CEO Business Climate Survey 2011 - Silicon Valley Leadership Group

SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011

SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
Introduction
Key Findings
SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
Business Climate 2011
After three years of
deep economic retrenchment,
Silicon Valley’s
innovation economy has
been clearly re-ignited.
It’s not a full-throttle
recovery, but results of
two surveys of CEOs from
established and private, Carl Guardino Ken Wilcox
startup companies show renewed optimism and deepening growth
– including in hiring. The two words that sum up results of the Silicon
Valley Leadership Group’s 8th Annual “CEO Business Climate
Survey” and Silicon Valley Bank’s “Startup Outlook:” Very optimistic.
For example, two-thirds of the responding established company
CEOs stated they have added jobs over the past year, nearly double
the 2009 and 2010 responses. Only one-tenth shed jobs last year.
And 55 percent of the respondents expect their job growth in Silicon
Valley to be better in 2011 than in 2010. Only 5 percent expect it
to be worse. Among the startup companies, 83 percent plan to
create new jobs this year.
This year’s results are particularly impressive because a record
number of executives participated in the surveys. The “CEO Survey”
was answered by 175 of the Leadership Group’s 340-member
CEOs at the polling time. The separate “Startup Outlook” was
completed by 375 executives from private startup and high growth,
U.S.-based technology and life science companies.
Several perennial issues continue to dominate the list of concerns
by Leadership Group member CEOs including high employee housing
costs, employee recruitment costs, education, taxes, transportation
and health care. For the second year in a row, the state budget
was cited as the No. 4 business challenge. This issue makes it very
difficult for companies to do long-term planning and makes recruitment
more difficult. New to the “CEO Survey” this year were questions
about pensions. An overwhelming majority of the CEO respondents
think public employees should have “undefined” pensions,
such as 401(k)s. Nearly half of the respondents believe that public
employees should work at least 20 years before qualifying for
pensions.
CEO faith in Silicon Valley’s strengths remains enthusiastic,
among companies of all sizes. Respondents cite access to skilled
labor, our entrepreneurial mindset, proximity to customers and
competitors, access to venture capital, along with world class universities
and our wonderful climate, as the creative foundation that
drives our innovation and global successes.
Last year at this time, Silicon Valley executives were guarded.
This year, it appears that another economic wave is just off shore.
Working together we can continue to build a stronger tomorrow and
to meet the challenges still ahead.
The 2011 Business Climate Survey is produced
by the Silicon Valley Leadership Group.
Job Growth
Two-thirds of the companies surveyed have added jobs
over the past year, nearly double the 2009 and 2010
responses. Only one-tenth cut jobs last year.
More than half (55 percent) of the respondents expect
their job growth in Silicon Valley to be better in 2011 than
in 2010, with only 5 percent expecting it to be worse.
Strengths of Silicon Valley
1. Access to skilled labor
2. Entrepreneurial mindset
3. Proximity to customers and competitors
4. Access to venture capital
5. World class universities & climate/weather (tie)
Business challenges
1. High housing costs for employees
2. Employee recruitment/retention costs
3. Business taxes
4. State budget structure
5. Business regulations
Cost of living challenges for workers
1. Housing costs
2. High taxes
3. Traffic congestion and Health care (tied)
4. K-12 education
Actions local government should take to strengthen Silicon
Valley’s business climate
1. Improve K-12 public education
2. Reduce public pension costs
3. Approve more affordable home developments
4. Ease local street and road congestion
5. Streamline permit approval process
Actions state government should take to strengthen Silicon
Valley’s business climate
1. Improve K-12 education
2. Reduce public pension costs
3. Continue research and development tax credit
4. Adopt a multi-year budget cycle
5. Help create more affordable housing
Actions federal government should take to strengthen
Silicon Valley’s business climate
Other
1. Comprehensive tax reform
2. The federal deficit
3. H1-B visa/green card reform
4. Climate change legislation to reduce greenhouse
gases and increase energy security
5. Deferral/repatriation of foreign earnings
Local executives continue to name housing costs as the
number one problem for their employees.
Strong support exists for increasing motor vehicle fees
and gasoline taxes to improve California’s
transportation system.
By fairly one-sided margins, Valley executives want to
see more resources dedicated to K-12 public education,
higher education and transportation; local executives
want to see fewer state dollars dedicated to prisons,
health and human services, and state employee labor
costs.
One-sixth of the companies moved jobs out of state
during 2010; of that number, nearly half did so because
of reduced labor costs.
Two-thirds of respondents believe that the Patient
Protection and Affordable Care Act of 2010, a.k.a.
national health care reform, should remain in place.
An overwhelming majority believe that public employees
should have “undefined” pensions, such as 401(k)s.
Nearly half of the respondents believe that public
employees should work at least 20 years before
qualifying for pensions.
Survey respondents place more faith in Governor Jerry
Brown than the state legislature and regulators for
providing a healthy business climate. Three-fourths of the
respondents are critical of the legislature’s performance
- the highest negative rating in the history of the CEO
Business Climate survey.
01 Introduction
Key findings
02

SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
Overview
About the Survey
SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
The Silicon Valley Leadership Group 2011 CEO Business
Climate Survey is more than a collection of opinions on issues
by leaders of the Valley’s companies. It is a representation of
the political and economic conditions that inhibit the region’s
success as well as a guide for enhancing the possibilities of a
better future in the state and nation. In this report, leading
business executives identify critical policy bottlenecks as well
as paths to thoughtful solutions. For this reason alone, federal,
state and local leaders as well as economic forecasters would
be well-advised to comb through the report’s findings.
The current survey is distinguished not only by the breadth of
subject matter content but the extent of CEO participation.
Silicon Valley Leadership Group member companies employ
250,000 people locally, amounting to nearly one-third of the
private sector workforce in the area. In 2011, executives from
175 of these companies responded to the survey. Their
numbers account for 52 percent of the organization’s 335
members - a response rate more than five times the average for
an online survey. Few broad-based surveys have participation
rates anywhere near this percentage. Just as clearly, Leadership
Group members appreciate the importance of this annual
economic inventory, knowing that their responses help define
the state and national public policy agendas.
Silicon Valley has long been known as an incubator of new
ideas, a substantial number of which are the foundations for
future technologies, products and services. This is a problemsolving
community of “can doers” rather than “nay sayers.” But
traditionally, many of the concerns expressed in the CEO
Business Climate Survey are also precursors of statewide and
national discussions that follow. This report highlights both
conventions. Opinions of respondents about threatened
infrastructure components such as public education and transportation
are registered, as well as pro-active suggestions
about the state’s budget crisis, tax policies, the nation’s new
healthcare law and the growing issue of public employee
pension programs.
What happens in the Valley also is often a window into
future economic patterns of the state and nation. Over the past
year, tech companies exhibited the first signs in hiring and
spending 1 , an early sign that the end of California’s recession
would begin in the state’s most innovative and adaptive
economic sector. One study shows employment in tech-heavy
San Jose growing 50 percent more than the state average in
2011 2 . To the extent that the Valley leads the state's recovery,
elected officials and other opinion leaders may also benefit
from the recommendations in this report.
Recent data indicate that Silicon Valley is recovering from
the Great Recession at a faster pace than the state as a whole.
Technology companies from start-ups to mature corporations
lead the nation once again. Technology-related jobs in Silicon
Valley pay an average of $99,000, $20,000 more than
compensation for comparable jobs elsewhere in the nation 3 .
Moreover, several companies intend to hire large numbers of
workers over the coming months. Google, for example,
announced in January 2011 that the company would hire
more than 6,000 new employees during the year —the most
during any single calendar year since its creation. Within days
of the announcement, the company received more than
75,000 applications, one more sign that much remains to be
done before the Valley’s vitality is fully restored 4 .
Over the years, members of the nonpartisan Silicon Valley
Leadership Group have cultivated working relationships with
elected officials at all levels of government. This is an important
linkage, given that in addition to covering several Bay Area
counties, the organization’s membership spans 14 assembly
districts, 8 state senate districts and 6 congressional districts.
Each year, Leadership Group delegations meet with elected
representatives in Washington, D.C. and Sacramento to
exchange ideas on key matters of public policy. The organization
also hosts Cabinet members, key elected officials and
other influential leaders on a regular basis. So prized are the
organization’s ideas that before he even assumed office,
Governor-elect Jerry Brown’s team asked the Leadership Group
for a list of recommendations on how to repair the state’s manufacturing
sector, which was completed in January 5 . Some of
the report’s recommendations were in the Governor’s State of
the State address on January 30, 2011.
Silicon Valley Leadership Group members realize that no
single sector or region will be enough to pull the state out of its
recession and that countless compromises and sacrifices are in
order. Still, the Valley’s success in these otherwise troubled
times cannot be ignored. The unemployment rate here is well
below the state average. Given the success of the companies
and their employees here, it may be worthwhile to view the
Valley’s collective experiences as a template for what might be
done elsewhere.
Larry N. Gerston, Ph.D.
Analysis by:
Professor, Political Science
San Jose State University
1 “See Valley tech companies make hiring promise,” San Jose Mercury News, February
24, 2010, and “Tech Spending Bounces Back as Profits Rise,” Wall Street Journal,
February 4, 2010.
2 “Vital Signs,” The Wall Street Journal, February 10, 2011.
3 “Local Technology Salaries Lead the Nation,” Wall Street Journal, February 3, 2011.
4 See “Google gets 75,000 applications,” San Francisco Chronicle, February 4, 2011,
and “Tech Revival Lifts Silicon Valley,” Wall Street Journal, December 20, 2010.
5 “Policy Recommendations to Create California Manufacturing Jobs,” January 2011.
http://svlg.org/docs/CA_whitepaper_digital.pdf
Between December 9, 2010 and January 28, 2011, the Silicon Valley Leadership Group conducted its eighth annual CEO Survey
focusing on the business climate and general living environment in Silicon Valley as well as key issues of the day. The responding
member companies were organized into 10 sectors, an activity that helped to chronicle current business trends in Silicon Valley.
40
29
21
19
16
14
12
11
8
4
1
Financial/Professional/Venture Captial
High- Tech Manufacturing
Utilities/Energy
Health Care/Bio-Tech
Software
Other
Internet Communications
Education
Manufacturing/Aerospace/Defense
Transportation
No Response
What is Your Industry Sector?
14
16
What is your Industry Sector?
Other - 37
40
19
21
29
Some sector participation remained fairly consistent with the 2010 survey. For example, 17 percent of the respondents were in the
financial services / venture capital / professional category, compared with 18 percent in 2010. General manufacturing / Aerospace
/ Defense had 5 percent of the respondents, replicating the 2010 pattern.
Industry cluster participation varied considerably from the past. High tech manufacturing dropped to 15 percent from 19 percent
in 2010. Health Care / Bio-tech jumped to 10 percent in 2011 from 6 percent in 2010. Participation of the software industry also
grew - to 9 percent in 2011 from 6 percent in 2010.
12
11
4
8
1
03 Overview
About the Survey
04

SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
Quality of Life
Business Climate
Business Climate
SILICON VALLEY
CEO
SURVEY
BUSINESS
CLIMATE
2011
Improving the Quality of Life in Silicon Valley
Companies thrive when their employees thrive; indeed, the
two concepts are inseparable. With this in mind, the survey
asked respondents to identify the three top cost of living
challenges for Silicon Valley workers and their families. In
order, the answers were: housing costs (84 percent), high
taxes (59 percent) and traffic congestion (36 percent).
Top 3 Cost of Living Challenges in Silicon
Valley for workers and their families
High Taxes - 59%
Housing Costs - 84%
Traffic Congestion - 36%
Health Care - 36%
K-12 Education Care - 31%
Child Care - 19%
Energy Costs - 10%
Higher Education - 5%
Of interest is that these three answers appeared in the same
order in the 2010 survey. In fact, “housing costs” has been the
number one answer in each of the eight years of the CEO
Business Climate Survey. Even with the general decline in
prices, housing costs remain higher in this region than almost
anywhere else in the state and nation. High housing costs
make it difficult to attract employees. The Leadership Group
has worked hard to ameliorate this through its creation of the
Housing Trust of Santa Clara County. With a $39 million
investment driven largely by the Leadership Group, this publicprivate
partnership program has leveraged $1.9 billion in
private investment, helping 9,036 families secure housing.
However, beyond this partnership, much work needs to be
done to assure the workforce of reasonably priced housing.
The Business Climate
For many companies in Silicon Valley, 2010 was a
turnaround year. Nearly two-thirds of the survey participants
declared that their companies added jobs, the highest percentage
in the history of the CEO Business Climate Survey and
nearly double the results of the 2009 and 2010 business
climate surveys. As shown below, the survey data comport well
with the observations of leading analysts, which show “Silicon
Valley is inching ahead of the rest of California.” 6
Since January 1, 2010, have you added, stayed
the same, or lost jobs in Silicon Valley?
66%
21%
2%
11%
21%
Added Jobs
Stayed the Same
66%
Subtracted Jobs
No Response
Even though 2010 showed solid signs of recovery for most
companies, 55 percent of respondents see even better growth
over last year, with only 5 percent predicting any slippage for
their companies.
11%
How do you see job growth for your
company in 2011?
2%
No Change - 36%
Worse - 5%
Better - 55%
Nevertheless, while some of the Valley’s companies may have prospered, not all have been able to do so within the state.
According to the 2011 CEO Business Climate Survey findings, one of six companies moved jobs out of state during 2010. Of those
that did relocate jobs, nearly half did so because of reduced labor costs. The bottom line is that while most companies have thrived,
a sizable minority have had to relocate or grow some of their jobs elsewhere because of the high cost of doing business in Silicon
Valley. This means both a stretched supply chain and less tax revenues for state and local governments. These observations should
stand as a sobering sign to anyone who would place burdensome conditions on thriving companies.
Did your company move jobs out
of state since January 1, 2010?
Yes - 16%
No Response - 6%
No - 78%
(Of those that moved)
What was the most important reason your company
moved jobs out of state since January 1, 2010?
Reduced Labor Costs - 46%
Other - 14%
More Available Workforce - 11%
Less Regulation - 7%
Proximity to Customers - 7%
Government Incentives - 7%
Lower Land / Infrastructure Costs - 4%
High State Corporate Taxes - 4%
Did your company move jobs out
of the U.S. since January 1, 2010?
Yes - 16%
No Response - 6%
No - 78%
(Of those that moved)
What 0was the 30most important 60 reason 90 your 120 company150
moved jobs out of the U.S. since January 1, 2010?
Other - 7%
Reduced Labor Costs - 54%
More Available Workforce - 11%
Proximity to Customers - 11%
High U.S. Corporate Taxes - 7%
Government Incentives - 7%
6
“Tech Revival Lifts Silicon Valley,” Wall Street Journal, December 30, 2010.
No Response -3%
05
Quality of Life
Business Climate
Business Climate
06

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CEO
SURVEY
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2011
Business Challenges
Elected Officials
SILICON VALLEY
CEO
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2011
The Challenges and Opportunities in Silicon Valley
Although salaries are high and employment has improved,
Valley businesses continue to face obstacles, many of which
appear in the survey results year after year. The 2011 CEO
Business Climate Survey asked participants to name the five
most pressing business challenges. Housing costs for employees
ranked first, followed by employee recruitment/retention
costs, business taxes, the state budget structure, and business
regulations.
What are the 5 top business
challenges in Silicon Valley?
High housing costs for employees - 67%
Employee recruitment/retention costs - 54%
Business taxes - 45%
State budget structure - 42%
Business regulations - 41%
It is important to note that employee housing has ranked as
the most important challenge to business in every CEO
Business Climate Survey since the report’s inception.
Employee recruitment/retention costs and high taxes have also
appeared in the top five responses for most of the period as
well.
Among the 41 percent who pointed to business regulations
as an obstacle, these respondents pointed to a series of state
and federal causes. The greatest concern centered on
employee wage and hour issues, followed by the demands of
complying with the federal Sarbanes-Oxley accounting
requirements.
(Of those who answered “business regulations”)
Which of the following challenges applied?
AB32 Requirements - 23%
Wage and Hour Issues - 47%
Sarbanes-Oxley - 38%
Other - 23%
Green Chemistry Regulations - 15%
Import-Export Controls - 14%
Don’t Know/No Answer - 11%
Still, the Valley has some characteristics that go a considerable
distance toward offsetting some of the negatives. These
should not be ignored, for they are critical to assuring long
term success for the region. When asked to declare the four
most important benefits of doing business in the region, survey
participants overwhelmingly praise access to skilled labor and
the Valley’s entrepreneurial mindset, followed by their companies’
proximity to customers and competitors and access to
venture capital.
What are the top 4 benefits/strengths
of doing business in Silicon Valley?
Access to Skilled Labor - 69%
Entrepreneurial Mindset - 66%
Proximity to Customers/Competitors - 42%
Access to Venture Capital - 23%
Performance of Elected State Officials
The Silicon Valley Leadership Group interacts more with the state government than the local or federal levels because of the
state’s prominent role in policymaking, taxation and regulatory matters. Bearing that in mind, the survey asked respondents about
the performance of the legislature, governor and regulatory sector. These questions based answers on a 1 - to - 5 scale, with 1
being best and 5 being worst.
With respect to whether the legislature is “on the right track,” three-fourths of the respondents are critical of the legislature’s
performance—the highest negative rating in the history of the CEO Business Climate Survey. Displayed below are the replies for
2011 alongside the replies for 2008, 2009, and 2010. Each year, the evaluation is increasingly negative than the prior year.
Is statewide legislation on the right track (1) or the wrong track (5) in creating a healthy business climate?
1%
13%
4%
26%
2011
50%
2010 2009 2008
1% 2%
2%
6%
21% 36%
36%
28%
28%
36%
5 - Wrong 4 3
2 1 - Right
The news is almost as bleak on regulatory matters. Here, 7 out of 10 respondents offer critical assessments of the impact of state
regulations on the business environment.
Are statewide regulations on the right track (1) or the wrong track (5) in creating a healthy business climate?
1%
6%
2011
6%
6%
16% 43%
28%
6%
27%
30%
35%
6%
22%
10%
40%
2010 2009 2008
2% 1% 1%
9%
26%
30%
34%
17%
9%
48%
26%
Don’t Know
25%
5 - Wrong 4 3 2 1 - Right Don’t Know
07 Business Challenges
Elected Officials
08

SILICON VALLEY
CEO
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2011
Elected Officials
Improving Government
SILICON VALLEY
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2011
The assessment of Governor Jerry Brown, who assumed office on January 3, 2011, is more positive. The data below shows that
almost half of the respondents do not yet have an opinion of the governor. In all likelihood, the 2012 survey results will shed more
light on this question.
Two facts need to be mentioned, however. First, inasmuch as Brown was governor between 1975 and 1983, some respondents
no doubt had impressions from the past. Second, the Leadership Group had a close relationship with former Governor Arnold
Schwarzenegger, as demonstrated by past data.
Is the Governor on the right track (1) or the wrong track (5) in creating a healthy business climate?
32%
2011
6%
2010 2009 2008
8%
9%
9% 18%
26%
14%
9%
14%
25%
38%
10%
27%
13%
42%
18%
14%
2%
27%
39%
Improving Government at the Local, State and Federal Levels
Members of the Silicon Valley Leadership Group strive for
constructive relationships with representatives at all levels of
government. To that end, the 2011 CEO Business Climate
Survey asked participants to cite how government entities
could be more responsive to the business climate of their
companies and employees as well as the betterment of the
region. Regarding local government, respondents were asked
to list three changes that would improve the business climate
for their company. Foremost in the answers was a plea to
improve the quality of K-12 public education, which received
the nod from almost three-fourths of the survey participants. The
second and third most popular responses centered on reducing
public pension costs and approving more affordable home
developments. Easing traffic congestion and streamlining the
permit approval process rounded out the Top 5.
What top 5 changes could local government undertake
to improve the business climate for your company?
Improve K-12 education - 71%
Sadly, recent studies show a deterioration of the nation’s
ability to produce quality science students, with an even worse
performance in California. 7 If left unaddressed, this pattern will
produce an uncompetitive region, in part due to the lack of a
trained workforce to carry out skilled tasks.
Moving on to the state level, respondents were asked almost
the same question for possible state public policy initiatives for
improving the business climates for their companies. Those
areas receiving the greatest numbers of responses included
K-12 public education, reducing public pension costs, making
permanent the R&D tax credit, adoption of a multi-year budget
and creating more affordable housing. (Transportation and
higher education improvements are a close six and seven.)
What top 5 changes could the state government undertake
to improve the business climate for your company?
Improve K-12 education - 54%
Governor Brown
Governor Schwarzenegger
Reduce public pension costs - 57%
Approve more affordable
home developments - 52%
Reduce public pension costs - 46%
Enhance and make permanent the
- 43%
research and development tax credit
5 - Wrong 4 3 2 1 - Right Don’t Know
Ease Local road congestion- 37%
Streamline permit
approval process
- 36%
Adopt a multi-year budget cycle - 40%
Help create more affordable housing - 36%
7 “Youths lagging in science,” San Francisco Chronicle, January 26, 2011.
09 Elected Officials
Improving Government
10

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Improving Government
State Budget Deficit
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2011
Participants in the 2011 CEO Business Climate Survey were
also asked to pick the top five issues in Silicon Valley that
deserve the most attention from the federal government: (by a
large margin) comprehensive tax reform, then the federal
deficit, H1-B visa/green card reform, climate change legislation
and repatriation of foreign earnings. Here again, taxes
and revenues dominated the selection pattern, as indicated in
the responses below.
Which 5 of the following issue areas deserve the most
attention from the federal government for Silicon Valley
Comprehensive tax reform - 68%
Addressing the State’s Budget Deficit
For several years, California has faced annual state budget deficits, with some ranging as much as $30 billion. The current year
is no different. With depleted revenues and growing expenses, the state is on track for a shortfall of $26.6 billion through June
30, 2012. No state has suffered so many repeated shortfalls. 8 Until now, neither state elected officials nor the public have fully
acknowledged the depth of California’s fiscal issues, opting more times than not for a “cake and eat it” formula. 9 Many observers
believe that the state’s woes can be addressed only through both cuts and new revenues. It’s in this contentious environment that
the 2011 CEO Business Climate Survey asked participants for recommendations on new revenues and budget reductions.
On the question of additional taxation, respondents expressed considerable support for increases in broad-based revenue
generators like vehicle license fees and gasoline taxes. Taxes on narrow sectors of society, like additional corporate taxes and
personal income taxes, drew the greatest opposition.
What revenue changes would you support in the following categories:
Federal deficit - 41%
H1-B visa/green card reform - 32%
Corporate Tax
Sales Tax
Personal Income Tax
Property Tax
Vehicle License Fee
or Car Related Tax
Gas Tax
Climate change legislation* - 30%
Deferral/Repatriation
of foreign earnings
- 28%
*Climate change legislation to reduce
greenhouse gases and increase
energy security
12%
38%
50%
46%
34%
20%
14%
44%
41%
29%
57%
14%
32%
7%
61%
22%
9%
69%
Increase Decrease Stay the Same
Survey participants were also asked to weigh in on the state’s major expenditure areas, both in terms of greater or reduced
commitments. K-12 public education and transportation/infrastructure receive the greatest support from respondents for increased
expenditures. Strong sentiment also exists for reducing financial commitments to corrections, health and human services and state
employee salaries and benefits.
What revenue changes would you support in the following categories:
K-12 Education
42%
15%
41%
Higher Education
46%
15%
39%
Health and Human
Services
8%
30%
62%
Corrections and
Rehabilitation
2%
18%
79%
Transportation and
Infrastructure
37% 52%
11%
State Government Employees:
reduction in salaries and benefits
or layoffs and furloughs
19%
24%
57%
Increase Decrease Stay the Same
11 Improving Government
8 “A state trapped by fiscal inertia,” Los Angeles Times, May 24, 2009.
9 “Californians want it both ways on budget,” Los Angeles Times, November 18, 2010.
State Budget Deficit
12

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2011
Healthcare Reform
Pension Reform
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2011
Healthcare Reform
Healthcare reform has gripped the nation for the past two years, leading to passage of the Patient Protection and Affordable
Care Act of 2010. Survey participants were asked about the new legislation. Those with opinions approved the new healthcare
law by a margin of about 3-to-2. More than one third of the respondents expressed no opinion, possibly because the law will not
be fully phased in until 2014.
Which of these statements is closest to your feelings about
the Patient Protection and Affordable Care act of 2010
Repeal it - 26%
Keep it - 38%
No opinion/ no answer - 36%
Healthcare costs have stabilized in most local companies, according to the 2011 survey. When asked about the percent of total
business costs that are attributable to healthcare, the replies to the current survey are almost identical to the replies in 2010.
What percent of your total business
costs are attributable to healthcare?
Pension Reform
With decreasing resources available for major public policy
commitments, the sizes and types of government pensions have
come under scrutiny. As of December 31, 2010, more than
500,000 retirees received pensions from CalPERS, the state’s
largest pension program. In addition, the program contained
nearly 1.2 million active and inactive members. 10 One recent
independent analysis places California’s pension obligations
at more than $500 billion, with the gap growing every year. 11
Bearing in mind the state’s ongoing revenue and spending
problems, the 2011 CEO Business Climate Survey asked
participants a series of questions on the pension issue.
Respondents were asked whether their companies have
pension programs, and if so, what type. The overwhelming
majority of companies responding (80 percent) have pensions,
with most offering an “undefined,” 401(k)-type plan which
means that the return (or value) fluctuates with the value of the
investment (e.g., stocks, mutual funds). Almost all government
pensions are in the “defined” format, which means that the
retiree gets a fixed amount for the life of the pension, regardless
of market conditions.
Regarding employee retirement, does your company
offer an employee pension plan and if so, what type?
The survey also asked whether governments should stay with
defined pension plans or shift to undefined pensions. By a
margin of 9-to-1, respondents opted for undefined plans.
Most federal, state and local governments
offer defined pension plans. Should they:
Keep defined plans - 7%
Shift to undefined plans, similar to a 401(k) - 71%
Eliminate all pensions - 7%
Don’t know/ no answer - 15%
Along with the question on pension type is the issue of how
long an employee should work until he or she qualifies for a
pension. Many state and local government pension programs
vest employees after 5 years, although the amount of the
pension is relatively small. The survey asked how much time
should elapse before an employee qualifies for a minimum
pension. More respondents opted for employment periods of
20 years or more.
2011
2010
Yes, Defined benefits - 15%
How long should a public employee work for his/her
government entity before qualifiying for a pension?
30%
23%
27%
7% 7%
11%
3% 2%
29% 25%
14%
23%
Yes, undefined benefits (e.g., 401(k)s) - 63%
No benefits - 22%
Don’t know/ no answer - 2%
5 years - 12%
10 years - 11%
15 years - 6%
1 - 5%
6 - 10%
11 -15%
16 - 20%
Over 20%
Don’t know/ no answer
*Note: Percentages total more than 100
because a few respondents answered “yes”
to both defined and undefined plans.
20 years - 17%
25 years - 27%
Don’t know / no answer - 27%
10 CalPERS, “Facts At a Glance: Retirement & Membership,” February 2011.
11 “Analysis of California pensions Finds Half-Trillion Dollar Gap,” The New York Times,
April 6, 2010.
13 Healthcare Reform
Pension Reform
14

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Pension Reform
Conclusion
SILICON VALLEY
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In addition to pension type and years of service, there is the
question of the age at which a public employee should be
allowed to collect his or her pension. The tables below address
this issue for non-public safety and public safety government
employees. Respondents are a bit more generous with public
safety employees, although pluralities in each case believe that
retirement pensions should accompany the age of full Social
Security retirement.
What should be the minimum age for non-public
safety government employees to collect a pension?
55 years - 11%
60 years - 22%
Full social security retirement age
(currently 67 years for thouse born after 1959)
Other - 8%
- 44%
Don’t know / no answer - 16%
Finally, there is the matter of how much the public sector
employee should contribute to his or her retirement plan.
Typically, most public employee pensions contribute between 5
and 6 percent of their gross pay to their retirement. 12 The
survey asked respondents to suggest an appropriate percentage
for employee contributions. Although about one-third of
the respondents expressed no opinion on the matter, of those
with opinions most said 10 percent or more.
What percent of their salary should public sector
employees be required to pay into their pension fund?
3 percent - 5%
5 percent - 22%
10 percent - 24%
15 percent - 13%
Don’t know / no answer - 36%
Increasingly, it is difficult for Silicon Valley companies to
compete against other centers of innovation and entrepreneurship
- both domestic and abroad. Among the unique
challenges are globalization and the international competition
for talent. A deteriorating state infrastructure in areas ranging
from public education to public transportation has added to the
difficulties of recruiting the best workforce, finding them
suitable housing and educating their children to be tomorrow’s
first class workforce. Still, the region plugs on with its own
unique attributes. From silicon chips to novel electronics
devices to social networking applications, this area manages
to maintain its magic. But to continue success in this extraordinary
setting will require public-private partnerships.
President Barack Obama seems to know this and has begun
to take action. His new initiative “Startup America” is based on
speeding up the development of advanced technology, green
technology and information technology, with $2 billion in new
funding for companies committed to these ends. Much of that
funding is coming to Silicon Valley because of the region’s
ability to move swiftly and deftly in product research and
development. 13 Still, Valley leaders must continue to work with
members of Congress to make them aware of what needs to be
done and how the private and public sectors succeed together.
Sacramento for private-public sector innovation economy
employers to grow technology and manufacturing jobs in
California?” 14 The Leadership Group responded with its own
white paper. The governor said in his ”State of the State
address” on January 28, 2011, “My intention is to make
California again a leader in job creation, renewable energy
and state of the art efficiency, innovation of all kinds and a
solid primary and secondary education…. We have the inventors,
the dreamers, the entrepreneurs, the venture capitalists
and a vast array of physical, intellectual and political assets.”
It is now up to the governor and the state legislature to work
with Silicon Valley leaders on facilitating policies that will get
the most out of this region’s extraordinary talent pool.
The Silicon Valley Leadership Group once again has
provided a blueprint for improving conditions for businesses
and the general community alike. The 2011 CEO Business
Climate Survey results clearly identify problem areas, concrete
solutions and potential opportunities for the region and state to
thrive. If history is any guide to the future, Leadership Group
members will make themselves available to help public policy
makers take advantage of the vast talent that resides in Silicon
Valley.
Larry N. Gerston, Ph.D.
What should be the minimum age for public safety
government employees to collect a pension?
Governor Jerry Brown knows this, too. Even before his
swearing in ceremony, the Brown Administration asked the
Silicon Valley Leadership Group, “What would it take from
Professor, Political Science
San Jose State University
50 years - 2%
55 years - 17%
60 years - 28%
Full social security retirement age
(currently 67 years for those born after 1959)
- 33%
Don’t know / no answer - 21%
13 “Valley firms at center of Obama’s push for innovation,” San Jose Mercury News,
February 1, 2011.
14 Quoted in “Governor strives to help tech firms add state jobs,” San Francisco
Chronicle, January 16, 2011.
12 CalPERS, “Facts At a Glance: Retirement & Membership,” February 2011.
15 Pension Reform
Conclusion
16

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Survey Results
6. If subtracted, were most of the jobs:
Permanently eliminated - 70%
10. What was the MOST important reason your company
moved jobs out of the U.S. since January 1, 2010?
Reduced labor costs - 54%
Temporarily eliminated - 30%
U.S. corporate tax rates - 11%
1. Which of the following most closely describes your industry sector:
3. Since January 1, 2010, have you added, stayed
the same, or subtracted jobs in Silicon Valley?
Added or stayed the same - 0%
Proximity to customers - 11%
0 10 20 More 30 available 40 workforce 50 60- 11% 70 80
Other - 20%
Financial/Professional/Venture Capital - 17%
Added Jobs - 66%
Don’t know/no answer - 0%
Government incentives in new location - 7%
Other - 7%
High-Tech Manufacturing - 14%
Stayed the same - 21%
7. Did your company move jobs out of state since January 1, 2010?
Less federal regulation - 0%
Health Care/Bio-Tech - 10%
Utilities/Energy - 9%
Software - 9%
Internet/Communications - 7%
Subtracted jobs - 11%
Don’t know/no answer - 2%
Yes - 16%
No - 78%
Lower land/lower infastructure costs - 0%
More convenient supply chain - 0%
Don’t Know/no answer - 0%
Education - 6%
Gen. Manufacturing/Aerospace/Defense - 5%
4. If added, how many?
Don’t know/no answer - 6%
11. How do you see job growth in Silicon
Valley in your industry sector in 2011?
Transportation - 2%
Don’t Know/no answer - 1%
2. Number of employees in Silicon Valley:
1 to 20 - 15%
21 to 100 - 26%
101 to 500 29%
1 to 20 - 53%
21 to 100 - 33%
101 to 250 - 3%
251 to 500 - 3%
501 to 1,000 - 2%
More than 1,000 1%
Don’t know/no answer - 4%
8. What was the MOST important reason your company moved ?
Other - 14%
Reduced labor costs - 46%
More available workforce - 11%
Less regulation - 7%
Proximity to customers - 7%
Government incentives in new location - 7%
Worse - 6%
No change - 38%
Don’t know/no answer - 3%
12. How do you see job growth in Silicon
Valley for your company in 2011?
Better - 54%
501 to 1,000 - 9%
1,001 to 5,000 - 17%
5,001 to 10,000 - 2%
10,001 or higher - 2%
5. If subtracted, how many?
10 20 30
21 to 100 - 5%
1 to 20 - 60%
Lower land/ lower infrastructure costs - 4%
State corporate taxes too high - 4%
Lack of tax policy incentives in California - 0%
More convenient supply chain - 0%
Don’t Know/no answer - 0%
Worse - 5%
No change - 38%
Better - 55%
101 to 250 - 15%
251 to 500 - 10%
9. Did your company move jobs out
of the U.S. since January 1, 2010?
Don’t know/no answer - 3%
501 to 1,000 - 5%
No - 78%
More than 1,000 0%
Yes - 16%
17 Survey Results
Don’t know/no answer - 5%
Don’t know/no answer - 6%
Survey Results
18

13. What are the top 3 benefits/strengths
of doing business in Silicon Valley?
15. Because you answerd “b” (Business Regulations) for business
challenges, which of the following challenges applied:
17. What top 3 changes could local government undertake
to improve the business climate for your company?
19. Which 3 of the following issue areas deserve the most
attention from the federal government for Silicon Valley:
Access to skilled labor - 69%
Entrepreneurial mindset - 66%
Proximity to customers and competitors - 42%
Access to venture capital - 23%
Climate/weather - 21%
World class universities - 21%
Merit-based work environment - 16%
Ethnic diversity - 11%
Access to airports/seaports - 7%
Pacific Rim locations - 5%
Other -3%
Don’t know/no answer - 2%
Arts and culture - 2%
14. What are the top 5 Business challenges in Silicon Valley?
High housing costs for employees - 67%
Employee recruitment/retention costs - 54%
Business taxes- 45%
State budget structure - 42%
Business regulations - 41%
Traffic congestion - 38%
Health care costs - 37%
Immigration: H1-B and/or green cards - 23%
Energy costs - 17%
Frivolous lawsuits - 15%
Workers’ compensation costs - 12%
Access to capital - 9%
Overtime/8-hour work day requirement -8%
Intellectual property protection costs - 7%
Wage and Hour Issues - 44%
0 10 20 30 40 50 60 70 80
Sarbanes-Oxley - 38%
AB 32 requirements - 23%
Other - 23%
Green Chemistry Regulations - 15%
Import-export controls - 14%
Don’t know/no answer - 11%
16. What are the top 3 cost of living challenges
in Silicon Valley for workers and their families?
Health care - 36%
High taxes - 59%
Housing costs - 84%
Traffic congestion - 36%
K-12 education - 31%
Child care - 19%
Energy costs - 10%
Higher education - 5%
Don’t know/no answer - 4%
Other - 1%
Improve K-12 public education - 71%
Reduce public pension costs - 57%
Approve more affordable
home developments
Ease local street and road congestion 37%
Streamline permit approval process - 36%
Fund more street maintenance/pothole repairs - 9%
Other - 8%
Support development of professional sports facilities - 6%
Improve public safety - 5%
Provide more parks and open space - 3%
Enhance arts and culture - 2%
- 52%
Expand convention center space 0%
18. What top 5 actions could the state government take
to improve the business climate for your company?
Improve K-12 education - 54%
Reduce public pension costs - 46%
Enhance and make permanent
the R&D tax credit- 43%
Adopt a multi-year budget cycle - 40%
Invest in traffic relief/transportation improvements - 35%
Improve higher education - 32%
Limit frivolous lawsuits - 26%
Streamline regulatory and permit approvals -26%
Offer full sales tax exemption for purchases
of manufacturing equimpment
Reinstate overtime after a 40-hour work
week rather than an 8-hour work day
Invest in broadband development - 13%
Reduce workers compensation rates - 13%
Avoid split roll tax - 11%
Help create more affordable housing - 36%
- 18%
- 21%
Comprehensive tax reform - 68%
The fedral deficit - 41%
H1-B visa/green card reform - 32%
Climate change legislation to reduce green
-house gases and increase energy security
Deferral/repatriation of foreign earnings 28%
Intellectual property protection - 15%
Sarbanes-Oxley reform - 14%
Cybersecurity - 11%
Broadband deployment - 9%
Corporate governance (Shareholder Empowerment Act,
derivatives, proxy, ect.) - 9%
Patent reform - 9%
Rejection of the “Employee Free
- 9%
Choice” Act, e.g. card check bill
Other - 9%
More free trade - 8%
20. What percent of your total business
costs are attributable to healthcare?
1 percent to 5 percent - 23%
6 percent to 10 percent - 27%
11 percent to 15 percent - 11%
16 percent to 20 percent - 7%
Over 20 percent - 3%
Don’t know/no answer - 30%
21. Which of these statments is closest to your feelings about
the Patient Protection and Affordable Care Act of 2010, a.k.a.
National comprehensive health care reform law?
- 30%
Other - 6%
Unemployment insurance costs- 5%
Don’t know/no answer - 5%
Paid family leave - 2%
Air transportation/cargo - 1%
Water - 1%
Lower energy costs - 11%
Reduce unemployment insurance costs - 10%
Other - 9%
Don’t know/no answer - 3%
Lower California’s minimum wage to the national minimum wage - 2%
Repeal paid family leave benefits - 2%
Repeal it - 25%
Keep it - 38%
No opinion/no answer - 36%
19 Survey Results
Survey Results
20

22. Regarding employee retirement, does your copany
offer an employee pension plan and if so, what type?
25. What should be the minimum age for non-public
safety government employees to collect a pension?
28. The nonpartisan state legislative analyst projects a $25 billion
defict through June 30, 2011. What revenue changes would you
support in the following categories:
29. In which of the following areas would
you support changes in state expenditures:
Yes, undefined benifits (e.g., 401(k)) - 65%
50 years - 0%
a. Corporate Tax
a. K-12 education (42% of budget)
No, we do not offer a penison plan - 23%
55 years - 11%
Increase - 12%
Increase - 41%
Yes, defined benifits - 15%
Don’t know/no answer - 2%
60 years - 22%
Full social security retirement age (currently
67 years for those born after 1959)
- 44%
Stay the same - 38%
Decrease - 50%
Decrease - 17%
Stay the same - 42%
Don’t know/no answer - 16%
b. Sales Tax
b. Higher education (13% of budget)
23. Most federal, state and local governments
offer defined pension plans. Should they:
Other - 8%
Increase - 34%
Increase - 39%
Decrease - 20%
Decrease - 15%
Shift to undefined plans, similar to a 401(k) - 72%
26. What should be the minimum age for public
safety government employees to collect a pension?
Stay the same - 46%
Stay the same - 46%
Don’t know/no answer - 15%
Keep defined plans - 8%
Eliminate all pensions - 7%
24. How long should a public employee work for his/her
government before qualifying for a pension?
5 years - 12%
c. Personal Income Tax
50 years - 2%
Increase - 14%
55 years - 17%
Decrease - 41%
60 years - 28%
Stay the same - 44%
Full social security retirement age (currently
67 years for those born after 1959) - 44% d. Property Tax
Don’t know/no answer - 21%
Increase - 29%
c. Health and human services (30% of budget)
Increase - 8%
Decrease - 62%
Stay the same - 30%
d. Corrections and rehabilitation (10% of budget)
Increase - 2%
15 years - 6%
10 years - 11%
27. What percent of their salary should public sector
employees be required to pay into their pension fund?
Decrease - 14%
Stay the same - 57%
Stay the same - 18%
Decrease - 79%
20 years - 17%
25 years - 28%
Don’t know/no answer - 28%
3 percent - 5%
5 percent - 22%
10 percent - 24%
e.Vehicle License Fee or Car related Tax
Increase - 61%
Decrease - 7%
e. Transportation and infastructure (1% of budget)
Decrease - 11%
Increase - 52%
15 percent - 13%
Stay the same - 32%
Stay the same - 37%
Don’t know/no answer - 36%
f. Gas Tax
f. State government employees: reduction in salaries
and benefits or layoffs and furloughs
Increase - 69%
Increase - 24%
Decrease - 9%
Decrease - 57%
Stay the same - 22%
Stay the same - 19%
21 Survey Results
Survey Results
22

30. Generally speaking, would you say that:
a. Statewide legislation is on the right track (1) or the
wrong track (5) in creating a helathy business climate?
d. The state legislature is on the right track (1) or the
wrong track (5) in creating a helathy business climate?
Participants
SILICON VALLEY
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2011
Right track (1) - 1%
Right track (1) - 0%
2 - 4%
3 -13%
4 - 26%
Don’t know/no answer - 6%
Right track (1) - 1%
2 - 6%
3 -16%
4 - 28%
Don’t know/no answer - 6%
Wrong track (5) - 50%
b. Statewide regulations are on the right track (1) or the
wrong track (5) in creating a helathy business climate?
4 - 5%
Wrong track (5) - 43%
c. Governor-elect Brown is on the right track (1) or the
wrong track (5) in creating a helathy business climate?
Right track (1) - 9%
2 - 18%
Wrong track (5) - 9%
3 - 26%
Don’t know/no answer - 32%
2 - 4%
3 -13%
4 - 24%
Wrong track (5) - 50%
Don’t know/no answer - 9%
Accept Corporation
Aerotek
Affymetrix
Akraya
Alom
Altera
Alzeta Corporation
American Airlines
Anaerobe Systems
Aon Risk Services
Apple
Applied Materials
AT&T
Atmel
Audience
Aviat Networks
Bank of America
BD Biosciences
Bentek
Berger Lewis
Better Place
BMC Software
Bridgelux
Brocade
California Water Service
CaliSolar
Cargill
Catalyst Biosciences
Centrify Corporation
CentroSolar
Chrysalis Software
Citibank
City National Bank
Clear Street
Cobalt Technologies
ConorMed Systems
Coulomb Technologies
CSC
Daintree Networks
Declaration Services
Deloitte
DeVry University
eBay
EFI
Egon Zehnder International
eLynx
eMeter
Empire Broadcasting
EMQ Families First
Energy Connect
Equilar
ETM
Exponent
Extron
Fairchild Semiconductor
Finelite
Foothill-De Anza Community
College
Fujifilm Dimatix
G24
Garland Actuarial
Golden Gate University
Good Samaritan Hospital
Goodwill of Silicon Valley
Gordon Biersch Brewing Company
Green Machine Light Engine
GridIron Systems
Heritage Bank of Commerce
Hewlett-Packard
IBM
Integrated Science Solutions
Intel
Intersil
Irish Innovation Center
Janssen Alzheimer Immunotherapy
Johnson & Johnson
KLA-Tencor
Kovio
Lawrence Berkeley Lab
Lee Hecht Harrison
LibraryWorld
Lockheed Martin Space Systems
Lucile Packard Children's Hospital
M Squared Consulting
Maxim Integrated Products
McAfee
McKinsey & Co.
Metricstream
Mission College
MoSys
The NASDAQ
National Semiconductor
Net Logic Microsystems
NetApp
NetGear
Northrup Grumman Marine
Systems
Numenta
NXP Semiconductors
Oakland As/San Jose Earthquakes
Pacific Gas & Electric
Palmer College
Palo Alto Medical Foundation
Pinger
Power Freight Systems
Procter & Gamble
Progreso Financiero
Prosper Marketplace
Quantum Energy Services
Recurrent Energy
Robert Half International
San Francisco 49ers
San Jose Giants
San Jose Mercury News
San Jose Water Company
Santa Clara Family Health
Plan
Santa Clara University
SAP
Schweichler Price
Serious Materials
Silicon Valley Leadership
Group
Soladigm
Solar City
Solar Junction
Specialized
Sperry Van Ness
SRI
Storm Ventures
SunPower Corporation
SVB Financial Group
Symmetricom
Synaptics
Synopsys
Tagent
Taleo
Tecan
Technology Credit Union
Ternion Bio
Tessera
The Health Trust
The Prosser Group
Transpak
Trimble Navigation
Tropos Networks
TSMC
UC Santa Cruz
Union Bank
University of Phoenix
VantagePoint Venture Partners
Varian Medical Systems
Venrock
Virgin America
Watt Stopper
Wave2Wave Solution
Webcor Builders
Wells Fargo Bank
West Valley -Mission College
CCD
West Valley Staffing Group
Westinghouse Solar
Wyse
Xstrata Recycling Inc.
*Some participants are anonymous
23 Survey Results
Participants
24

SILICON VALLEY
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Acknowledgements
About the Leadership Group
The Silicon Valley Leadership Group, founded in 1978 by
David Packard of Hewlett-Packard, represents more than 340 of
Silicon Valley's most respected employers on issues, programs
and campaigns that affect the economic health and quality of life
in Silicon Valley, including energy, transportation, education,
housing, health care, tax policies, economic vitality and the
environment. Leadership Group members collectively provide
nearly one of every three private sector jobs in Silicon Valley.
Board Officers
Tom Werner, Sunpower, Chairman
Mike Klayko, Brocade, Vice Chairman
Aart De Geus, Synopsys, Past Chairman
Michael Splinter, Applied Materials, Inc.,Past Chairman
Robert Shoffner, Citibank, Secretary/treasurer
Carl Guardino, Silicon Valley Leadership Group, President & CEO
Board Members:
John Adams, Wells Fargo Bank
Shellye Archambeau, Metricstream, Inc.
Andrew Ball, Webcor Builders
George Blumenthal, University Of California, Santa Cruz
Tom Bottorff, Pacific Gas & Electric
Rami Branitzky, SAP Labs North America
Tory Bruno, Lockheed Martin Space Systems Company
David Cush, Virgin America
David Dewalt, McAfee, Inc.
Father Michael Engh, S.J. Santa Clara University
Jay Glasscock, BD Biosciences
Raquel Gonzalez, Bank Of America
Tim Guertin, Varian Medical Systems
James Gutierrez, Progreso Financiero
Kevin King, Affymetrix
Tarkan Maner, Wyse Technology
Ken McNeely, AT&T
Leonard Perham, Monolithic Systems
Kim Polese, SynchEnergy
Alan Salzman, VantagePoint Venture Partners
Mac Tully, San Jose Mercury News
Rick Wallace, KLA-Tencor
Dan Warmenhoven, NetApp, Inc.
Bill Watkins, Bridgelux
Ken Wilcox, SVB Financial
Jed York, 49ers
Staff
Carl Guardino, President & CEO
Dennis Cima, Senior Vice President, Public Policy
Shiloh Ballard, Vice President, Housing & Community Development
Phyllis Claassen, Vice President, Administration
Steve Wright, Vice President, Strategic Communications
Kirk Everett, Vice President, Government Relations & Tax Policy
Brian Brennan, Senior Director, Member Services
Emily Lam, Senior Director, Health Care & Federal Issues
Mike Mielke, Senior Director, Environmental Programs & Policy
Bena Chang, Senior Associate, Housing & Transportation
Anne Smart, Director, Energy Issues
Jessica Zenk, Director, Transportation Policy
Samantha James, Communications Associate
Colin Buckner, Creative Associate
Monica Crouch, Member Services Associate
Clorama Dorvilias, Housing & Community Development Associate
Ashley Smith, Office Manager
Justin Marlaire, Executive Assistant
Contributed to this report
Iain Macleod, Communications Coordinator
© 2011 Silicon Valley Leadership Group
25 Acknowledgements