are throwing out the baby with the bathwater.”

Greifeld took aim at research and development funding levels.

“We identified a single concern that was expressed by all participants. That
single concern is that we are gravely under investing in research and
development,” Griefeld said. “The U.S. investment in research and
development has been flat for the past 30 years. Our competitive
countries — Brazil, India, China, Israel — their research and development
has grown dramatically.”

Greifeld said that unless the United States “takes steps now to increase
our national commitment to research and development, we will not win the
global competitive challenge in the decades to come.”

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